Strengthening Reconstruction Regulations → Remodeling Expands Beyond the Seoul Metropolitan Area to Provinces... What Are the Prospects?

Seoul and Gyeonggi-do Expand to Busan and Daegu with Promotion Complexes
However, Remodeling Faces Regulatory Challenges... Research on Load-Bearing Wall Demolition Delayed Repeatedly
Vertical Extension Efforts Also Face Setbacks, Former Minister Byeon Chang-heum Warned "Vertical Extension is Risky"

View of apartments in Songpa and Gangnam areas from Maebongsan Mountain in Seoul [Image source=Yonhap News]

[Asia Economy Reporter Onyu Lim] As regulations on apartment reconstruction projects have tightened, the number of complexes pursuing remodeling is increasing not only in Seoul and the Gyeonggi metropolitan area but also in provincial regions. However, cautious approaches are necessary as regulations directly related to profitability, such as the demolition of load-bearing walls, remain in place, and the new Minister of Land, Infrastructure and Transport, Byeon Chang-heum, has expressed negative views on remodeling.

Remodeling Projects Spread Beyond the Metropolitan Area to Provincial Metropolitan Cities like Busan and Daegu

According to the Korea Remodeling Association on the 10th, the number of apartment complexes pursuing remodeling in the metropolitan area (including those that have completed approval for the establishment of associations and those planning association founding general meetings) increased from 37 complexes (23,935 households) at the end of December 2019 to 54 complexes (40,551 households) at the end of last December. This means 17 complexes were added in one year.

In Seoul, in November last year, the Garak (Phase 1) Ssangyong Apartment in Garak-dong, Songpa-gu (2,064 households) received approval for the establishment of a remodeling association, followed last month by the establishment of remodeling associations for Geumho Byeoksan Apartment in Geumho-dong, Seongdong-gu (1,707 households) and Godeok Anam Apartment in Godeok-dong, Gangdong-gu (807 households). Gunpo City in Gyeonggi Province announced the approval for the establishment of a remodeling association for Yulgok Jugong Complex 3 in Geumjeong-dong, Sanbon New Town, a first-generation new town, with 2,042 households on the 31st of last month.

In particular, the remodeling momentum has recently spread beyond the metropolitan area to provincial metropolitan cities. LG Metrocity in Yongho-dong, Nam-gu, Busan, the largest apartment complex in Busan with 7,374 households, formed a promotion committee for the establishment of a remodeling housing association at the end of last year. This is the first apartment complex in Busan to pursue remodeling. In Daegu, the Woobang Cheongsol Mansion Apartment in Beomeo-dong, Suseong-gu (194 households) also formed a remodeling association promotion committee and announced a bid for partner companies last month.

An association official said, "Since the second half of last year, remodeling has attracted great interest not only in Seoul but also in apartment complexes located in Suwon and Suji, Yongin," adding, "It is expected that the number of complexes in the promotion committee stage will establish associations in earnest, so the number of projects will increase further this year."

Reflex Effect of Reconstruction Regulations... Remodeling Possible if Over 15 Years Old

Remodeling differs from reconstruction, which completely demolishes and rebuilds existing apartments, by maintaining the frame while expanding the floor plan forward and backward to increase area or adding floors to increase the number of housing units. It is also possible to create or expand underground parking lots.

The sharp increase in remodeling projects is largely due to the reflex effect of tightened reconstruction regulations. Since March 2018, with the strengthening of safety inspections, it has become difficult to pass with grades D (conditionally allowed) or E (poor) even if the building exceeds the standard age of 30 years after completion for reconstruction. In contrast, remodeling can be pursued if the building is over 15 years old, and if the structural (frame) safety inspection results are B or higher among maintenance grades (A to C), vertical extension by adding floors is possible, and if C or higher, horizontal extension is possible.

Since the approval standards are less stringent than reconstruction, project promotion is relatively easier, there is no obligation to supply rental housing, and it is not subject to the excess profit recovery system. A real estate industry official diagnosed, "Due to the strengthening of reconstruction project regulations such as the excess profit recovery system, the remodeling boom that occurred in the mid to late 2000s seems to be reemerging."

