Apartment Reconstruction Market in Gangnam Frozen Hard

Since the government announced its plan to stabilize the realty market on September 5, prices for Gangnam-located apartments, which previously were scheduled for reconstruction, have nosedived while offers to buy inundated real estate markets.

Accordingly, those who have pursued reconstruction plans are weary of an uncertain future. Union members and construction companies are in a hurry to call contingency meetings.

According to industry sources yesterday, the September 5 government announcement dropped the market price for a 31-pyong Eunma Apartment in Gangnam from 770 million to 680 million won, but the transaction is virtually suspended.

With quick offers to buy in abundance, an 18-pyong apartment in Banpo 2 Complex, Seocho-gu, witnessed the price loss from 700 million won to somewhere between 670 million and 680 million won. In Gangdong-gu area, the dramatic increase in sales offers is putting the apartments‘ market prices on a drastic downturn.

Unions, which embarked on the reconstruction plans, are struggling to cope with the problems in the emergency situation.

Lee, Young-su, union head of the Jugong 2 Complex in Gaepo-dong, Gangnam-gu, said, “The government announcement has made our long-term business plan useless. Balanced distribution won‘t be easy if we are to meet the government’s demand.” He also noted expressing embarrassment. “I‘m at a loss as to what to say to union members when they ask, ’what is going to happen to the apartment reconstruction plan?’”

“The government plan will severely hurt profitability of our business”, said, Kim Woo-jin, president of the Housing Condition Research Center. He also added, “In the case of one-to-one reconstruction plans, in which reconstruction will only expand the space of an apartment without doubling the number of households, some complexes may give up the reconstruction plan.”

As reconstruction plans are suspended, contractor firms including Hyundai, Daewoo, Samsung, and Daerim hold emergency meetings.

A manager at a construction firm said, “We are reviewing attendant implications of the recent government announcement on over 40 areas, where we won the reconstruction contracts.” He went on to say, “We would have no choice but to give up some of the projects.”

Some contractors are known to be reviewing on their plans to cut down the portion of the reconstruction business in their business portfolio.