[Exclusive] Eunpyeong-gu Daejo 1 District Project Resumes with Construction Notification Submitted After 3 Years of Suspension

On the 8th, the construction start report was submitted to the district office,
but the market has changed due to real estate stagnation,
and urgent sales of move-in rights, which have dropped over 100 million won, are not going through.

On the afternoon of the 13th, I visited the redevelopment site of Daejo 1 District in Eunpyeong-gu, Seoul. Through the holes in the temporary wall, excavators and cargo trucks were moving to install container offices at the site. Photo by Hwang Seoyul

[Asia Economy Reporter Hwang Seoyul] The groundbreaking for the redevelopment project of Daejo 1 District in Eunpyeong-gu, Seoul is imminent. It has been nearly three years since the management disposition approval procedure was completed. However, due to the real estate market downturn caused by interest rate hikes, the atmosphere is not as favorable as in previous years. Not only has the premium on the residential rights disappeared, but even quick sales are being ignored in the market.

Temporary Office Set Up After Groundbreaking Report Submission

On the 13th, at the Daejo 1 District redevelopment site in Eunpyeong-gu, Seoul, the once quiet construction site was filled with the electronic sounds of vehicles, "beep~ beep beep~." Peeking through the gaps between temporary walls, a few trucks and excavators were moving. When asked whether construction was underway, a representative from the association said, "We are installing container offices before the groundbreaking starts," adding, "Since the groundbreaking report has been submitted, construction could begin as early as this week."

According to the Daejo 1 District Redevelopment Association and Eunpyeong-gu Office, the association submitted the groundbreaking report to the district office on the 8th. After consultations with relevant departments, the report processing results are expected within a maximum of 20 days. The Daejo 1 District is planned to be developed into 28 buildings ranging from 4 basement floors to 25 above-ground floors, with a total of 2,451 households (including 368 rental units).

Association members expressed relief upon hearing the news of the groundbreaking report submission. Until recently, despite receiving management disposition approval in May 2019 and completing relocation and demolition, construction had not started due to conflicts over construction costs with the contractor. Eventually, in July, the association signed a revised contract with the contractor, extending the construction period from 36 months to 39 months, resolving the conflict for the time being. Additionally, conflicts between association members and the executive committee led to the replacement of the association chairman. One member said, "Because the schedule was delayed so many times, members are quite exhausted," but added, "Now, we are hopeful that construction will finally begin."

No Inquiries for Residential Rights Purchases, Prices Have Dropped Over 100 Million Won

Near the redevelopment site of Daecho 1 District in Eunpyeong-gu, Seoul, a paper stating that a 'chogeupmae' occupancy right is for sale is posted on the bulletin board of a real estate agency. Photo by Hwang Seoyul

Although talks of imminent groundbreaking are circulating, real estate agency representatives unanimously agreed that the market is unresponsive compared to before. The head of Agency A said, "Since before the Chuseok holiday, there have been talks about the groundbreaking report, but even in real estate offices with many inquiries about purchasing residential rights, there have only been two or three cases," adding, "Sellers expect old prices, but buyers, considering the real estate slump, want much lower prices, so they cannot agree on a reasonable price." A representative from Agency B also said, "When the market was good, prices rose and properties were listed at every stage of the project, but now there are no purchase inquiries at all."

Some agency representatives mentioned that due to the poor apartment market, some association members are putting up quick sales despite redevelopment benefits. Indeed, on the bulletin boards of real estate offices lined up in front of Daejo 1 District, there were posts advertising "super quick sale" residential rights. Seoul is designated as a speculative overheating district, and in redevelopment zones, transfer of association member status is prohibited after management disposition approval. However, Daejo 1 District is an exception where residential rights transfer is allowed. This is because only districts that applied for project implementation approval after January 25, 2018, are prohibited from transferring association member status, and Daejo 1 District applied in June 2016.

A representative from Agency C hinted, "For a 59㎡ exclusive area, the premium on residential rights previously rose up to 580 million won, but now it is about 460 million won." He added, "The situation may change later, but currently it seems to be more affected by the real estate slump." The head of Agency D said, "Due to the price ceiling system, rising raw material costs, and interest rate hikes, the profitability of the association members' project has declined, and it seems to be affected by these factors."

Remaining Conflicts Cause 'Concerns, but...'

View of Redevelopment Site of Daecho 1 District from the Hill / Photo by Hwang Seoyul

Meanwhile, there are various opinions about whether remaining conflicts, such as Daejo 1 District being cited as an example of association member operation ineligibility during a recent joint inspection by the Ministry of Land, Infrastructure and Transport and Seoul City, will cause delays in the project. A representative from Agency E said, "The groundbreaking report has been submitted, but construction has not actually started yet, so there are concerns." On the other hand, the head of Agency A expressed, "Although Daejo 1 District was designated due to ineligibility cases, even if investigations are conducted, the project will probably continue."

A representative from the association explained regarding the issue, "We submitted explanatory materials to the district office on the 7th," adding, "Whether it is illegal is a matter to be legally contested." He emphasized, "This is a separate issue from the progress of the groundbreaking."