Announcement of Special Law on Safety Inspection and Floor Area Ratio Relaxation
Increased Expectations for Reconstruction Due to Improved Profitability
"Price Raised Due to Deregulation, Leading to Failed Transactions"
"The reconstruction projects in the first-generation new towns, which had been tightly bound, have found a breakthrough."
On the 7th, when the government announced a special law aimed at promoting redevelopment projects in aging residential districts by easing safety inspections and increasing floor area ratios, residents of first-generation new towns such as Bundang in Seongnam and Ilsan in Goyang welcomed it unanimously. There is also a mood that the previously sluggish buying sentiment is beginning to revive. However, in areas like Mokdong in Yangcheon-gu, Seoul, where many safety inspections have recently been passed, there are criticisms that the special measures are less attractive.
◆First-generation new towns "Welcome"…Expectations for increased project feasibility due to floor area ratio relaxation=According to the real estate industry on the 8th, after the release of the ‘Special Act on the Maintenance and Support of Aging Planned Cities’ the day before, expectations for reconstruction projects grew mainly among residents of first-generation new towns. A representative of the First-generation New Town Reconstruction Alliance said, "We broadly welcome the intent and direction to revitalize aging areas through the relaxation of reconstruction regulations," adding, "Until now, reconstruction complexes in first-generation new towns had not even taken the first step, so expectations are high."
There was particularly strong support for the relaxation of floor area ratios. If designated as a special maintenance district, the floor area ratio will be eased from the current maximum of 300% to 500%, allowing more housing to be built. The current average floor area ratios in first-generation new towns are ▶Bundang 184% ▶Ilsan 169% ▶Pyeongchon 204% ▶Sanbon 205% ▶Jungdong 226%, etc. Previously, compared to other areas where reconstruction projects had proceeded, the high floor area ratios limited project feasibility. A resident of Ilsan expressed hope, saying, "If a floor area ratio of over 400% is applied, it will give momentum to the first-generation new towns where project promotion was difficult."
The buying sentiment, which had been quiet for several months before and after the announcement of the special law, also seems to be stirring. A representative of real estate office A near the pilot complex in Seohyeon-dong, Bundang, said, "The pilot complex was the first among first-generation new towns to be occupied and has a high possibility of reconstruction," adding, "Until recently, there were no inquiry calls, but on the day of the special law announcement alone, we received four purchase inquiries." He added, "There were even cases where the selling price was raised by 150 million KRW due to expectations of deregulation, causing transactions to fail."
Some complexes that were pursuing remodeling are also showing signs of shifting toward reconstruction. A representative of real estate office C in Jeongja-dong, Bundang, said, "Hansol Village Complex 6 was pursuing remodeling, but since it is not a place where a union has been established like Complex 5, there is bound to be unrest among residents due to the announcement of the special law."
However, there were also voices of concern regarding large-scale block-level integrated maintenance and the recovery of excess profits. A representative of the First-generation New Town Reconstruction Alliance expressed concern, saying, "In reality, it is not easy to unify opinions even between one or two complexes, so if several complexes with different environments come together, I worry whether progress can be made." Researcher Eun Hyung Lee of the Korea Institute of Policy and Construction Research diagnosed, "There are still obstacles to redevelopment projects in new towns, such as discussions on the recovery of excess reconstruction profits," adding, "If these remain, they could undermine the policy effects of the special law."
◆Mokdong "Many have already passed reconstruction safety inspections..."=Unlike the first-generation new towns, reactions were mixed regarding the application of the special law to aging residential districts in Seoul. In Seoul, areas such as Sanggye, Junggye, and Hagye-dong in Nowon-gu, and Mokdong in Yangcheon-gu meet the criteria for aging planned cities. Ham Young-jin, head of the Zigbang Big Data Lab, predicted, "For Seoul residential districts like Mokdong and Sanggye-dong where the special law can be applied, it would be more advantageous to designate them as leading districts for aging planned cities rather than existing maintenance projects, considering project speed," adding, "These areas can raise floor area ratios to the legal plan level and also increase zoning, allowing high-density, mixed-use development around station areas to improve land efficiency."
On the other hand, on-site voices said that since the special law was originally planned for first-generation new towns, the benefits for aging residential districts in Seoul would not be significant. A real estate agent in Mokdong said, "Except for Complexes 9 and 11, all apartments in the new town area of Mokdong have passed reconstruction safety inspections," adding, "Most are in the third residential zone, so the increase in floor area ratio will not be large."
In Mokdong’s case, since a district unit plan has already been established, there are concerns that re-designating it as a special maintenance district could delay projects. A real estate agent in Mokdong argued, "Complex 6 is proceeding under Seoul’s rapid integrated planning, and other complexes are obtaining consent forms," adding, "At this point, it would be better to proceed quickly using the existing method rather than applying a new law."
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