The End of the New-Build Era? How the Reconstruction and Redevelopment Promotion Act is Shaking Up Seoul’s Real Estate Market

Seoul's apartment market is undergoing significant changes.

Seoul's apartment market is undergoing significant changes. The phrase "얼죽신" (meaning "I'd rather freeze to death than live in anything but a new build") encapsulated the recent trend of favoring newly constructed apartments. However, the government's announcement of the Reconstruction and Redevelopment Promotion Act is set to shift this trend. In this post, we’ll explore the current state and future outlook of Seoul’s apartment market in light of these changes.

In recent years, Seoul's apartment market has been dominated by a strong preference for newly constructed buildings. Many buyers avoided the uncertainty and high costs associated with reconstruction projects, opting instead for the safety and modernity of new builds. This trend resulted in a widening price gap between newly built and older apartments, even within the same neighborhood.

A prime example of this is found in Seoul’s Seongdong-gu, where the recently constructed "e-Pyunhansesang Oksu Park Hills" and the older "Geumho Doosan" apartments stand in the same area. Despite their proximity, the price difference between these properties is staggering, with the newer apartments commanding prices up to 800 million KRW (around $600,000) higher. This stark contrast illustrates the powerful allure of new construction in the market.

However, this trend is now facing a potential reversal. The Ministry of Land, Infrastructure, and Transport recently unveiled the "Housing Supply Expansion Plan for National Housing Stability," which includes the introduction of the Reconstruction and Redevelopment Promotion Act. This new law aims to simplify the procedures for reconstruction and redevelopment projects, reduce financial burdens, and accelerate project timelines. Notably, the law proposes increasing the maximum floor area ratio by up to 30 percentage points and eliminating the reconstruction levy, which could significantly boost the profitability of these projects.

As a result, the price gap between new and older apartments is expected to narrow. With increased government support, reconstruction projects could become more attractive, leading to higher demand for older, more affordable apartments. Industry experts predict that as the profitability of reconstruction projects improves, the value of older apartments will be re-evaluated, creating a more balanced market.

The era of "얼죽신" may soon be a thing of the past. The introduction of the Reconstruction and Redevelopment Promotion Act is poised to be a game-changer for Seoul's apartment market, potentially ending the dominance of new builds and bringing older apartments back into the spotlight. As the market evolves, staying informed and making wise investment decisions will be crucial for securing stable returns in this dynamic environment.