Eunma's end greenlit after decades of effort just as prices drop

Economy

Published: 20 Oct. 2022, 18:09 Updated: 20 Oct. 2022, 18:54

Eunma's end greenlit after decades of effort just as prices drop

View of Eunma apartment complex in Daechi-dong, Gangnam Seoul, on Thursday. The Seoul city government greenlit the complex of being rebult. [YONHAP]

Eunma Apartments, an iconic housing complex built in 1979, will be torn down and replaced with state-of-the-art high-rise residences.

A committee of 30, including Seoul city government officials, Seoul city council members and a university professor, greenlit the project on Wednesday, approving the demolition of a symbol of Korea's golden age that eventually became an eyesore in one of the city's swankiest neighborhoods.

Eunma, which is located in Gangnam, has 4,424 units in 28 buildings, each 14 stories high. The new buildings will be 35 stories for a total of 5,778 units.

The redevelopment of the aging complex has been more than 20 years in the making, with a union representing apartment owners pushing since 1996 for the project. More than a decade passed before the necessary safety approvals were received.

Late mayor Park Won-soon was against newly built apartments rising more than 35 stories and demanded that more of the new units be set aside for public housing and more space be set aside for green areas.

He also felt that projects in the Gangnam area benefit the rich and would fuel speculation throughout the city.

The approval came as prices in Seoul have started to decline after a period of rapid increases. According to Korea Real Estate Board, apartment prices in the first eight months of the year declined 6.6 percent year-on-year.

This is the sharpest decline since the data were first compiled in 2006.

A 76-square-meter Eunma apartment last month sold for 1.99 billion won ($1.4 million), 24 percent cheaper than an apartment of the same size that sold in November.

It was the first time in nearly two years that an Eunma apartment was sold for less than 2 billion won. The last time was in December 2020, when an apartment was sold for 1.95 billion won.

The proposed look of the newly built Eunma apartment complex. [SEOUL METROPOLITAN GOVERNMENT]

The Woosung Town complex in Junghwa-dong, northeastern Seoul, built in 1986, has been approved for demolition and redevelopment, but it only has 96 units, which will be increased to 223 units.

The latest approval is the first under Seoul Mayor Oh Se-hoon, who was elected last year, and the first under the Yoon Suk-yeol government. They have both promised to increase housing supply with the relaxation of regulations and fast tracking approvals.

Other major apartment complexes waiting on Seoul city government approvals include Jamsil 5 Danji, which is located next to Lotte Tower in Seoul and is another example of an iconic but aging block in otherwise upscale Gangnam.

The complex, built in 1978, has 3,930 units in 30 buildings.

Among the 3 million housing units in Seoul, 20 percent are older than 30.

Housing supply dropped during the Moon Jae-in government.

According to Statistics Korea, the housing supply ratio, which is the number of residential housing units to the total number of households, in Seoul fell from 96.3 percent in 2017 to 94.9 percent in 2020.

The ratio nationwide was 103.6 percent.

While the increase in the number of people living alone may have played a significant role on the undersupply of residential housing, restrictive policies were also a factor.

While Gyeonggi has the largest number of housing units, at more than 4.6 million, 24.5 percent of the total, Seoul has 16 percent.

Other city governments are also speeding up apartment projects and much larger city redevelopment projects.

On Thursday, the Goyang city government said it signed an agreement with the Korean Association For Housing Policy Studies on the redevelopment of Ilsan, one of the first generation New Towns built in the 1990s.

“The reconstruction still involves many steps,” said Kim Hyo-sun, senior real estate analyst at NH Nonghyup Bank, referring to the Eunma project. “There are several key issues that still need to be addressed."

The weak market may also be a factor.

“We had several calls this morning since the news of Eunma broke out late afternoon on Wednesday,” said a realtor in Jamsil, who currently has a landlord trying to sell an apartment at Jamsil 5 Danji. “But no concrete offers has been made.”

Property analysts say that the market could remain weak given the state of the world economy and rising interest rates.

The Bank of Korea earlier this month raised the key policy rate 0.5 percentage points to 3 percent. An additional rate hike is expected to follow in November, the last monetary committee meeting this year.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]