'Mammoth-scale' Dunchon Jugong, Opportunity to Enter Gangnam... Pricing Variable [2022 Real Estate One Pick]

<1>Subscription - Dunchon Jugong Reconstruction

12,032 Households, Largest Ever General Sale Approaching 5,000 Units
Conflict with Contractor over Construction Costs... Sale Price Still Undecided, a 'Variable'

[Asia Economy Reporter Kim Hyemin] This year, the apartment subscription market is expected to experience an unprecedented boom.

According to Real Estate R114 on the 3rd, a total of 418,351 households are preparing for pre-sale across 500 projects nationwide this year. This is about a 57% increase compared to the recent five-year average of approximately 260,000 households.

The sharp increase in pre-sale volume is due to more than half (56%) of the units planned for pre-sale last year being postponed. In particular, nearly half of the total volume, 204,225 households, are expected to be in the metropolitan area, significantly expanding the options for homebuyers.

The reconstruction of Dunchon Jugong Apartments in Dunchon-dong, Gangdong-gu, Seoul, is considered a barometer that can gauge not only Seoul but the entire pre-sale market. The Dunchon Jugong reconstruction project in the 170-1 area of Dunchon-dong, Gangdong-gu, is regarded as the largest maintenance project ever for a single complex. The existing 5,930 households will be transformed through reconstruction into a mammoth complex of 12,032 households?a mini new town scale. The general pre-sale volume also reaches 4,786 households. Although administratively in Gangdong-gu, the location borders Songpa-gu, so it is effectively perceived as part of the Gangnam area.

Originally, the name was decided as Dunchon Olympic Park Avenue Foret, but the association is currently in the process of changing the name. They plan to conduct a preference survey among association members soon, considering options such as ▲Olympic Park D1 ▲Olympic Park Foreon ▲Risean ▲La Hills.

The general pre-sale units are allocated with highly preferred sizes of 59㎡ (exclusive area) and 84㎡, with 1,488 and 1,237 households respectively. Since the lottery system applies from general supply units exceeding 85㎡, all general pre-sale units will select winners based on a point system.

However, the progress of the Dunchon Jugong project reflects the concerns faced by major reconstruction and redevelopment complexes in Seoul and the metropolitan area preparing for general pre-sale. Initially, pre-sale was planned for October last year but was postponed beyond the year. It is highly likely to appear in the pre-sale market in the second to third quarter of this year, with the key issue being how to resolve conflicts with the construction company over pricing and construction costs.

The pricing issue has been ongoing for more than two years since 2019. At the end of 2019, the association set the general pre-sale price at 35.5 million KRW per 3.3㎡, but the Housing and Urban Guarantee Corporation (HUG) proposed about 29 million KRW, sparking conflict. Discord among association members over whether to accept this led to a change in the association's executive body.

Currently, Dunchon Jugong has started reappraisal work on land costs, which is the basic groundwork for pricing. It was predicted that general pre-sale would be possible by March next year through this, but now there is conflict with the construction company over the confirmed construction cost, one of the pricing factors. The controversy centers on whether to acknowledge the contract to increase construction costs signed in June 2020. At that time, the association and the construction consortium led by Hyundai Engineering & Construction signed a contract to increase construction costs from about 2.6 trillion KRW to about 3.2 trillion KRW. However, the current association refuses to accept this, claiming the previous chairman signed the contract without proper procedures.

The association and the construction company are trying to reconcile their views through meetings, but the situation remains uncertain. In December last year, Hyundai Engineering & Construction filed an injunction lawsuit against four people including the Dunchon Jugong association chairman for spreading false information and defamation. There are concerns that if construction costs are not executed on time, ongoing construction may be halted.

The pre-sale price is expected to be somewhat higher than the price initially proposed by HUG. Although subject to the pre-sale price ceiling system, the government improved the system last year by considering the characteristics of individual locations.

The association feels that the price should be at least 37 million KRW per 3.3㎡. In this case, the price for 59㎡ units would exceed 900 million KRW, excluding them from special supply eligibility and making interim payment loans impossible. Since the move-in period is at the end of next year, the association does not rule out the possibility of post-sale if the desired price level is not set. An industry insider predicted, "Depending on the presidential election results, the possibility of abolishing the pre-sale price ceiling system for private land is also being discussed, so major metropolitan complexes like Dunchon Jugong may adopt a strategy to postpone pre-sale schedules until after the election."

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