Difficult to Construct High-rise Apartment Complexes in Gangnam Area

Construction of high-rise apartment complexes has become difficult in Gangnam area, as the floor area ratio for housings in this area was reduced sharply. For instance, floor area ratio was limited to 200% for Cheongsil apartment in Daechi-dong, Southern Seoul.

The reconstruction market in Gangnam area is likely to be frozen further as the government imposed a strict restriction on the floor area ratio, just a few days after it came up with the September 5 measures against realty speculation, which include an increased ratio of small-size apartment units for reconstruction and strengthened conditions for exemption from transfer income tax.

The Seoul metropolitan government said on Tuesday that on Monday the city planning committee convened to decide on floor area ratio and the number of floor for apartment reconstruction for 10 districts in Seoul, including Gangnam-gu.

Under the revised law on improvement of city and residential community, which came into effect last July, the number of floors, the building-to-land ratio, and floor area ratio of buildings in residential areas are being regulated differently after they are divided into three groups: class A, class B, and class C. Before July, the law collectively regulated them.

Gangnam-gu asked the Seoul city government to designate 62.5% of its residential areas as class C (floor area ratio should be less than 250%, no limit for the number of floors). However, the city government only put 47.8% of residential areas in Gangnam-gu into the category.

Under the classification, C apartment in Daechi-dong falls into class B (floor area ratio less than 200%, less than 12 floors). Therefore, if seems difficult to reconstruct this apartment complex. However, the apartment already designated a construction company, expecting that the apartment complex would fall into class C.

"If it is impossible to build high-rise apartment complexes because of limit for floor area ratio, housing prices will drop in Gangnam area, with low expectations for profitability of apartment reconstruction."

Daecheong village in Ilwon-dong and residential areas in Nonhyeon-dong, for which Gangnam-gu demanded class C status, were classified as class B. As investors recently flocked to those areas, housing prices soared there.

However, E apartment in Daechi-dong and H apartment in Apgujeong-dong, which is in preparation for reconstruction, were designated as class C.

An official with the Seoul metropolitan government said that they designated five-story apartment buildings that seek reconstruction as class B after considering attributes of the area and to control the speed of development. He explained that the classification could be adjusted later in consultation with the city planning committee, if more facilities, such as parks, are built in the area.

ray@donga.com