New projects breathe fresh life into Yongsan

After years of tepid interest, the real estate market of Yongsan, Seoul, is now expected to reach a boiling point.

Property sales in the area had been in an extended slump after the cancellation of the International Business District (IBD) development project two years ago swept away dreams of Yongsan becoming the tourism hub of Northeast Asia.

Today, however, there is a resurgence of interest in the area due to new development plans which include the reconstruction on the former U.S. Army base and adjacent Seobuichon-dong.

Housing and shopping arcade sales are rising. “Yongsan will become a place representative of Seoul with super-sized parks and high-rise buildings once the proposed plans are accomplished,” said Kim Seung-bae, current COO of Fides Development, a real estate company.

A 61-year-old Gangnam resident surnamed Jeong, has been left empty-handed in his attempts to buy properties for investment. The recent surge in interest and accompanying rise in prices, have made finding suitable properties almost impossible.

Expectations for high-rise buildings in areas around Seobuichon-dong and Yongsan Station have played the role. “I’m not expecting a loss [from the investment], because prices here are still cheaper after the withdrawal of the IBD development project and new reconstruction plans are coming up,” Jeong explained.

High-rise apartments and officetels reconstructed by Samsung C&T and Daewoo E&C, at Yongsan District Areas 2 and 3 near Yongsan Station, were left unsold until the end of last year. But now the residences are almost full. “Sales for the officetels were tough last year, but the demand spurred at the beginning of this year and just last month all lots were filled,” an official from Samsung C&T said.

The cancellation of the IBD development project was a major blow to Yongsan. The plans involved the construction of housing, offices and cultural facilities at the Rolling Stock Workshop site behind Yongsan Station with an estimated budget of 51 trillion won ($42.85 billion).

Disappointment over the loss of the project was amplified by the loss of appeal and interest in the area that dragged property prices down.

In the late 2000’s, 3.3 square meters or one pyeong (35.52 square feet) which used to be worth 150 million won lost half its value in Yongsan. City Park apartment complex with units which have an area of 116 square meters at Hangangno, Yongsan, suffered a price drop from 1.4 billion in 2008 to 1 billion last year.

According to KB Kookmin Bank, house prices in Yongsan fell for five consecutive years until last year. “Those who took part late in the investment were willing to sell, but the purchase rate was very low,” said an official from a brokerage agency in Hangangno.

But recent sale prices show the air is changing around the area. This May, City Park apartments sold for an average of 1.14 billion won and kept rising up to 1.2 billion won. Wanggung apartments, with 102 square meters of space in Ichon-dong, Yongsan, also saw a rise in price from 885 million won this July to 950 million today.

Five consecutive years of price declines appear to be slowly turning around, showing a 1.8 percent increase from the beginning of this year until the end of last month.

As well as sales, the number of sales is also rising in the area.

According to the Seoul Metropolitan Government, this year’s trading volume shows that 1,573 deals went through until August, slightly less than 1,679, the total volume for the whole of last year. While only 10 houses were sold last year at Woolim FillU Apt. at Hangangno 3-ga, 13 houses have already been sold this year. Jungsan 1 Cha Apt. in Seobuichon-dong, which recorded no sales last year, sold two houses this year.

The government’s plan, released early this year, to boost investment by transforming the current U.S. Army base into a new business district has played a major role in easing the downward pressure on the market.

According to the development plan, the present United Nations Command (UNC) site, with a total area of about 51,753 square meters, east of the Army base, will become a low density business district with buildings a maximum of 70 meters (76 yards) high or 20 stories tall. Another seven to eight high-rise buildings about 60-70 stories high will be constructed at the Camp Kim site, with a total area of 48,399 square meters, west of the Army base.

The Main Post and South Post in the central area, which occupy 2.43 million square meters, will be remodeled into parks scheduled to be open in 2019. The eastern transportation motor pool site, comprising 78,918 square meters, is also part of the reconstruction.

To speed up the process, the government is planning to select a private operator for the UNC and Camp Kim site reconstruction this year.

Development plans for Seobuichon-dong near the Han River are still to be established. The area, a former part of the IBD zone, has suffered from the project closing down. Seoul City plans to upgrade the area into a semi-residential area. Once authorized, reconstruction up to 35 stories is possible for each building.

According to city officials, a maximum 30 stories of reconstruction will be allowed for Jungsan Apt. and 35 stories for Ichon and Mido Yeollip Apt. Other buildings 35 stories high and a government office building 30 meters tall will be located in Ichon-1-Special Planning District.

Soon, forests of high-rise buildings may surround Yongsan District. Samsung C&T and Daewoo E&C are already under construction with apartment and commercial complexes up to 40 stories high at Yongsan District Areas 2 and 3, and three 39-story hotels will also be built near Yongsan Station.

Conglomerates are also planning to relocate their company buildings to Yongsan in step with the opening of the largest duty-free shop in the country in Yongsan Station. New tourist attraction developments will be built around the Han River near Yongsan, at the opposite side of Yeouido. “With new tourist attractions and self-sufficiency to be retained, further impact on the area’s real estate market is expected,” said Park Won-gap, a real estate analyst at the KB Kookmin Bank.

But experts express caution over the plans. If the real estate market is in depression, development plans could be delayed or even cancelled, they say. The former IBD development project began in the mid-2000s when the market was booming, but by the plunge in the real estate market due to the global crisis in 2008, forced cancellation of the plan.

Plans for the U.S. Army base site where high-rise buildings are under way are subject to real estate market changes since government is handing the project to a private operator.

“If the real estate market is stagnant, development plans particularly for high-rise buildings can be shaken, since buildings 60-70 stories high require far more investment compared to general buildings,” said Lee Nam-su, a real estate specialist at Shinhan Investment Corp.

“It is true that conglomerates’ office relocations and new duty-free shops bring big potential for other development business as well,” Kwon Dae-joong, professor at the department of real estate in Myungji University, advised, “however, regarding the characteristics of real estate development, there should be a careful approach since market support is crucial to realize the plans.”

BY HWANG JEONG-IL, HWANG EUI-YOUNG [kim.jeehee@joongang.co.kr]