In the metropolitan area remodeling projects, there have been repeated cases of failing to find construction companies. As difficulties arise in selecting construction companies, some associations pushing forward with remodeling projects are even dissolving. This is interpreted as construction companies becoming more selective in bidding due to rising raw material costs and deteriorating profitability.
According to the maintenance industry on the 13th, the Gangbyeon Hyundai remodeling project in Pungnap-dong, Songpa-gu, Seoul recently began the process of dissolving its association. Although a bid was held last May to select a construction company, no construction companies participated in the bid even after a year and a half. The association is reportedly planning to switch from the existing remodeling project to a street housing maintenance project to secure project feasibility.
The situation is no different in Gyeonggi Province. The Sanbon 8 Complex Seorak Apartment remodeling project in Gunpo City is also stalled due to difficulties in selecting a construction company. The Seorak Apartment project began selecting a construction company in July last year. At that time, the consortium of Ssangyong Construction and SK Ecoplant was selected as the preferred negotiator, but they eventually gave up, causing the construction company selection to fail.
The reason construction companies are taking a conservative approach to bidding is closely related to the sluggish market atmosphere. Since the second half of last year, the real estate market has entered a downturn, construction costs have surged due to rising raw material prices, and prolonged high interest rates have led construction companies to be selective in bidding. Remodeling projects, which are relatively smaller in scale or less profitable compared to reconstruction projects, are being neglected.
Another negative factor for remodeling projects is that Seoul City has recently strengthened regulations related to remodeling. According to the '2030 Seoul City Apartment Remodeling Basic Plan' recently announced by Seoul City, horizontal extensions that could be pursued with only a primary safety inspection will now require a secondary safety inspection, similar to vertical extensions. Additionally, to prevent blocked views and inconvenience caused by remodeling extensions, infrastructure must be improved and facilities opened to enhance public interest. Unlike reconstruction and redevelopment, remodeling projects have not been required to contribute to public benefits. Although the increase in the number of households was small, the lack of public contribution was an advantage of remodeling, but the situation has changed.
In particular, many remodeling complexes in Seoul are preparing for general meetings to decide whether to dissolve their associations within this year, drawing attention to whether they will switch to reconstruction. According to Seoul City Council member Heo Hun and Seoul City, out of 76 apartment complexes pursuing remodeling in Seoul, 23 are required to hold general meetings within this year to decide on association dissolution. According to the amended Housing Act of 2020, if a project plan approval is not obtained within three years after the establishment of an association, a general meeting must be held to decide whether to dissolve the association.
Experts predict that if construction companies continue selective bidding for the time being, remodeling complexes with relatively poor project feasibility may face difficulties in selecting construction companies. Ko Jun-seok, CEO of J.Edu Investment Advisory, said, “Remodeling does not increase the number of households as much as reconstruction, and it is true that it lags behind in terms of project feasibility. Due to the recent surge in raw material prices and high interest rates, construction companies are not actively pursuing remodeling projects, so maintenance projects with poor feasibility may face even greater difficulties in selecting construction companies.”
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