Perspective view of 'Seohui Starhills The Dohwa' in Dohwa-dong, Michuhol-gu, Incheon. [Photo by Sales Homepage]
[Asia Economy Reporter Cha Wanyong] Cases where developers (project operators) consider canceling the resident recruitment announcement in complexes that have proceeded to the main contract stage have occurred in the metropolitan area following regional areas. Canceling the resident recruitment announcement is a measure taken by complexes that failed to sell units to minimize losses by withdrawing the project, which occasionally happened during periods of extreme real estate market downturns in the past.
According to the sales industry on the 9th, ‘Seohui Starhills The Dohwa’ in Dohwa-dong, Michuhol-gu, Incheon, which conducted sales in July, is reportedly informing recent contract holders about ‘contract termination by mutual agreement’ to cancel the resident recruitment announcement.
Seohui Starhills The Dohwa is a complex that offered a total of 144 units for sale, including 73 units for general supply, and recorded a competition rate of 3.4 to 1 with 249 applicants for the general supply recruitment. However, due to the real estate market downturn, a large number of units remained unsold, and although non-priority and first-come-first-served subscriptions were conducted, even these faced difficulties.
Accordingly, the project operator (Yuseong TNS) and the construction company (Seohui Construction) decided to cancel the resident recruitment announcement after internal review and plan to submit an application to the local government to revoke the recruitment approval. They judged that canceling the project would reduce losses more than continuing to fill unsold units and proceeding with construction.
The operator and the construction company plan to refund deposits and pay penalties according to contract termination procedures once the local government grants approval to cancel the resident recruitment announcement.
Previously, a case of considering cancellation of the resident recruitment announcement also occurred in Gwangyang, Jeollanam-do. ‘The Sharp Gwangyang Lacpoem’ in Gwangyang-si, Jeollanam-do, which was sold in October, recently sent certified letters and text messages to contract holders stating that ‘cancellation of resident recruitment and sales postponement are under review.’
Due to the recent sharp interest rate hikes and the resulting contraction of the sales market, the construction will proceed as planned, but the sales timing will be adjusted.
The real estate and sales industries are taking the consecutive occurrences of resident recruitment announcement cancellation considerations in both regional and metropolitan areas very seriously.
A sales industry official said, “Usually, if 60% of residents are secured during sales, losses do not occur,” adding, “In the cases of Incheon and Gwangyang, the sales market is so difficult that even with non-priority and first-come-first-served sales, it is judged difficult to secure 60%, leading to the decision to cancel the resident recruitment announcement.”
Meanwhile, cases of resident recruitment approval cancellation are extremely rare. They occasionally occurred during the severe real estate market downturn caused by the global financial crisis from 2008 to 2012 and from 2016 to 2017. In 2017, ‘Namwonju Dongyang Apart Edu City’ informed prospective buyers of the cancellation of the contract signing schedule just before the official contract date.
In 2016, ‘Dongtan 2 New Town Sinan Insville Ribera 3 and 4’ requested cancellation of resident recruitment approval after failing to fill the second priority recruitment and experiencing poor contract rates. An earlier case was in 2011 when ‘Well County Complex 5’ in Songdo International City canceled its resident recruitment approval.
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