"Is the Real Estate Market This Difficult?"... Considering Cancellation of Resident Recruitment Due to Unsold Units

[Image source=Yonhap News]

[Asia Economy Reporter Cha Wanyong] It has been reported that an apartment in a provincial area, which has already completed pre-sale, is considering canceling the recruitment of residents due to unsold units and low contract rates.

According to the real estate and development industry on the 2nd, 'The Sharp Gwangyang Lacpoem' in Gwangyang-si, Jeollanam-do, which was pre-sold last October, recently sent certified letters and text messages to contract holders stating that "the recruitment of residents is being canceled and the pre-sale is under review for postponement."

This apartment had a total supply of 898 units during the subscription recruitment, but only 530 applications were received, resulting in undersubscription. Although the official contracts were conducted last month, the contract rate was lower than expected. Accordingly, the project developer, Korea Asset Development, decided to cancel the recruitment of residents after internal review and plans to submit an application to the local government to cancel the recruitment approval. If the cancellation of recruitment approval is confirmed, the developer will proceed with contract termination procedures, including refunding deposits and paying penalties.

Korea Asset Development explained, "Due to the recent rapid interest rate hikes, the pre-sale market is shrinking, making it inevitable to postpone the pre-sale timing," adding, "Construction is proceeding as planned, and only the pre-sale timing is being adjusted." They continued, "Existing contract holders are also mostly agreeing to contract termination due to the market downturn," and added, "We will repay existing contract holders and interested customers with better products and more competitive pre-sale conditions during the re-sale."

Meanwhile, cases of canceling recruitment approval are extremely rare. They occasionally occurred during the severe real estate market downturn caused by the global financial crisis from 2008 to 2012 and from 2016 to 2017. In 2017, 'Namwonju Dongyang Enpart Edu City' notified prospective buyers of the cancellation of contract signing schedules before the official contract date.

In 2016, 'Dongtan 2 New Town Sinan Insville Ribera 3 and 4' requested cancellation of recruitment approval after undersubscription up to the second priority recruitment and low contract rates. An earlier case was in 2011 when 'Well County Complex 5' in Songdo International City canceled recruitment approval.

An official from a construction company said, "Canceling recruitment approval is an unusual event," adding, "It means that the current pre-sale market is difficult." He further explained, "In fact, canceling recruitment approval publicly signals that the pre-sale has failed, so it is a difficult decision for the developer as well."

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