[Post-Reconstruction Measures] ① "All Remedies Fail" Cold Response from No, Do, Gang Districts

Housing Prices Not Rising, Construction Costs Skyrocket
"No Profit Even After Reconstruction"
Despite Simplified Procedures, Real Estate Slump Causes Indifference

Editor's NoteFollowing the announcement of the fast-track system allowing reconstruction to begin after 30 years of completion, old apartments in Nowon-gu, Seoul were considered beneficiaries. However, the atmosphere at the site visited on the 21st was cold. Due to rising construction costs caused by global inflation and the prolonged high-interest rates leading to a real estate market downturn, the mood was assessed as weak for any turnaround. In particular, an analysis by Asia Economy using real estate big data firm 'Asil' on land shares of apartments over 30 years old (excluding row houses and multi-family houses) in Sanggye, Junggye, and Hagye-dong in Nowon-gu showed that the reconstruction profitability of old apartments in Nowon-gu has significantly declined. Experts analyze that the effect of the government's January 10th policy, which greatly eased reconstruction safety inspection regulations, will be limited to some areas with good project feasibility such as first-generation new towns.

"These days, when the real estate market is bad, no remedy works."

Chang-dong in Dobong-gu, Seoul, where large-scale Jugong apartments built after the 1988 Seoul Olympics as part of urban development are concentrated. A week has passed since the government announced it would introduce a fast-track allowing reconstruction to start without safety inspections for apartments over 30 years old, but the atmosphere here, once considered a beneficiary, was this cold.

Wolgye 'MimiSam (Miryung·Miseong·Samho 3rd Phase)' Apartments, the largest reconstruction complex in Nowon-gu

The chairman of the reconstruction promotion committee of a Jugong apartment complex in Chang-dong said on the 18th, "Even if safety inspection regulations are eased, construction costs have soared and housing prices haven't risen, so even if reconstruction is done, the union members won't gain anything, so who would want to take the risk?" He added, "Since last year, we hung a fundraising banner for detailed safety inspections on the apartment exterior wall, but since no funds were raised, we took it down."

Unprofitable Reconstruction... Easing Regulations Is Futile

When President Yoon Suk-yeol declared, "We will completely lift regulations on redevelopment and reconstruction," Seoul City also relaxed the landowners' consent rate required for redevelopment decisions from 66% to 50%. However, the apartments subject to reconstruction remain unmoved. No matter how much regulations are eased, the psychological reluctance to engage in maintenance projects is stronger amid the economic downturn where profitability is not guaranteed.

A representative of another apartment complex's reconstruction promotion committee in Dobong-gu said, "A 20-pyeong (approx. 66 sqm) apartment here costs about 500 million KRW, but reconstruction requires a contribution of about 300 million KRW," adding, "Even if you move into a new 25-pyeong apartment, it would cost a total of 800 million KRW." He said, "Now, 800 million KRW is roughly equivalent to the market price in most areas of northern Seoul," and added, "Given this situation, there is no reason to borrow money at high interest rates to pay the contribution; residents here think reconstruction is just a 'bitter disappointment'."

Sanggye Jugong Complex 5, Nowon-gu, Seoul. Photo by Jinhyung Kang aymsdream@

The atmosphere is similar at Wolgye 'Mimisam (Miryung, Miseong, Samho 3rd phase)' apartments, the largest reconstruction complex in Nowon-gu. At the apartment entrance visited that day, a banner for collecting residents' consent forms for the maintenance plan proposal was displayed. Banners from major construction companies such as Samsung C&T, GS Engineering & Construction, and DL E&C wishing for "swift project progress" were also seen throughout the complex.

However, the old saying that "even the mention of reconstruction makes prices fluctuate" is now outdated. Although the project took its first step by passing the detailed safety inspection in June last year, the sale prices have remained flat. According to KB market prices in December last year, the sale price for a 78㎡ unit was 743.33 million KRW. In December 2022, it was 746.67 million KRW, showing a parallel trend throughout the year.

A certified real estate agent in the complex said, "Usually, after a policy announcement, there would be inquiries and visits to see properties, but now not even a single phone call comes," adding, "In union offices across Seoul, the contribution per pyeong, which was around 4 million KRW, has been adjusted to 5 to 6 million KRW, and with an unknown timeline and high interest rates, there is no response at all."

Delaying Safety Inspections May Worsen Side Effects

There are also voices questioning whether the government's announced policy will be realized. To adjust the mandatory timing for passing safety inspections, which is the key to shortening reconstruction periods, the Urban Maintenance Act must be amended. A real estate industry official said, "It will be difficult for the ruling party to get the opposition, which holds the majority, to pass the bill," adding, "Since many voters are eager for reconstruction, this is nothing more than a populist policy for the general election to gain public favor."

Urban maintenance project officials are also concerned that the timing of safety inspections is only postponed from 'before proposal submission' to 'before project implementation approval,' meaning there are still hurdles to overcome. A representative of a reconstruction promotion association in an old complex in Nowon-gu said, "By the time it reaches 'before project implementation approval,' the promotion committee is formed, the union is established, architectural reviews are completed, and even the design contractor is selected," adding, "If the project is halted because the safety inspection is not passed at that stage, the damage will be enormous." Since safety inspections are not abolished but postponed, it means the government must prepare countermeasures for the side effects that will arise in the future.

A view of Jugong 2nd Complex in Chang-dong, Dobong-gu