Exit Blocked for Association Members... Broad Regulations Inevitably Delay Redevelopment Projects [Real Estate AtoZ]

All of Seoul Designated as Speculative Overheated Districts... Restrictions on Transfer of Association Membership
Applies to 160,000 Units in Seoul Redevelopment and Reconstruction Projects
Brokerages Report "Flood of Inquiries from Multi-Home Owners"
Blockade of Investment Demand Inflow, Concerns Over Intensifying Internal Association Conflicts

Following the announcement of the October 15 real estate measures, all areas of Seoul have been designated as speculative overheated districts, significantly expanding the regions where the transfer of membership status in redevelopment associations is restricted. Concerns are being raised that this could block the exit route for association members who cannot afford to pay their share of the costs, restrict property rights, and potentially disrupt housing supply through redevelopment projects.

Harder to Sell and Exit in Redevelopment Complexes Where Associations Have Been Established

According to the industry on October 17, with all of Seoul now designated as a speculative overheated district, transfers have become impossible for Mok-dong Complex 6, which received approval to establish an association in May, and Complexes 13 and 14, where project implementer announcements were recently completed. The same applies to Daegyo Apartment in Yeouido, where the association was established in January last year; Gwangjang Apartment (38-1) in Yeouido, which received association establishment approval in August 2024; Gwangjang Apartment (28), which received a project implementer announcement in 2019; and Gongjak Apartment, which completed the designation of a project implementer in 2023. According to the Seoul Metropolitan Government, as of the end of August, there were 139 districts (108,387 units) in Seoul with completed approval for the establishment of redevelopment associations, and 75 districts (50,577 units) with completed management disposition approvals.

With these areas designated as regulated zones, it is now impossible to transfer association membership status in redevelopment zones with association establishment approval and in redevelopment areas with approved management disposition plans. While properties can still be sold, buyers cannot obtain association membership status and will be subject to cash settlement. Exceptions are only made for single-home owners who have met the 10-year residency and 5-year ownership requirements after association establishment approval, as well as in cases of overseas emigration, inheritance, or division.

An official from a real estate agency near Mok-dong Complex 5 stated, "Complex 5 is about to select a trust company as the project implementer, so owners are extremely anxious after hearing the news of the regulations. In particular, there has been a flood of inquiries from multi-home owners. Many are asking whether there is any point in selling if association membership cannot be transferred, and are seeking advice on whether they should hurry to put their homes on the market." An owner in a Mok-dong redevelopment complex said, "With all of Seoul designated as a speculative overheated district, there is even joking among redevelopment association members that perhaps we should slow down the project by ramping up emergency committee activities."

The restriction on the number of housing units supplied to association members is also expected to dampen project momentum. After the designation as a speculative overheated district, association members who are eligible for allocation cannot apply for association member allocation in other redevelopment projects located in speculative overheated districts within five years. For projects applying for project implementation approval for the first time after the regulation, the number of housing units that can be supplied per association member is reduced to one. Previously, association members in overpopulation control areas could receive up to three housing units.

Rising Contribution Costs and Internal Conflicts Are Also Negative Factors

With construction costs rising sharply, the amount each association member must contribute is inevitably increasing, and as it becomes more difficult to exercise property rights, concerns are growing that disputes within associations will become more frequent. An association member of a redevelopment apartment in Yeouido said, "Even if internal conflicts arise, association membership cannot be transferred, so all owners are bound to see themselves as a community of fate that must see the redevelopment project through to the end. Even if you dislike the situation, you cannot leave, so it will take time and effort to resolve internal conflicts."

The Seoul Metropolitan Government also expressed strong concern that the October 15 measures could dampen efforts to expand supply, especially since the city has recently been pushing to accelerate redevelopment projects through initiatives such as the Shintong Planning 2.0. Seoul Mayor Oh Se-hoon also met with the Seoul Redevelopment Business Association on October 16 and said, "Due to the government measures, redevelopment contribution costs may increase." Choi Jin-seok, Director of Housing, pointed out, "New variables such as the issue of transferring association membership status could directly or indirectly affect (housing) demand and supply, potentially disrupting supply."

Song Seung-hyun, CEO of Urban & Economy, explained, "During the redevelopment process, those who cannot afford to pay their share should be able to sell and leave, while those who can afford it come in and pay, ensuring smooth progress. That channel has now been blocked. The reason redevelopment projects in the Gangnam area proceed smoothly is because investment demand flows in easily, but if it becomes difficult to transfer association membership, projects will inevitably face setbacks."

There is also criticism that the restriction prohibiting reapplication for allocation in another project within a speculative overheated district within five years after allocation is excessive. For multi-home owners, if the timing of management disposition overlaps within five years across different project sites, they must dispose of all but one property. However, if they own a redevelopment property with association establishment approval, it is not easy to dispose of it. Kim Jekyung, CEO of Toomee Real Estate Consulting, said, "Multi-home owners with several redevelopment properties are now subject to the five-year reallocation restriction and are in a situation where they must sell. However, since it is not possible to sell properties with association establishment approval, dissatisfaction among association members is likely to grow."