As Housing Prices Fluctuate, Reconstruction Speed Slows... 1st Generation New Towns Feel "Betrayed"

[Image source=Yonhap News]

After saying "a mid- to long-term review task"

Changed stance to "prompt promotion of maintenance projects"

Residents of 1st generation new towns enraged

"Severe aging, implement as promised"

[Asia Economy Reporters Kim Min-young, Kim Hye-min] The Presidential Transition Committee's stance of "not rushing" regarding the easing of reconstruction regulations in 1st generation new towns has stirred strong public sentiment in reconstruction complexes such as Bundang in Gyeonggi Province. Recently, as housing prices in beneficiary complexes including Gangnam in Seoul showed signs of rising amid expectations of regulatory easing, remarks seemingly aimed at calming the situation were made by the transition committee. However, as these remarks led to increased dissatisfaction among 1st generation new town associations, the committee has again been trying to soothe tensions by stating that they are "making efforts to promptly promote maintenance projects," creating a "seesaw game" situation.

Shim Gyo-eon, head of the real estate task force (TF) of the transition committee, said on the 26th, "Regarding the redevelopment of 1st generation new towns, the phrase 'mid- to long-term review task' was used by the chief deputy spokesperson (the previous day), but the president-elect's pledges are proceeding as planned," adding, "We are reviewing various aspects such as rental market controversies due to large-scale relocations, establishment of maintenance plans, and securing relocation-only complexes for 3rd generation new towns." The previous day, Won Il-hee, chief deputy spokesperson of the transition committee, stated, "The reconstruction issue of 1st generation new towns is a matter under mid- to long-term national agenda review by the real estate TF," raising the idea of slowing down the process, and some even speculated that the pledge might be abolished altogether.

In fact, reconstruction complexes of 1st generation new towns, including Bundang, showed an enraged reaction to Won's remarks. Lee Jong-seok, president of the Bundang Reconstruction Association, conveyed the atmosphere, saying, "The association's 43 member complexes' union officials are unanimously saying they feel 'betrayed' and that it's like 'not feeding a fish that has already been caught'." He also pointed out, "If it is for housing price stabilization, it would be better to promote the projects quickly to increase supply."

Another association official said, "Areas with concentrated reconstruction projects such as Yeouido, Ichon-dong, and Mok-dong have both new and old buildings coexisting, but all 1st generation new towns consist of old buildings, and aging progresses over time, which is the problem." Bundang alone has about 74,000 apartment units. Even if the projects proceed in five-year basic plans, it is explained that it will take at least 25 to 30 years until the last reconstruction complex is occupied. The Bundang Reconstruction Association plans to hold a meeting on the 3rd of next month to discuss current issues.

Facing the June local elections, the transition committee seems to be in a kind of dilemma, needing to soothe public sentiment and stabilize housing prices. If they focus on market activation and regulatory easing, they risk being blamed for re-stimulating the real estate market, which has been in a correction phase since the end of last year. In fact, due to expectations of regulatory easing measures by President-elect Yoon Seok-yeol, apartment prices in 1st generation new towns have shifted to an upward trend since the presidential election. According to the weekly apartment trend report by the Korea Real Estate Board, the apartment sales price index in Bundang recorded declines and stagnation until March, right after the presidential election, but rose by 0.02% this week (as of the 18th). Gunpo City in Gyeonggi Province also turned to an upward trend last week and has risen for two consecutive weeks. Ilsandong-gu in Goyang City has also been on an upward trend for four consecutive weeks since the last week of March.

The transition committee's remarks the previous day also seem to reflect this unusual market atmosphere. On the 21st, Seoul City, seeing house prices in Apgujeong, Yeouido, and Mok-dong start to stir with the good news of reconstruction regulation easing, took measures to re-designate these areas as land transaction permission zones.