尹 in the reconstruction dilemma, will the policy change to a cautious mode?

[난제 산적. 尹정부의 부동산③]
In anticipation of deregulation, reports of Seoul reconstruction complexes have been reported one following another
Policies ‘cautious’ raised over fears of nationwide expansion of rising house prices
Some experts say “Speed ​​control is necessary, but long-term roadmap is important”

A view of Hyundai Apartment in Apgujeong-dong. [연합뉴스]

The newly-launched Seok-Yeol Yoon administration fell into a ‘reconstruction dilemma’ ahead of the announcement of its real estate policy. As market instability was detected, such as a surge in prices centering on reconstruction projects in anticipation of the Yoon administration’s easing of real estate regulations, ‘prudentism’ is emerging.

Gangnam reconstruction complexes have shown a sensational movement following the presidential election. ‘Apgujeong Hyundai Apartment’, which is a symbol of Korea’s wealth, also wrote a new record. According to the real transaction price disclosure system of the Ministry of Land, Infrastructure and Transport, the 183.41 m² exclusive area for the 11th apartment building was traded for 5.95 billion won on March 17, less than ten days following the presidential election.

The area has risen by 750 million won since it was traded at 5.2 billion won in December 2020. Since the complex was designated as a land transaction permit zone last year, transactions have been quiet. However, there were speculations that the deal might have been concluded in the hopes that the project would speed up with the promise of ‘regulations’ for reconstruction, which was put forward by President-elect Yoon.

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Seoul Reconstruction Complex Center Price ‘Surges’ on Expectations for Deregulation

President-elect Yoon said that he would ease restrictions on reconstruction, redevelopment, and remodeling so that high-quality housing might be sufficiently supplied in downtown Seoul, where there is a lot of demand. If the proportion of structural safety in safety diagnosis is lowered from the current 50%, it will be possible to promote the project for complexes that have suffered hardship in the precise safety diagnosis. There is no need to amend the law, only the enforcement ordinance of the Ministry of Land, Infrastructure and Transport needs to be changed.

In particular, it offered a promise to promote an exemption from precision safety examinations for old apartment houses that were built more than 30 years ago. Even if the residential environment of the 30-year-old apartment building is poor, it is difficult to pass the safety examination if the structure itself is strong.

Is it because of these expectations? Not only in Apgujeong-dong, but also in Seongsu-dong and Mok-dong, which are bounded by the land transaction permission zone, reported new prices continued. The 85 m2 of Han River Hanshin in Seongsu-dong, Seongdong-gu, Seoul was traded for 2.37 billion won on the 10th of last month. It jumped by 340 million won from the previous record of 2.03 billion won in January last year. On the 29th of last month, the 107 square meter area of ​​Mok-dong New Town Complex 9, Mok-dong, Yangcheon-gu, Seoul was newly renovated for 2.15 billion won.

The view that the expansion of reconstruction and redevelopment is affecting overall house prices in Seoul. According to the Korea Real Estate Agency, apartment prices in Seoul stopped falling for the first time in 11 weeks in the first week of April and remained flat in the second week. Of the total 25 districts, 11 districts turned to an upward trend. In particular, Gangnam-gu recorded the largest increase in 14 weeks. As the asking prices of Gangnam reconstruction complexes rose significantly, the sale price of apartments in Gangnam-gu rose 0.04% from the previous week.

Not only in the Gangnam area of ​​Seoul, but also in the first new towns (Bundang, Pyeongchon, Ilsan, Sanbon, and Jung-dong), where most of the complexes are 30 years old. As President-elect Yoon made a promise to renovate the first new city, new prices are increasing in Bundang and Ilsan, and homeowners are collecting properties in anticipation of rising house prices. In fact, the 172 m² (63 pyeong) dedicated to Samsung and Hanshin, Bundang-gu, Seongnam-si, which is 32 years old this year, was traded at the reported price of 2.49 billion won on the 1st of this month.

In the market, there is concern that apartment prices in reconstruction complexes across the country, beyond Gangnam, Seoul, will fluctuate if the new government rushes to reorganize the reconstruction excess profit recovery system along with the easing of the reconstruction safety diagnosis regulations. This is because the reconstruction project was not easy due to the opposition of members once morest the per capita burden of hundreds of millions of won in Gangnam as well as Gyeonggi and other provinces. So far, 63 complexes and 33,800 households have been notified of the expected amount of the reconstruction contribution.

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Policy ‘prudentism’ raised over fears of nationwide expansion of rising house prices

In response, the Presidential Transition Committee recently started to reorganize the excess profit recovery system (re-return) as part of a plan to rationalize the reconstruction regulations. However, since the revision of the reconstruction fee system is not an enforcement ordinance but an amendment to the Reconstruction Excess Profit Recovery Act, the consent of the majority party, the Democratic Party of Korea, is essential. Experts believe that a plan will come out to lower the burden to an appropriate level that the union can afford, rather than lowering the system to the level that neutralizes the system in consideration of concerns regarding a rise in house prices following the deregulation of reconstruction regulations, social perception that development profits need to be returned, and the possibility of passing the National Assembly.

In addition, experts point out that the easing of reconstruction regulations should be approached with caution, considering the side effects of rising house prices and the principle of return of development profits. The Solidarity for Participation was also concerned regarding side effects, saying that the real estate deregulation and redevelopment/reconstruction policy that the Yoon administration is pursuing is similar to the new town project of the Lee Myung-bak administration.

On the 11th of this month, the Solidarity for Participation released a report titled ‘Problems of excessive/speedy redevelopment and reconstruction projects seen through the case of new towns in the past’, saying, “Housing prices are rising as expectations for easing of real estate regulations following the presidential election last month have risen.” “The redevelopment and reconstruction policies that President-elect Yoon intends to pursue are in line with the new town project of the Lee Myung-bak administration in the past,” he argued.

According to the report, the problems with the new town development project are ▶The fact that the local natives and tenants were pushed out due to the construction of mid- to large-sized high-priced apartments ▶The fact that the housing price soared as the development area turned into an arena ▶The fact that the demand for relocation exploded and the Jeonse price soared ▶The price ceiling system The fact that the sale price went up due to the abolition and that it had an impact on neighboring house prices ▶ The increase in floor area ratio incentives and the fact that it stimulated speculative demand by maximizing development profits.

The transition committee decided to postpone the announcement of the real estate policy, which was scheduled for this month, until the new government was inaugurated. This seems to be due to the recent reconstructed and high-rise apartment prices showing signs of fluctuating, and concerns in the market over real estate deregulation have been raised.

However, some experts are of the view that it is too early to judge that real estate prices will rise due to the easing of reconstruction regulations. It is argued that a change in the perception of a new ‘creation of real estate value’ is necessary. Seo Jin-hyeong, co-representative of the Fair Housing Forum (Professor at Kyungin Women’s University), said, “In the long term, we need to stabilize the real estate market through supply expansion. ” he advised.

Reporter Lee Seung-hoon [email protected]