Deregulation and Redevelopment of First-Generation New Towns Promoted
Yoon President-Elect’s Pledges and Housing Price Boosting Factors Expected
Interest Rate Hikes and Fatigue from Price Increases Also Suggest Stable Outlook
[Asia Economy Reporter Kim Min-young] The biggest variable determining this year’s housing price trends is identified as ‘reconstruction.’ This view is based on President-elect Yoon Seok-yeol’s promises to ease reconstruction regulations and to promote redevelopment projects in first-generation new towns. Since housing prices have never shown weakness during periods of reconstruction activation, such an environment could act as a factor driving up housing prices this year. On the other hand, the ongoing interest rate hike trend and fatigue from long-term housing price increases are factors that could suppress price rises. In summary, the real estate market this year is expected to experience a ‘bumpy’ trend oscillating between slight increases and slight decreases.
Yoon Ji-hae, Senior Researcher at Real Estate R114, said, “It is difficult to expect housing prices to fall during periods of redevelopment and reconstruction activation,” adding, “Especially in the high-priced markets such as Gangnam reconstruction complexes, unless there are signs of price declines, the overall market will not shift to a bearish trend.”
The fact that homeowners excited by expectations of reconstruction activation are withdrawing their listings is also confirmed by statistics. According to the apartment transaction data platform Apartment Real Transaction Price (Asil), from the 9th to the 15th?the period of the presidential election?the listings in Bundang-gu, Seongnam-si, Gyeonggi Province, a first-generation new town, decreased by 2.4%, from 3,385 to 3,305. During the same period, listings in Gunpo-si, Gyeonggi Province fell by 3.1%, and listings in Ilsan Dong-gu, Goyang-si, Gyeonggi Province also decreased by 2.0%. Listings in Nowon-gu, Seoul, which includes the aging complex-dense area of Sanggye-dong, dropped by 2.0%. Yangcheon-gu, home to Mok-dong where many reconstruction projects are underway, also saw a 1.8% decrease in listings during this period.
This is a markedly different atmosphere compared to before the presidential election, when a transaction freeze and accumulation of listings accelerated. The growing expectations for reconstruction in Seoul, driven by issues such as floor area ratio deregulation, are interpreted as having spread this mood to surrounding complexes. Furthermore, with the recent announcement by Seoul City to abolish the so-called ‘35-floor rule’ that capped apartment building heights at 35 floors, the market’s enthusiasm for reconstruction activation has been greatly heightened.
Park Won-gap, Senior Real Estate Specialist at KB Kookmin Bank, predicted, “The biggest theme during the five years of the Yoon Seok-yeol administration will likely be reconstruction,” adding, “The reconstruction market will become the barometer and weather vane for future housing prices.”
During his presidential campaign, President-elect Yoon promised to revitalize reconstruction, redevelopment, and remodeling projects through measures such as exempting detailed safety inspections for apartment complexes over 30 years old, preventing excessive donation requirements, easing the reconstruction surplus profit recovery system, and enacting a special law for first-generation new towns.
Ham Young-jin, Head of the Big Data Lab at Zigbang, said, “While we need to observe legal amendments and the realization of pledges, it is currently predicted that a stable market will unfold in the second half of this year, centered on aging complexes built in the 1980s along the Han River and in the Gangnam area.” However, he added, “Due to interest rate hikes, credit regulations, and concerns over price peaks, the housing market atmosphere is subdued, limiting the possibility of a significant short-term increase in transaction volume.”
Senior Specialist Park also forecasted, “Statistically, rather than a decline in housing prices, a box-range market with irregular repetitions of slight decreases and slight increases is expected to appear.”
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