On February 4th, the current government announced the 25th real estate plan. ‘Public-led 3080+, a plan to expand housing supply in metropolitan areas’ is that. The government, local governments, and public corporations (hereinafter referred to as public) will provide additional housing sites for 320,000 units in Seoul and 830,000 units nationwide by 2025.
It is positive that the government finally acknowledged the’short supply’ as the main cause of the increase in house prices and changed the route to’expand supply’, but this countermeasure also predicts another ballooning effect. It is predicted that the popularity of new apartments will increase as the purchase of villas and constructions (apartments) is put to a brake as a high-intensity anti-speculation measure called’cash settlement’. There is also controversy that a public corporation independently conducts redevelopment and reconstruction projects without the establishment of a cooperative.
Recently, I heard from Kim Je-kyung, the owner of Tumi Real Estate, who is considered a’redevelopment and reconstruction expert’ on social network services (SNS) such as YouTube, what loopholes in the 2nd and 4th real estate measures and what points to keep in mind when investing in redevelopment.
I think the biggest issue in this measure is’cash settlement’.
“For items purchased after February 4, 2021, if the area goes to the public direct implementation and development method, it may be liquidated in cash. The press release of the Ministry of Land, Infrastructure and Transport (Ministry of Land) states that’I will not give priority to supply’, but the concept of priority supply is unfamiliar. In the reconstruction and redevelopment of the existing Urban and Residential Environment Improvement Act (Provincial Government Act), a’residence right’ is received, and a person who wins the subscription receives a’sale right’. The priority supply right announced this time seems to be the right to move in when the public directly implements it. The problem is that the villas and houses purchased after the announcement of the measures will not be given the right to move in (priority supply right) and will pay the cash.”
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In the case of cash settlement, can it be evaluated lower than the original purchase amount?
“It does reflect the price to some extent. Still, there is a very high probability that it will be set lower than the amount originally purchased. Even if the price is high, what the party wants is the right to move in, isn’t it possible to get the money back as it was bought? When it comes to cash settlement, the future value of the asset disappears.”
It seems that there are many people who think,’I can’t buy a villa in the future.’
“You must be careful when you look at the announcements made by the Ministry of Land, Infrastructure and Transport. The same goes for not only villas, but also apartments. Let’s say you bought a 30-year-old apartment for the purpose of living after the 2·4 real estate plan. If one day two-thirds of the apartment residents agree and the public-led reconstruction is carried out, it may be subject to cash settlement even in this case. Eventually, the popularity of new apartments seems to increase with this measure. Even if it’s a little expensive, I think more people will buy safe housing.”
Is it difficult to invest in redevelopment and reconstruction anymore?
“It doesn’t matter if you buy a place where development is already going on. However, such places have a lot of premiums already attached. Anyone who wants to purchase a villa from the early stages of development for a small amount must make a careful decision. People who want to sell and move their existing villas or houses can also face difficulties with fewer buyers. Countermeasures to prevent speculation are of course necessary, but there must be an accurate explanation. In this release of the Ministry of Land, Infrastructure and Transport, there is only one page of anti-speculation measures, of which only four lines of cash liquidation. At least you need to tell me where you are going to be paid in cash when you buy something, but that part is missing.”
I don’t think the transaction itself can be stopped.
“A lot of people want to live in a new apartment. New construction in downtown Seoul is too expensive and difficult to access. That is why we turn our heads on redevelopment and reconstruction, which can be invested in relatively small amounts even if it takes a lot of time. The transaction itself cannot be stopped because of a single statement saying that you are being liquidated. However, it is true that you need to approach more carefully than before. In order not to get caught up in unnecessary lawsuits, real estate brokers also need to state a special agreement in the contract stating that “if development is carried out by the public direct implementation method, you may be liquidated in cash” in the case of brokering a villa or house in an area where the association has not been established. It will. Buyers need to know this so that they can properly express their opinions when there is a discussion on reconstruction or redevelopment later.”
The temperature difference between Gangnam and Gangbuk in Seoul seems to be large in terms of public-led development.
“Somehow, Gangnam has a sense of resistance to public rental housing. The public reconstruction (union + public enterprise) method announced earlier by the government was also recognized as having low profitability due to the reconstruction excess profit return system (re-return). In fact, no one has yet applied for public reconstruction. However, in this 2·4 real estate countermeasure, it was said that’re-return is not applied’. Failure to re-invitation is enormous. Nevertheless, Gangnam has not yet been greatly disturbed by the public direct implementation method. On the other hand, Gangbuk may be a little different. It seems that there will be places where there is a merit just by not applying the re-invitation. I know that LH (Korea Land and Housing Corporation) is also attempting interviews with reconstruction cooperatives.”
