"Increase in Sale Prices Falls Short of Expectations"
Limitations in Resolving Conflicts with Bunsangje Reform
Association Proceeds with Executive Dismissal Process
Utilizing August Loan Maturity Extension Option
On the 17th, the Dunchon Jugong construction site as seen from Lotte World Tower Seoul Sky in Songpa-gu, Seoul. Photo by Jinhyung Kang aymsdream@
[Asia Economy Reporter Hwang Seoyul] The reconstruction project of Dunchon Jugong in Gangdong-gu, Seoul, which has been embroiled in internal conflict, has come to a standstill. The government's plan to reform the price ceiling system for pre-sale apartments does not seem to help resolve the conflict. On the contrary, a new conflict variable has been added as the dismissal of the executive committee within the union is being rapidly pushed forward.
On the 29th, after compiling industry sources related to Dunchon Jugong, analysis suggests that the recent reform plan of the pre-sale price ceiling system is unlikely to act as a positive factor in resolving the Dunchon Jugong conflict. The internal conflict within the union was triggered by the price ceiling system, but the limited scope of price increase makes it difficult to resolve. The pre-sale price set by the union in 2019 was 35.5 million KRW per 3.3㎡, and applying the government's expected average increase rate of 2% would result in a total increase of about 710,000 KRW per pyeong.
This level is widely considered to fall far short of the union's expectations. An industry insider familiar with Dunchon Jugong stated, "There might have been expectations that the losses incurred after the construction halt could be resolved through a price increase, but the increase seems smaller than expected," adding, "This will not work in favor of the union."
In this situation, the Dunchon Jugong Union Normalization Committee, acting as an emergency countermeasure committee, is accelerating the replacement of the union's executive committee. On the 27th, they received dismissal proposals from more than one-tenth of all union members, meeting the requirements to convene a dismissal general meeting, and they intend to complete the dismissal process by the end of August. This is to negotiate with the main creditors to extend the maturity date of the project loan, considering the loan maturity at the end of August.
The Normalization Committee plans to quickly finalize the general pre-sale schedule after dismissing the union executives to resolve conflicts with the construction business group, but this also seems difficult to schedule within this year. This is because procedures such as the review of the pre-sale price and confirmation of the construction period extension remain. The construction business group stated, "To announce the general pre-sale, the move-in date must be confirmed," and added, "Even if a decision to resume construction is made, it is difficult to proceed with the project immediately, so the extension period of the construction schedule must be considered."
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