Reconstruction 'Feasibility Review' Pitfalls Panic... Seoul Mayoral Election Regulatory Relaxation Variable

Mokdong New Town 11 Complex, Final Rejection of Reconstruction
Second Feasibility Review Blocked... Government Raising Bar
Seoul Mayoral Candidates from Both Parties Promise to Ease Reconstruction Regulations
Continued False Hope Likely to Result in Few Disappointment Listings

The Seoul reconstruction market, which had recently seen a series of positive signals, has encountered a stumbling block called the 'feasibility review.' While major complexes have consecutively passed the first safety inspection and favorable factors such as Seoul mayoral candidates' pledges to ease reconstruction regulations have emerged, the pros and cons of the projects are becoming more pronounced.

According to the real estate industry on the 31st, the Mokdong New Town 11 Complex apartment in Yangcheon-gu, Seoul, failed the final reconstruction detailed safety inspection. It received a C grade (maintenance and repair) in the second detailed safety inspection conducted by the Korea Institute of Civil Engineering and Building Technology, resulting in a determination that reconstruction is not possible. Until recently, 13 out of 14 complexes in the Mokdong New Town area had consecutively passed the first safety inspection, raising expectations for the projects.

Until now, 'passing the first detailed inspection' had signified the starting signal for the long reconstruction projects, but this evaluation is rapidly losing its significance. The government announced the 'Management Plan for Housing Market Stabilization' as part of the June 17 measures last year, strengthening the safety inspection procedures compared to before. The selection and management of first safety inspection contractors were transferred from local governments to metropolitan mayors and governors, and the second safety inspection strengthened on-site investigations. Additionally, during the advisory process, total scores were kept confidential to advisory committee members for each review item to allow independent judgment.

Previously, in September last year, nine complexes failed the second detailed safety inspection. As the raised threshold of the second safety inspection gradually becomes a reality, the entire Mokdong apartment reconstruction initiative is entering a state of panic. The Yangcheon Development Citizens' Coalition immediately issued a statement condemning the government's arbitrary reconstruction safety inspection regulations and demanding their abolition.

Some have recently mentioned 'remodeling' as an alternative, but considering the characteristics of Mokdong New Town, it is regarded as unrealistic. Compared to apartments of similar construction years, Mokdong has larger land shares, resulting in lower additional contributions upon reconstruction. Also, the floor area ratio is low, allowing for high profitability through new construction. A representative from Mokdong A Real Estate Agency said, "Reconstruction alone can yield lottery-level profits, so residents are unlikely to switch to remodeling, which has lower profitability."

However, despite the failure in the feasibility review this time, there are forecasts that the strong housing prices in reconstruction-promoting complexes in Mokdong, Gangnam, and Yeouido will not weaken. In particular, there is considerable expectation that the Seoul mayoral by-election will be a game changer.

Park Young-sun, the Democratic Party candidate for Seoul mayor, has pledged to support redevelopment and reconstruction and to slow the increase in official land prices, differing from the current government's real estate policy direction. The People Power Party candidate, Oh Se-hoon, is even more proactive in easing reconstruction regulations. He has promised to supply a total of 360,000 new homes, including 185,000 through private supply by easing redevelopment and reconstruction regulations as well as floor area ratio and height restrictions.

Lim Byung-chul, chief researcher at Real Estate 114, said, "While the progress of individual reconstruction complexes may be delayed, discussions about easing reconstruction regulations have been steadily emerging ahead of the Seoul mayoral by-election," adding, "This will not have a significant impact on the recent upward trend in reconstruction complexes."

There is also a low possibility of 'disappointment sales' emerging due to the sudden halt in reconstruction. When nine complexes in Mokdong failed the safety inspection in September last year, prices briefly dropped but soon continued to reach new highs. Chief researcher Lim explained, "Residents of reconstruction complexes fundamentally understand that reconstruction projects take a long time."

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