Money in Market Flows into Commercial-Residential Complexes and Commercial Buildings

Money spoken for that has not yet found the right place for investment is flowing into land, commercial-residential building complexes, and commercial buildings after a huge rush toward “City Park,” giving rise to an “overall overheated investment.” Given that there are no strict regulations in the realty market except for apartments, and that it is rare to find a good market in the current situation, analysts said this would be the trend for the time being.

▽ Back to the realty market = According to the Kukdong Construction Company, about 3,000 people were already crowded in during its first and second day accepting applications, marking an average 30-1 competitive rate, in order to apply for 96 units from 43 to 78 pyong in a commercial-residential building complex named “Kukdong Starclass.” This complex is planned to be built in Dokok-dong in the Gangnam district.

Some criticized earlier that the selling price per pyong (17 million) is rather high compared to its’ surrounding location, however, the majority of applicants were attracted by the possibility of being able to resell for once. A company official said, “Considering the first day marked 3-1 competitive rate, those who received City Park refunds from Koram Bank on April 2 were one of the big reasons that raised tougher competition.

On Mar. 23 and 24, in a bid on a commercial building located inside Samsan Jugong apartment complex in Incheon city, stores of 6.2 pyong and 6.5 pyong on the first floor were successfully accepted at 550 million won and 540 million won each, amounting to 83~90 million won per pyong. The most successful bid of commercial building inside the residential complex so far was 10-pyong store of Taean Jugong residential complex, which was accepted at 60 million won per pyong.

Land auction markets for “prospective areas” are also gaining popularity. Last January, 22 investors had competed for the bid on 1824-pyong’s land nearby the new town Pankyo and eventually raised the bidding price up at 2.3 billion, 1.6 times more expensive than the estimated price. In addition, lands in the areas such as Pyongtaek, Suwon and Youngtong (which have favorable factors such as the transfer of a U.S. military base and the extension of Bundang subway line) showed their prices bid 1.5 to 2.4 times higher than the estimated price.

▽ There is no ceiling = The government, changing its firm attitude toward apartment markets last year, maintains its policy by attenuating regulations while producing development plans such as; loosening regulations on farmlands and green belted areas, building new administrative capital, developing new cities or designating districts of balanced development promotion. Experts accordingly analyzed that the majority of available money will flow into the real estate market. Financial authorities estimated that 380 trillion 500 billion out of 780 trillion 700 billion of total deposit as of February are short-term funds with less than 6 months. Among the funds, 65-70 trillion won is assumed to be irregular floating money.

“This is sort of a game between the power of market money and that of various governmental regulations,” said Park Jae-ryong, a senior researcher with Samsung Economic Research Institute. “The investors who left realty market due to unprofitable short-term marginal profits are re-entering the market, since there are no good places elsewhere for investment and they now are looking forward to middle and long-term investment as a “buy and hold” method.

In-Jik Cho cij1999@donga.com