What Happens to Nearby House Prices When a Large Complex Building Is Constructed? Regional Value Soars Due to Increased 'Urban Amenity' Effect

Price Surge in Surrounding Areas of Seoul Gangnam, Busan Haeundae and Suyeong-gu

Improved Living Comfort... Premium UP with Sea, Mountains, and Waterfront Parks

Community and Public-Private Consensus Needed to Enjoy 'Amenity Benefits'

A panoramic view of Gwangandaegyo Bridge and the Gwangalli area connecting Suyeong-gu and Haeundae-gu in Busan.

[Asia Economy Yeongnam Reporting Headquarters Reporter Kim Yong-woo] Are you familiar with ‘urban amenity’?

It refers to the comfort provided by the environment and climate of a certain urban area. It is a composite expression of beauty (美), feeling (感), comfort (快), and freshness (靑), including beautiful scenery and the warmth of the people living there.

It is common knowledge that when a large complex building is constructed, nearby commercial areas and apartments usually benefit from the development.

This is because complex buildings combining leisure, culture, accommodation, and shopping serve as ‘urban amenities’ in terms of comfort and convenience in the urban environment.

Subway stations, parks, natural environments, hospitals, school districts, and shopping malls are typical examples of ‘urban amenities.’ Large complex buildings are also considered amenities for local residents and landmarks attracting outsiders, contributing to the increase in the area's value.

In the real estate industry, it is generally believed that when a large building with a total floor area of 33,000㎡ (10,000 pyeong) or more is completed, visitors amounting to 1.5 times the resident population are generated, and about three times the floating population uses nearby commercial facilities.

When a large complex building is constructed, not only the building itself but also the influx of floating population visiting the vicinity greatly increases, acting as a major boon to the local real estate market.

If the complex building is adjacent to a waterfront park, sea, mountain, lake, or park, or is located in the hinterland of a tourist destination, the positive effects of development are even greater.

This is advantageous for revitalizing commercial districts through the influx of floating population, and the effect on increasing the real estate value of nearby apartment complexes and other properties is correspondingly larger.

Trends in Land Price Change Rates in Busan City and Haeundae-gu, Suyeong-gu, Dongnae-gu (Data from Ministry of Land, Infrastructure and Transport).

In fact, from 2015 to 2019, when the Haeundae LCT, a super high-rise complex that attracted nationwide attention in Busan, was being sold and constructed, the land price change rate in Haeundae-gu was 3.8%, 7.4%, 9.0%, 7.9%, and 5.6%, respectively, which was significantly higher than the Busan city average (3.0%, 4.2%, 6.5%, 5.7%, 3.8%).

On the other hand, Suyeong-gu and Dongnae-gu, which can be considered affluent neighborhoods comparable to Haeundae-gu, showed little difference from the Busan city average during the same period.

The Haeundae LCT is a large complex building with a total floor area of 660,000㎡ (200,000 pyeong), comprising apartments, residences, a luxury hotel, an observatory, a water park, and commercial facilities.

A representative from a real estate investment corporation in Haeundae analyzed that the ‘LCT effect’ played a part in the rising ‘stock price’ of Haeundae.

He said, “With the largest residential complex in the country as a single building, there were chain effects such as road improvements around the area, the conversion of the Donghae Nambu Line abandoned railway into a park, and the redevelopment of old buildings nearby,” adding, “It acted as a catalyst for the rise in land prices around the area as well as the market prices of nearby apartment complexes.”

‘Lotte Castle De Mer,’ the new landmark of the North Port redevelopment zone that sparked nationwide interest with record-breaking subscription enthusiasm last March, is also raising interest in nearby apartment complexes considered the hinterland residential areas of the North Port.

In Suyeong-gu, Busan, a complex building consisting of accommodation and commercial facilities is planned to be built on the former Mi World site in Millak-dong, attracting attention from the local community.

As such, when a large complex building is constructed, it not only helps improve the living infrastructure of the area but also significantly increases the influx of floating population.

There are many cases in major areas of Seoul where large complex buildings have driven up local market prices. In the Gangnam area, the real estate industry analyzes that when a super-large complex building is constructed, the market prices of surrounding buildings can rise by up to 50%.

The Lotte World Tower in Jamsil, Seoul, which opened in 2017, is no exception. A real estate industry official in Songpa-gu said, “The increase in floating population revitalizes nearby commercial districts and accelerates surrounding development,” adding, “Vacancy rates have decreased, and rental prices have relatively increased.”

An official from the real estate consulting industry pointed out, “More important than the increase in the value of surrounding real estate is that complex building development can promote the regeneration and revitalization of aging and declining areas.”

He explained, “If a building of sufficient scale to function as a landmark is mixed appropriately with uses suitable for the characteristics of the area, the effect is amplified like a so-called ‘collaboration.’”

However, while complex building development has significant economies of scale, it is not easy to proceed with the project due to enormous investment costs, long project periods, and complex construction processes including permits and approvals.

Therefore, considering project feasibility and regional revitalization effects, it is primarily required for the local community to come together and form a consensus.

Also, industry insiders agree that efforts to shorten the project period through cooperation between the public and private sectors, especially in areas requiring permits and cooperation from related agencies, are necessary to finally enjoy the benefits of ‘amenity.’

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