Where should those who want to invest in redevelopment and redevelopment look to?
“It is safe where the project is conducted by the private sector. In addition to the cash settlement risk, it is natural that private apartments will be better than public rental apartments in terms of the quality of apartments. Even nowadays, in the media, isn’t it a problem with LH and SH (Seoul Housing and Urban Corporation)’s poor construction? The one-to-one ratio of the underground parking lot can also be broken, and there can also be a noise problem between floors due to poor design. As anyone who’s gone through it knows, there’s nothing more upset than living in a house with flaws. In the absence of an accurate blueprint for public direct implementation, it is necessary to turn attention to where the project has already been conducted to some extent.”
Somewhere like that.
“If you have funding, it is worth considering places with high premiums. In particular, places that applied for administrative disposition prior to December 31, 2017 and avoided re-recruitment are very scarce. These places have no choice but to keep climbing. It can be said that the ransom price of the places that are about to be completed within the next three or five years have increased with this measure. It means adding good news to good news. The problem is that the premium is so high that it is not easy to access.”
At least you have to invest in the establishment of a union
If you recommend it among places that are still undervalued.
“I would like to recommend Sanggye New Town in Nowon-gu, Seoul. It requires about 300 million to 400 million won for initial investment. It is near Danggogae Station, the last point of Seoul Subway Line 4. You can think of it as the end of Seoul, but on the contrary, it is the gateway to Seoul. Anyone interested in real estate knows, but these days Gyeonggi-do is as expensive as Seoul. Places like Seongnam and Gwangmyeong have almost the same price as Seoul Redevelopment New Town. Currently, the initial investment amount of Lee Moon Hwi-gyeong New Town in Dongdaemun, Seoul is about 800 million won, and that is the case in Seongnam-si also approved for administrative disposal. Gwangmyeong is the next place to look after Seongnam, and the Gwangmyeong 1, 2, 4, 5 and 10 districts that have been approved for administrative disposition already cost over 500 million won. If you think’Seoul is better at all,’ I would recommend that you pay attention to the still undervalued Sanggye New Town.”
Where is the best place in the south of the Han River?
“I would like to recommend Sinlim New Town in Gwanak-gu. Honestly, it’s not cheap. If you can’t, you have to think about 500 million to 600 million won. The next Noryangjin New Town is worth 800 million to 900 million won. Heukseok New Town and Shingil New Town are more expensive. People in Gangnam hate leaving Gangnam. Since last year’s June 17 real estate countermeasures that in order to meet the requirements for reconstruction members, they need to live for two years, inquiries for investment in Hannam New Town and Seongsu Strategic Maintenance Area have increased sharply. Hannam-dong is a traditional wealthy village, and there are many places built with large complexes and skyscrapers on the plains of Seongsu-dong, so the premium is as good as the Gangnam reconstruction. In such a place, the investment amount is too expensive, and if you insist on the south of the Han River, then Sinlim New Town is good to approach.”
When you look at an investment chat room, you can often see the phrase’investment is possible with 50 million won’.
“Never be fooled. If a villa in Yongsan-gu, Seoul is 300 million won, everyone will think it is cheap. However, there are reasons for everything cheap. These places can be cashed out later. The most important thing in investing in reconstruction and redevelopment is minimizing risk. Thanks to my parents who specialize in redevelopment real estate brokerage, I have encountered a wide variety of cases since childhood, and I have seen many cases in which I was in trouble because I bought the wrong product for redevelopment. Redevelopment and reconstruction are money, time and battle. If you’re greedy for being cheap, it’s a big deal.”
What is the most important principle in redevelopment investment?
“At least, you should invest in a place where you have’approved to establish a union.’ In order for the reconstruction project to proceed, there are many mountains that must be overcome at each stage, from designation of a planned maintenance area to passing safety checkups, establishment of associations, and approval of management disposition. At least, a union can only be trusted and waited for when it is established. Although it may seem that the aging process has progressed a lot, the establishment of a union is in vain due to failure to meet the requirements in safety examination. In particular, it should be borne in mind that with this 2·4 real estate measure, goods in these areas may be tied up by public direct implementation in the future and may face cash liquidation.”
Reporter Kim Yu-rim [email protected]
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