[Report] "House Prices Are Falling, Who Would Buy Just Because Rebuilding Regulations Are Eased?"

On the 4th, Visiting 'Taereung Useong' Benefiting from Reconstruction Regulation Easing
Fundraising Started for Safety Inspection by Promotion Preparation Committee
No Transactions Due to Buyers and Sellers Having Different Expectations

[Asia Economy Reporter Onyu Lim] "It's surprising that the reconstruction safety inspection can be passed. We've started collecting funds from residents, but no one has come to view the houses yet. I think the high interest rates are preventing buying demand from picking up." (An official from real estate agency A in Gongneung-dong, Nowon-gu, Seoul)

On the 4th, we visited Taereung Woosung Apartment in Gongneung-dong, Nowon-gu, Seoul. Nearby real estate agencies appeared quiet despite the government's announcement on the same day about easing the 'housing reconstruction safety inspection standards.' An official from agency A said, "Even though there are some properties listed at bargain prices for quick sale, there have been no inquiries for months," adding, "Since the economy is not doing well, I don't think the reconstruction issue will lead to transactions or rising house prices."

Taereung Woosung was judged to have failed the reconstruction last year, but this regulatory easing has made a revival possible. As a follow-up measure to the 'Rationalization Plan for Reconstruction Safety Inspection' announced by the Ministry of Land, Infrastructure and Transport in December last year, starting from the 5th, the weight of structural stability in the evaluation criteria will be reduced, and conditional reconstruction judgments will only undergo an appropriateness review (secondary safety inspection) if there are serious defects. Accordingly, in Seoul, four places that previously received maintenance-only (no reconstruction) judgments, including Taereung Woosung, Mok-dong 9 and 11 complexes in Yangcheon-gu, and Gwangjang in Yeouido-dong, Yeongdeungpo-gu, can now pass the safety inspection.

The easing of the stringent detailed safety inspection regulations, once called the 'big nail,' has opened a path for reconstruction projects that were previously blocked. In fact, the Taereung Woosung Reconstruction Promotion Preparation Committee approved the application for a detailed inspection and started fundraising from the 2nd. Additionally, Godeok Jugong Complex 9 in Myeongil-dong, which failed the secondary safety inspection in June 2021, has already applied for a preliminary safety inspection at Gangdong-gu Office, and the Mok-dong 9 complex has begun collecting residents' consent forms for the preliminary safety inspection.

However, the market views the impact of the reconstruction regulation easing on transaction activation or house price fluctuations as minimal. Unlike the real estate boom period when house prices fluctuated sharply on expectations of regulatory easing, currently, it is the interest rates, not sentiment, that determine the market atmosphere.

Park Won-gap, Senior Real Estate Specialist at KB Kookmin Bank, said, "During a real estate slump, easing regulations does not make house prices react sensitively," adding, "Some homeowners may raise asking prices or withdraw listings, but with interest rates still high, it is difficult to stimulate buying demand."

In particular, on-site officials point out that the 'different dreams' between buyers and sellers are hindering transactions. An official from real estate agency B near Taereung Woosung said, "One side is waiting for house prices to fall, while the other sees regulatory easing as good news and is holding out, so transactions inevitably do not happen."