Only One Complex, Songpa Seongji, Has Received Remodeling Permits for Profitable Vertical Extension

However, remodeling projects also face many hurdles. This is because the government's regulatory stance is strong regarding the permission of vertical extension and demolition of load-bearing walls between units, which are directly related to profitability.

The government allowed vertical extension remodeling in April 2014. Vertical extension remodeling increases the number of floors of existing apartments, and under the current Housing Act, buildings under 15 floors can increase by up to 2 floors, and those with 15 floors or more can increase by up to 3 floors. Since the additional housing created through remodeling can be sold to the public to cover project costs, the profitability is higher compared to horizontal extension. For this reason, it has been noted as a new business alternative in aging mid-rise apartment complexes where reconstruction is difficult.

However, so far, the only place that has received approval for vertical extension remodeling is Seongji Apartment in Songpa-dong, Songpa-gu, Seoul, which received project plan approval in February last year. The Neutimauel Government Employee Complex 3 and 4 in Bundang-gu, Seongnam-si, Gyeonggi Province, which had pursued vertical extension remodeling since 2014 and passed the first safety inspection, was judged unsuitable in the second safety review last month.

The government introduced a safety review system when allowing vertical extension, but the review period is long and the process is excessively strict, making it difficult to pass. As a result, some remodeling complexes pursuing vertical extension are switching to horizontal or annex extension, which has relatively lower profitability.

Cheongdam Geonyeong in Gangnam-gu, Seoul (240 households) held a general meeting of association members early last month and resolved to submit a building review plan for horizontal extension. Similarly, Bundang Gumi-dong Mujigae Village Complex 4, Bundang Jeongja-dong Hansol Village Complex 5, and Pyeongchon Mokryeon Complex 2, which were pursuing vertical extension, have completed building reviews with horizontal extension designs.

New Minister of Land, Infrastructure and Transport's Policy Variable... Minister Byeon Calls Vertical Extension a "Dangerous Housing Policy"

Minister Byeon Chang-heum's policy is also a variable. He has previously expressed negative views on vertical extension remodeling.

In April 2013, at a forum hosted by the Democratic Policy Research Institute (now the Democratic Research Institute), Minister Byeon criticized vertical extension remodeling as a "dangerous housing policy," saying it was a policy to respond to the decline in housing prices in first-generation new towns such as Bundang and Ilsan. He emphasized, "Compared to second-generation new towns, first-generation new towns have higher density, so vertical extension remodeling could cause permanent shading and deteriorate the quality of living, fundamentally undermining the purpose of planned cities."

Accordingly, there are forecasts that vertical extension remodeling projects may shrink further in the future.

Additionally, the Ministry of Land, Infrastructure and Transport continues to delay the announcement of research results on whether to allow the demolition of load-bearing walls (walls designed to bear or distribute building loads) between units, which would improve the profitability of vertical extension remodeling.

Demolition of load-bearing walls is a key factor for expanding the apartment remodeling market, which is considered less profitable than reconstruction. Most mid-rise apartments over 15 years old in Korea have wall-type structures (structures without separate columns) and 2-bay floor plans (arrangements with one room and one living room facing the front of the apartment). During remodeling, demolishing load-bearing walls between units allows for lateral expansion to create 4-bay floor plans (arrangements with room-room-living room-room facing the front), maximizing lighting and ventilation, thereby improving project profitability.

The government announced at the end of 2015 that it would allow partial demolition of load-bearing walls between apartment units during vertical extension remodeling, but due to safety concerns, it decided to reconsider in August 2016. It then announced it would decide by March 2019 whether to allow it, but the decision has been repeatedly postponed.

The Korea Institute of Civil Engineering and Building Technology, which conducted the research, submitted a verification report to the Ministry of Land, Infrastructure and Transport in early September last year. A ministry official stated, "To avoid confusion in the market, we are currently organizing the experimental results," and added, "We will announce the results once discussions are concluded."

This content was produced with the assistance of AI translation services.