"Isn't This a Signal for Reconstruction?" Why the Transaction Permit System Is Welcomed

Apgujeong, Yeouido, Mokdong, and Seongsu Areas
Designated as Land Transaction Permission Zones from the 27th
Residents Say "Not a Negative Factor but a Positive One"

Despite Fewer Listings and Increasing Purchase Inquiries,
Transaction Volume May Decrease but Record Prices Will Continue

[Image source=Yonhap News]

[Asia Economy Reporters Kim Hyemin and Lim Onyu] Seoul Mayor Oh Se-hoon has introduced regulatory measures designating four large-scale reconstruction and redevelopment project areas as land transaction permission zones, but the atmosphere in these areas is rather welcoming. Interpreted as a preliminary step for project promotion, inquiries from buyers have increased. Because of this, some believe that while only actual residence sales will be allowed, reducing speculative demand, the measure will not be effective in stabilizing prices.

◆ "The transaction restrictions are to proceed with reconstruction" - growing expectations = The reconstruction and redevelopment complexes in Apgujeong, Yeouido, Mokdong, and Seongsu, which will be designated as land transaction permission zones starting from the 27th, are viewing this regulation as a positive development. A resident of the largest reconstruction complex, Shibeom Apartment, in Yeouido said, "Isn't this a clear signal that reconstruction will proceed?" and added, "It is seen as a preemptive measure to curb external speculative forces before reconstruction."

In Mokdong, residents are also expecting follow-up measures such as the announcement of district unit plans that have been blocking reconstruction. A resident of a reconstruction complex in Mokdong said, "Although some people complain about the transaction restrictions, more people see it as a preliminary step toward moving on to the district unit plan."

The reconstruction complexes in Apgujeong, Yeouido, and Mokdong designated as land transaction permission zones this time are areas grouped under district unit plans based on comprehensive development. Although the district unit plans have been drafted, reconstruction has not accelerated because the Seoul city government has not announced official confirmation for years.

The reason why Sangye-dong in Nowon-gu, where housing prices have been stimulated as much as in Apgujeong before and after Mayor Oh's election, was excluded from this land transaction permission zone is also interpreted to be related to the pace of the district unit plan progress. A Seoul city official said, "Many places in Sangye-dong are in the early stages of reconstruction procedures, so they were not designated separately," adding, "This time, the focus was on areas where district unit plans have been established, and although the maintenance zone designation has not been made, the procedures will now proceed."

Given this situation, there are no properties listed as 'urgent sales' before the enforcement. A representative of a real estate agency in Yeouido said, "Because it is designated as a land transaction permission zone, the atmosphere is that development will now proceed," and added, "Currently, inquiries from buyers are exploding, but there are almost no properties available." In Seongsu-dong, many properties have already been withdrawn due to redevelopment expectations. A representative of a real estate agency near the Seongsu Strategic Maintenance Zone said, "Although asking prices have risen significantly, there are not many people who can invest with cash, so transactions have hardly occurred," and added, "Once the land transaction permission system is implemented, transactions themselves will disappear."

◆ "Transaction volume will decrease but record prices will continue" ... concerns about balloon effects = Experts predict that while the transaction volume in the designated areas will decrease due to this decision, prices will rise. Although demand will decrease due to the ban on gap investments, record-breaking prices are expected to continue due to development expectations. Jang Jaehyun, head of Real Today, said, "All the places that Mayor Oh designated as development plans 10 years ago have become land transaction permission zones," adding, "Although the complicated procedures will reduce transaction volume, the development signals have become clear, so prices will rather increase."

Ham Youngjin, head of the Zigbang Real Estate Big Data Lab, also said, "The designation of land transaction permission zones is seen as Mayor Oh's preliminary move to normalize maintenance projects, such as easing the 35-floor height restriction," adding, "Although transaction volume will decrease for a while, considering the low-interest-rate environment, prices are expected to remain firm."

Last June, when Daechi, Samsung, and Cheongdam-dong in Gangnam-gu and Jamsil-dong in Songpa-gu were designated as land transaction permission zones, similar phenomena occurred. According to the Seoul Real Estate Information Plaza, apartment transactions in Jamsil-dong increased from 107 in May to 273 in June, then sharply dropped to 27 in July and 12 in August due to the enforcement of the land transaction permission system. However, as various development benefits continued to push up housing prices, a 124㎡ (exclusive area) apartment in Resentz, Jamsil-dong, which was traded for 2.595 billion KRW in June last year, changed hands for 3.05 billion KRW on the 3rd of this year. This is an increase of 455 million KRW in 10 months.

There are also voices expressing concern about the recurrence of balloon effects where housing prices rise in neighboring areas. In fact, after the designation of land transaction permission zones last year, housing prices in Yeoksam, Dogok, and Gaepo-dong in Gangnam-gu and Sincheon-dong in Songpa-gu surged sharply. For example, a 84㎡ apartment in Dogok Rexle, Dogok-dong, was traded for 2.49 billion KRW in June last year and increased by 400 million KRW to 2.89 billion KRW in January this year. The Seoul city government has stated that it can designate such areas as land transaction permission zones immediately upon the occurrence of balloon effects. Lee Jeonghwa, director of the Seoul City Urban Planning Bureau, said, "We will conduct continuous monitoring and immediately consider additional designations if speculative forces are suspected to be entering."