'Scarcity of Properties' Also Raised Market Prices Around Public Redevelopment Areas

Share Purchase Calls Surge... 8 Candidate Sites Locked Up
Investors Turn to Nearby Areas "Heukseok New Town Premium Rises"

Eight redevelopment areas, including Heukseok 2 District in Dongjak-gu, Seoul, have been selected as pilot sites for public redevelopment projects. The pilot sites are Heukseok 2 in Dongjak-gu; Yangpyeong 13 and 14 in Yeongdeungpo-gu; Yongdu 1-6 and Sinseol 1 in Dongdaemun-gu; Bongcheon 13 in Gwanak-gu; Sinmunno 2-12 in Jongno-gu; and Gangbuk 5 in Gangbuk-gu. A view of Heukseok 2 District in Dongjak-gu on the 15th. Photo by Moon Honam munonam@

[Asia Economy Reporter Onyu Lim] "The phones are ringing nonstop, but all the listings have completely disappeared. Because of that, premiums in other areas of Heukseok New Town have all risen." (A representative from real estate agency A in Heukseok-dong, Dongjak-gu, Seoul)

As the pilot project for public redevelopment aimed at supplying housing in downtown Seoul gets on track, the real estate market is being stimulated. With the deepening shortage of listings in the eight selected candidate areas, prices are soaring, and in places like Heukseok 2 District, even the surrounding redevelopment zones and apartment market prices are being affected.

According to the redevelopment and real estate brokerage industries on the 20th, since the announcement of the public redevelopment candidate sites on the 15th of this month, inquiries about purchasing shares have significantly increased in each district. Buyers have flocked due to expectations that projects, which had been stalled due to conflicts among owners and lack of profitability, will proceed swiftly. Moreover, since the number of association members in most districts ranges from 100 to 400, which is not large, and sellers are also withdrawing their listings, a phenomenon of listing shortages is emerging.

A representative from real estate agency B near Yangpyeong 13 and 14 Districts in Yeongdeungpo-gu, which were selected as candidate sites this time, said, "Yangpyeong 13 and 14 Districts have only about 500 owners combined, and due to development expectations, listings disappeared even before the official announcement." He added, "Most association members, having experienced price increases in the nearby Yangpyeong 12 District, which is about to be demolished, believe prices will rise further and thus are not putting their properties on the market."

[Image source=Yonhap News]

The shortage of listings is also stimulating prices in surrounding redevelopment areas and new apartment markets. Heukseok New Town is a representative example. Since Heukseok 2 District was selected as a public redevelopment candidate site, premiums in districts 3, 9, and 11 within the New Town have also surged. A representative from real estate agency C in the area explained, "Except for one detached house, there are no listings in Heukseok 2 District, so investors are turning their attention to nearby redevelopment areas." He added, "Because of this, premiums in other districts of the New Town have soared to 900 million to 1 billion KRW." According to local agencies, recently a 29.7㎡ (9 pyeong) land share in Heukseok 11 District was traded for 1.2 billion KRW.

The impact seems to be extending even to nearby newly built apartments. In the case of Yongdu 1-6 District in Dongdaemun-gu, which includes a fish market, online communities are reacting with comments such as, "Once the fish market area is cleared, major concerns like odor and scenery will be resolved, so nearby apartment prices will also rise."

However, there are also concerns that since there are still many challenges before the projects in the selected public redevelopment candidate sites can be realized, blind investments should be approached cautiously. For now, the eight districts must secure consent from more than two-thirds of landowners and other owners to be designated as housing supply activation zones. Some speculate that obtaining resident consent may be difficult due to excessive public contributions such as high proportions of rental housing. Another variable is that these districts are expected to be designated as land transaction permission zones.

Senior Researcher Doosung Kyu of the Korea Construction Industry Research Institute pointed out, "If profitability is not secured, initial public redevelopment projects may be halted later due to dissatisfaction among owners." He added, "Redevelopment inevitably takes a long time, and during this process, government policies may change, which cannot be ruled out."