“Expectations for reconstruction are a thing of the past”, people worried about the ‘cold wave’ of real estate in Nowon-gu

“I can’t find a buyer despite the low price,” the landlord sighs
Government aims to revitalize the market with a fast-track reconstruction plan
There is no discussion of huge contributions or tenant placement issues

During the real estate surge, apartments in the Nowon-gu area of ​​Seoul, which enjoyed a boom by attracting a large number of young buyers in their 2s and 30s, suffered a sharp drop in price. The government’s easing of reconstruction regulations, which aimed to revitalize the real estate market through large-scale maintenance projects in the area, appears to be not yielding results. In Nowon, Dobong, and Gangbuk-gu, which were called the ‘three leaders of reconstruction,’ there were even cases of houses being put up for sale at half the purchase price due to the burden of loan repayment, raising concerns about a further decline.

A double whammy of falling prices and the burden of loan repayment

According to the Ministry of Land, Infrastructure and Transport’s actual transaction price disclosure system on the 15th, Sanggye Jugong Complex 5 (lower floor, exclusive area 31㎡) in Sanggye-dong, Nowon-gu, Seoul found a new owner last month for 4 million won. The complex was traded for around 4,000 million won until March of last year. Although it is a drop of about 3% in just 5 months, the prevailing prediction is that there will be a flood of properties for sale at lower prices. A real estate agent active in the Sanggye-dong area said, “Some young homeowners who have difficulty repaying their loans are willing to sell their properties at even half the purchase price.”

Sanggye Jugong Complex 4, located in an area where metropolitan subway lines 7 and 5 intersect, attracted a large number of young buyers in their 2020s and 2s during the real estate surge that began after 30, and recorded a reported price of 31 million won based on an exclusive area of ​​8㎡, making it a ‘Yeongkkeul’ property. ‘It has emerged as a sacred place (purchase using loans as much as possible). However, in recent transactions, the price has plummeted to around 4 million won, which is close to half, and an increasing number of homeowners are having difficulty repaying their loans.

Mr. A, an office worker in his 30s who appeared on MBC’s current affairs program , said, “I bought an apartment that was built 30 years ago and has never been renovated for 2 million won with 7,500 million won of my own money and 3 million won in bank loans, but recently, I bought it for 7,500 million won. “It dropped to 6 million won,” he said in anger. The explanation is that not only did 5,000 million won disappear in the blink of an eye, but a buyer could not be found even at the lowered price, making it difficult to pay interest.

The decline in sales prices and the burden of loan repayment are not just the problems of the complex. At one time, expectations for reconstruction were high as the majority of apartments in the Sanggye-dong area were aging, but recently, buyer demand has cooled sharply, leading to a large price drop. A representative example is Sanggye Jugong Complex 3, which has fallen by an average of 11.3% over the past three months. The complex (12㎡), which was traded at 4 million won in the first half of last year, fell to 5,000 million won in December, showing a steep decline.

The situation is similar in Dobong-gu and Gangbuk-gu, which border Nowon-gu. Changdong Jugong Complex 2021 (7㎡) in Chang-dong, Dobong-gu, which showed high interest from buyers by recording a sale price of around 1 million won in 49, was traded for 11 million won in November last year, falling below 4 million won, which was considered the Maginot line for housing price decline. In the Samsung Raemian Tribera Complex 8,500 in Mia-dong, Gangbuk-gu, 5㎡, which was traded for around 2 billion won, found a new owner for 11 million won on the 84st of this month.

Regarding the steep decline in housing prices in these areas, Yeo Kyung-hee, a researcher at Real Estate R114, said, “Due to the continued high interest rates, the proportion of transactions with lower prices than before is occurring in the outskirts of Seoul,” adding, “Areas with a high concentration of mid- to low-priced apartments, such as Nowon, Dobong, and Gangbuk-gu, where there were many so-called young buyers. “Homeowners who are having trouble repaying their loans are putting up properties for sale, so prices will continue to fall for the time being,” he said.

More than half of the apartments are old, is reconstruction only a matter of time?

Nowon, Dobong, and Gangbuk-gu are considered a sacred place among those in their 2s and 30s who dream of owning their own home, as prices are relatively lower than those in central Seoul. In fact, in the case of Nowon-gu, people in their 2021s or younger account for nearly half (30%) of buyers in 49.2, proving the high interest of young market participants.

High expectations for reconstruction also played a decisive role in attracting large-scale demand. In the case of Nowon-gu, discussions on reconstruction began in earnest as 12 of the total 16 households were over 3,136 years old as of December last year, and in Dobong-gu, too, 9 of the 6,159 households were over 30 years old, making it a market leader. It stimulated anticipation.

Accordingly, the government also announced the ‘Reconstruction Fast Track’ plan on the 10th of this month and rolled up its arms to restore the market and supply housing through reconstruction. The government expected to speed up the reconstruction project and revitalize the market by simplifying procedures, such as postponing safety inspections for apartments 30 years after completion, and significantly easing related regulations.

Business is on the back burner, the government is scratching in the wrong place

However, even after the government’s announcement, the market shows no signs of recovery. This is because most complexes where reconstruction projects are put on hold suffer from internal conflicts not due to procedures or regulations but due to low business feasibility. In fact, Sanggye Jugong Complex 5 in Nowon-gu canceled the selection of GS Engineering & Construction as the construction company, as the contribution calculated based on the estimated reconstruction cost was estimated to be around 5 million won per household. Considering that the market price has recently been around 4 million won, you will have to pay a contribution that is more expensive than the price of the house.

The fact that a significant number of households living in old apartments are renters is also pointed out as a reason why the government’s plan to ease reconstruction has not been well received. Choi Min-seop, a professor at Seoul Venture Graduate University, said, “Apartments built after the 90s and already having a high floor area ratio have limitations in the number of units that can be increased through reconstruction, so they should focus on improving the residential environment rather than on business feasibility, but for tenants, housing stability is inevitably threatened. “There is none,” he pointed out, and advised, “We need to consider ways to maximize business feasibility while also considering publicity, such as relocating existing tenants to rental housing.”