[Real Asset Strategies] Securing a Home in Seoul Despite Regulations: Early-Stage Redevelopment, Auctions, and Officetels [Real Estate AtoZ]

"Early-Stage Redevelopment" and "Living Tech": High-Risk, High-Return Strategy
Major Investment Destinations Include Sanggye and Banghwa New Town
Association Member Status Transfer Possible for Institution-Executed Auction Properties
Experts: "Strategic Approach Needed Based on Investor Profile and Financial Capacity?Be Prepared for the Long Term"

Following the government's "10·15 Real Estate Measures," restrictions on the transfer of association member status and requirements for actual residence in land transaction permit zones have been tightened. The number of properties available for sale continues to decrease. In this environment, "alternative strategies" that offer practical opportunities to enter the Seoul real estate market are attracting attention. Early-stage redevelopment investments, court and public auctions, and large officetels are among the most notable options. Experts advise that each of these approaches has distinct advantages, disadvantages, and risks, so investors should adopt a strategic approach that matches their risk tolerance and financial capacity.

"Early-Stage Redevelopment" and "Living Tech": Low Initial Investment, High Risk

The most commonly mentioned method for entering the Seoul real estate market with limited capital is to secure properties in redevelopment zones before the restrictions on transferring association member status take effect. In redevelopment projects, transactions are freely permitted until the management disposition approval is granted. In particular, areas designated for the "Rapid Integrated Planning" initiative benefit from administrative support from the Seoul Metropolitan Government, resulting in faster project timelines. "Living tech"-living in aging row houses or villas to acquire preemptive rights for new units-is especially suitable for these areas.

Notable examples include "Sanggye New Town" in Nowon-gu and "Banghwa New Town" in Gangseo-gu. Sanggye New Town is divided into six zones, all undergoing redevelopment. A large-scale complex with approximately 10,000 units is planned for the future. The high sales prices and market values of apartments in zones 4 and 6, which have already been occupied, are fueling expectations for the remaining zones. The other Sanggye zones-1, 2, 3, and 5-have recently normalized their associations or selected construction companies, accelerating project progress. All of these zones are still in the pre-management disposition approval stage and are therefore exempt from the restrictions on transferring association member status. With proximity to Bulamsan Station on Subway Line 4 and the Junggye Academy District, the location is excellent, and the initial investment is relatively affordable at around 300 million won.

Banghwa New Town is also drawing renewed attention. Redevelopment is underway in zones 2, 3, 5, and 6. The area is notable for its double subway access, with both the Airport Railroad and Line 9, and is sometimes referred to as the "Second Magok." Of the four zones, only zones 2 and 3 are exempt from the restrictions on transferring association member status. Zone 2, which has been progressing the slowest, recently finalized its "Rapid Integrated Planning" proposal and is now moving forward. The market price for a property that secures preemptive rights for an 84-square-meter unit is around 1 billion won. Unlike Sanggye, where small-scale investments are still possible, prices here have risen to levels similar to neighboring areas (1.4 to 1.5 billion won), as the project outline has become clearer. Nevertheless, Banghwa New Town is frequently recommended due to its future potential.

However, in the case of redevelopment projects before management disposition approval, the project period can exceed ten years until move-in. Park Wongab, Chief Real Estate Specialist at KB Kookmin Bank, stated, "Early-stage redevelopment investment is a high-risk, high-return strategy suitable for investors who can endure 'living tech' and long-term capital lockup." Yang Jiyeong, Senior Specialist at Shinhan Premier Pathfinder, said, "If the location is good, time will work in your favor in early-stage redevelopment. However, given the clear value, investors must be prepared to accept the inconvenience of living on-site and the risk of project delays in advance."

"Regulation-Free Pass" via Auctions: Land Transaction Permits and Association Member Status Transfer Possible

Alongside redevelopment, court auctions are frequently discussed. As auction bid rates have surged recently, investor interest is intensifying. Last month, the average auction bid rate for Seoul apartments reached 102.3%, the highest in three years and four months. In particular, last month, the Doosan Apartment in Geumho-dong, Seongdong-gu, was auctioned off at 160% of its appraised value, marking the highest bid rate in Seoul this year.

As demand to avoid the actual residence requirement under the land transaction permit system combines with demand for upgrading homes, the auction market for Seoul apartments is heating up. The rapid decrease in available listings in regulated areas makes purchases difficult, but auctioned properties do not require a land transaction permit, which is a major advantage. Furthermore, for court and public auction properties executed by institutions, the restriction on transferring association member status does not apply. This means that successful bidders can inherit association member status.

Lee Juhyun, Senior Researcher at GGI Auction, commented, "Auctions provide a pathway to circumvent regulations and allow for the transfer of association member status. However, in auctions between individuals rather than institutions, such transfers are not possible, creating a risk of cash settlement. With regulations being strengthened to prevent illegal transactions, it is essential to conduct thorough due diligence on property rights."

Regulatory Blind Spot: "Large Officetels"-70% LTV, No Loan Limit

Large officetels are emerging as a real estate type benefiting from the 10·15 regulations. According to KB Real Estate, as of November, the average sale price for officetels in Seoul reached 305.98 million won, setting a new record high in three years and one month. In particular, officetels with a floor area of 85 square meters or more-considered alternatives to apartments-rose 5.9% year-on-year, outpacing smaller units.

Officetels are governed by the Building Act, not the Housing Act, so they are not counted as residential units. As non-apartments, they are also exempt from land transaction permit requirements and have no obligation for actual residence. The loan-to-value (LTV) ratio is set at 70%, and there is no cap on loan amounts. Unlike apartments in regulated areas, which have a loan limit of 600 million won, a 40% LTV, and a two-year actual residence requirement, officetels are free from such restrictions.

Ham Youngjin, Head of Real Estate Research Lab at Woori Bank, said, "Demand for large officetels as alternative housing to apartments is increasing, and rental yields are also rising, making them an attractive investment option." However, he cautioned that these assets are sensitive to policy changes. Yang Jiyeong added, "Officetels have the characteristics of 'theme stocks' and cannot fully replace apartments, which are the core of the housing market. Since they are more affected by short-term supply-demand dynamics and policy changes than by structural growth, investors should be careful about 'chasing the market.'"