[Report] Yongsan Area Designated as Land Transaction Permission Zone Today... "Likely to Seek Small-Scale Share Gaps"

Seoul Yongsan-gu Hangangno-dong Maintenance Depot Site View (Photo by Lee Chunhee)

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[Asia Economy Reporter Lee Chun-hee] "It spiked briefly, but since the weekend, foot traffic has completely stopped." (Representative of Real Estate Agency A in Hangang-ro)

On the afternoon of the 13th, real estate agencies around the Seoul Yongsan Railroad Maintenance Depot appeared quiet. This was the exact opposite of the scene just a few days ago when investors were continuously visiting. The representative of Real Estate Agency A, located in Maintenance Depot Front Zone 1 adjacent to the depot site, said, "Right after the government announced the housing supply plan for the maintenance depot site last week, customer visits increased due to development expectations, but it became quiet again after the announcement of the land transaction permission zone designation."

The atmosphere was similar in nearby Ichon 2-dong. This area is mostly filled with old and dilapidated houses except for a few high-rise apartments along the Han River. A representative from Real Estate Agency B in this area explained, "Right after the announcement of the maintenance depot site development, buyers kept coming and actual transactions were made," adding, "But inquiries have almost stopped this week." This is because transactions have become virtually impossible due to the permission zone designation.

Last week, the real estate market in the Yongsan area was heated by the government's announcement on the 6th of the "Measures to Strengthen the Housing Supply Base in the Metropolitan Area." The plan included supplying 8,000 large-scale housing units on the Yongsan maintenance depot site, which attracted investors with expectations that the redevelopment and reconstruction equity values of the surrounding old residential areas would rise.

However, the Ministry of Land, Infrastructure and Transport held the Central Urban Planning Committee on the 14th to designate this area as a land transaction permission zone to prevent speculation, and the market calmed down within just a week. It was reported that the committee would broadly designate surrounding areas expected to benefit from the depot development, such as Wonhyo-ro, Hangang-ro, Ichon, and Singye-dong in Yongsan-gu, as permission zones.

Once designated as a permission zone, the designation takes effect five days later, so from as early as the 19th, land transactions exceeding a certain area by land use district will be impossible without prior approval from the district office. Transactions made without permission will be legally invalid.

A representative from Real Estate Agency C in the area said, "There is a perception that even the methods of funding for transactions within the permission zone will be scrutinized in detail, so even genuine buyers are hesitant," predicting, "Transactions will inevitably shrink for the time being." A representative from nearby Real Estate Agency D also said, "There are sellers urgently asking to sell before the permission zone designation, but it seems difficult."

In particular, for residential areas, the principle is that land exceeding 180㎡ is subject to permission, but the Ministry of Land is expected to impose strict regulations by expanding the standard to 18㎡, which is the minimum legally allowed (one-tenth of the standard area).

Ichon 2-dong area, Yongsan-gu, Seoul (Photo by Lee Chun-hee)

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However, on-site observations also suggested that even if designated as a permission zone, there are still "gaps." A representative from Real Estate Agency D said, "Even if the permission target area standard is lowered to the minimum of 18㎡, demand for small-scale equity transactions smaller than this size will rather increase." Many old apartments or row houses in this area have land shares of 12 to 15㎡.

Meanwhile, reactions to the government's development of the maintenance depot site were mixed. Real estate agencies nearby expressed concerns that the high proportion of apartments in the development process might weaken the image of the international business district, and that the large volume of rental housing is not necessarily a positive factor.

On the other hand, there is considerable response that the resumption of development after more than 13 years has created momentum for surrounding redevelopment and reconstruction. In fact, in Ichon-dong, reconstruction is underway divided into three zones: Ichon 1 Housing Redevelopment, Ichon Pilot and Mido Row Houses, and Jungsan Pilot, but the designation of these maintenance zones has been repeatedly postponed as the development plan for the maintenance depot site had not been finalized.

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