News on lifting redevelopment rules sparks activity

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News on lifting redevelopment rules sparks activity

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Park Joon, who runs a real estate agency in Jamsil-dong, southeastern Seoul, was surprised at sale cancellations at Jamsil Jugong 5 Apartments on Thursday morning. Until Wednesday, there had been more than 10 apartments for sale, but three of them were taken back by their owners right after the government said it would eliminate outdated regulations on redevelopment projects.

“I got so many calls from owners asking how much prices would go up, and from potential buyers asking when is the right time to buy one [before prices go up],” Park said.

On the same day, Kim Kyoung-sook, a 45-year-old housewife living in Banpo-dong, Seocho District, visited a realtor to ask about profitable redevelopment projects.

“If you want to have a new apartment in Seoul, nothing is better than redeveloped ones,” she said. “I think I have to hurry before prices start rising.”

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The real estate redevelopment market is heating up after the Ministry of Land, Infrastructure and Transport announced on Wednesday it will lift two major restrictions that were introduced in 2006 to quash speculative bubbles in the property market: Heavy levies on the increased value of redeveloped apartments and percentage requirements for smaller units.

The market immediately reacted to the latest announcement.

More consumers visited real estate agencies near apartments that are planned for redevelopment.

“Those who have been waiting are starting to make purchases,” said Kim Soo-bok, a realtor in Godeok-dong in Gangdong, the far eastern side of Seoul.

Prices also are starting to budge.

Jamsil Jugong 5 Apartment units jumped around 20 million won ($18,663) Thursday, compared to a week earlier.

“A 85-square-meter unit to be reconstructed surged more than 10 million won to reach 595 million won today,” said Jang Yoo-shin, a realtor in Gaepo-dong, southern Seoul.

Reconstruction committees held temporary meetings after the government’s announcement to discuss how it might affect their profits.

“At a meeting of representatives, we agreed to accelerate our project, considering that the last hurdle is now gone,” said an official in Godeok-dong.

Scheduled projects in Gangnam District and southern Seoul welcome the government.

Because the value of redeveloped apartments in those areas has surged, homeowners had to pay heavy levies, sometimes more than 100 million won.

“In Gangnam, homeowners were not happy when their house prices rose because they were afraid of paying the levy,” said an official at a reconstruction committee meeting in Gangnam District. “They are now very happy with removal of the levy.”

The lifting of the percentage restriction on smaller apartments is good news for apartment complexes that are composed of large units. In a redevelopment project of an old apartment complex that was comprised of units bigger than 85 square meters (915 square feet), some owners were reluctantly allotted smaller units than they had previously owned.

Especially in Gaepo-dong, some homeowners who wanted to have their apartments expanded through redevelopment were strongly opposed to Seoul city government’s requirement that 30 percent of the total units be small apartments.

Northern Seoul is also expected to benefit from the measures.

A realtor in Nowon District said he received three or four inquiries from buyers of apartments on track to undergo reconstruction after the government announced the plan.

In Korea, redevelopment was a major driver of housing prices during 2001-2. At the time, residents of 29 apartment complexes in Seoul formed committees to turn their old apartments into new and bigger ones. In 2006, when redevelopment fever reached its peak, 24 apartment complexes were approved for reconstruction.

Currently, there are few available reconstruction projects.

BY AN JANG-WON AND HWANG YUI-YOUNG [ssh@joongang.co.kr]
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