Hannam 3 District Management Disposition Imminent... Why Did the Premium 'Halve'?

Business Resumes as Injunction Request by Commercial Association Members Dismissed
After Many Trials, Relocation Expected 20 Years After New Town Designation
Transfer of Member Status Not Allowed After Official Approval... Urgent Sales Appear

The largest redevelopment project in history, ‘Hannam 3 District’ in Yongsan-gu, Seoul, is on the verge of receiving management disposition approval, the final hurdle before relocation and demolition. The project is gaining momentum again as the court ruled in favor of the association regarding the provisional injunction filed by some commercial unit members. However, due to the sluggish real estate market and the emergence of urgent sale properties that cannot be traded after management disposition approval, the premium has been halved compared to its peak.

According to the maintenance industry on the 2nd, Hannam 3 District is expected to receive approval for the management disposition plan from Yongsan-gu Office by the end of this month and plans to start relocation as early as this fall. Initially, management disposition approval was expected in February, but it was delayed as some commercial unit members filed a provisional injunction to suspend the effect of the management disposition general meeting at the court. As a result, the injunction was canceled on the 26th of last month, allowing the redevelopment project, which had been stalled for about two months, to regain momentum.

Panorama of Hannam District 3

Hannam 3 District is the largest redevelopment project ever, constructing 5,816 households in the area of Hannam-dong 686. The total project cost reaches 8.3 trillion KRW. Although it was designated as a New Town district in November 2003, the project was delayed due to conflicts among association members and various internal disputes. The project implementation approval was only granted in March 2019, when the original owners, who were in their 60s at the beginning, had reached their 80s. In June 2020, after overcoming the cancellation of the contractor selection due to overheated competition, Hyundai Engineering & Construction was finally selected as the contractor.

After many twists and turns, the management disposition approval that Hannam 3 District is about to receive is considered the last step before relocation, demolition, and general sale in the redevelopment process. Although the project uncertainty has almost disappeared, current market prices have significantly dropped compared to the real estate boom two years ago. For properties eligible for a 59㎡ exclusive-use area occupancy right, the premium?calculated by subtracting the right value from the sale price?has fallen from the previous peak of around 1.2 billion KRW to about 600 to 700 million KRW.

The real estate market downturn has hit redevelopment projects hard, and since it is practically difficult to transfer association member status after management disposition approval in the speculative overheated district that includes Yongsan-gu, urgent sale properties have flooded the market. Owners seeking capital gains rather than actual residence must sell their properties before management disposition approval. As a result, the premium has been halved.

An industry insider said, "Although properties owned by owners who have held for more than 10 years and lived in them for more than 5 years can be traded even after management disposition approval, they are few, so there is a high possibility that premiums will surge in the future." He added, "Given the current prices, now might be a good time to invest, but caution is needed because to avoid forced cash settlement, the balance payment must be made and ownership transferred before management disposition approval."