Expectations for Reconstruction of Old Apartments in Seoul Weakened Since 2018... Impact of Government Policies

[Asia Economy Reporter Minyoung Kim] The preference for older apartments in Seoul has weakened since 2018. This is attributed to government policies that slow down redevelopment projects, such as the Redevelopment Excess Profit Recovery System, restrictions on the transfer of union member status, and strengthened safety inspections. Attention is focused on whether prices of older apartments will continue to rise as President-elect Yoon Seok-yeol has promised to ease redevelopment regulations.

On the 18th, Zigbang analyzed the number of sales and lease transactions of apartments aged 5 to 29 years from 2011 to April 4, 2022 (based on actual transaction reports). It found that apartments over 30 years old formed prices about 4% higher than general apartments in this year’s sales market. Conversely, in the lease market, they traded at prices about 21% lower, showing contrasting trends. Additionally, the price gap between older apartments and general apartments in the sales market has been continuously narrowing since it recorded 18% in 2017. In particular, in 2020, the gap shrank to 1%, significantly reducing the price difference with general apartments.

A Zigbang official explained, "This is interpreted as the effect of government policies aimed at stabilizing the redevelopment and reconstruction market, such as the Redevelopment Excess Profit Recovery System, restrictions on the transfer of union member status, and strengthened safety inspections." He added, "It will be noteworthy to see whether the next government, which has pledged to ease redevelopment regulations, will reflect redevelopment expectations in higher prices for older apartments again."

Meanwhile, newly built apartments in Seoul were found to have sales prices about 38% higher than general apartments. The degree of preference has remained at around 30-34% over the past decade. In the lease market, newly built apartments had prices about 10-20% higher in the early 2010s, but since 2017, the gap has widened to over 30%. Since apartments over 30 years old are considered merely aged housing in the lease market, redevelopment expectations have not been applied to the rental market.

Comparing the effects of new and older apartments by province, the strongest preference for new apartments this year was found in Jeollabuk-do, Ulsan, and Daejeon, where new apartments are priced more than 60% higher than general apartments.

Preferences for older apartments varied by region. Up to this year, in four provinces?Gyeonggi-do, Jeollabuk-do, Busan Metropolitan City, and Seoul Special City?older apartments recorded higher prices than general apartments. However, in Daegu and Jeju, there was no significant difference, and in other provinces, older apartments were priced lower. In particular, Jeollanam-do, Gwangju, Daejeon, Sejong, and Chungcheongbuk-do showed a clear dislike, with sales prices of older apartments more than 10% lower than general apartments. These regions appear to have low expectations for redevelopment in the apartment market, and the negative sentiment toward aging apartments is reflected only in the sales prices.

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