Pushed Out by Reconstruction and Abandoned by Builders... Remodeling Faces Neglect

[Asia Economy Reporter Cha Wanyong] Domestic apartment remodeling projects have become sidelined. Following the government's announcement of the ‘Special Act on the Maintenance and Support of Aging Planned Cities,’ which significantly lowers the threshold for reconstruction safety inspections and allows a floor area ratio of up to 500%, some complexes that were pursuing remodeling projects have withdrawn or shifted to reconstruction.

Recently, even construction companies that aggressively pursued remodeling projects are reluctant to take on new orders due to interest rate hikes and rising material costs. Some construction companies have even abandoned remodeling construction rights they had already secured.

According to the maintenance industry on the 28th, the remodeling promotion committee of Geoyeo 1 Complex in Songpa-gu, Seoul, plans to hold an ‘Extraordinary General Meeting to Decide on the Dissolution of the Geoyeo 1 Complex Remodeling’ on the 11th of next month. As the real estate market deteriorates due to economic recession, interest rate hikes, and increased construction costs from rising material prices, resident opposition to remodeling promotion has intensified. Among some residents, voices are emerging to shift from remodeling to reconstruction through this extraordinary general meeting.

In Gangseon 14 Complex Doosan in Ilsanseo-gu, Goyang-si, Gyeonggi Province, some residents have been collecting ‘Consent Forms Opposing Remodeling’ since the announcement of the 1st New Town Special Act earlier this month, demanding reconstruction. Similarly, voices calling for the withdrawal of remodeling promotion have grown in Hangaram Complex and Mokryeon 2 Complex in Dongan-gu, Anyang-si, Gyeonggi Province, as well as Sejong Jugong 6 Complex in Sanbon, Gunpo-si, Gyeonggi Province.

The area around Ichon-dong, Yongsan-gu, Seoul, where remodeling promotion complexes are concentrated, is struggling to gain momentum. Currently, Hangaram Apartment and Kolon Ichon Apartment have completed the establishment of their associations and selected construction companies, but they have yet to set project schedules. Hangang Daewoo Apartment has been pursuing remodeling since 2019 but has not yet obtained approval for association establishment.

A representative of a real estate agency in Ichon-dong said, “Several apartment complexes in the Ichon-dong area are promoting remodeling projects, but due to the recent downturn in the real estate market and rising material costs, association members are burdened with additional contributions, creating an atmosphere of project suspension.”

Construction companies are also cautious about remodeling orders. The rise in material and labor costs has increased construction expenses, worsening the profitability of remodeling projects.

An official from a major construction company said, “Remodeling is less profitable than reconstruction, and with recent construction costs rising so much, it is difficult to make a profit unless the scale is considerable. We plan to focus our efforts on securing orders only for complexes where profitability is guaranteed by carefully considering scale and location.”

Among construction companies, there have been cases of abandoning remodeling construction rights already secured. Ssangyong Construction, which holds the top record for remodeling completions, recently gave up its status as the preferred negotiator for remodeling at Seorak Jugong 8 Complex in Gunpo-si, Gyeonggi Province. Prior to this, it voluntarily returned the remodeling construction rights for Sindonga Apartment in Seongdong-gu, Seoul.

A Ssangyong Construction official said, “In the case of Seorak Jugong 9 Complex, internal reviews concluded that the complex’s ground is rocky, making construction difficult. Considering the rapid interest rate hikes and rising construction material costs, we plan to approach new orders conservatively.”