Experts:Chungcheong Real Estate Prices Will Fall by 50 Percent

Cho Han-oon, a representative of Gongju’s Green Real Estate Agency, says that real estate prices there will fall by 50 percent. He also notes that there will be no transactions made there, either.

In Yeongi, New Millennium Real Estate Agency (NMREA) chairman Yoon Sang-soo said, “Not only are the Yeongi and Gonju areas possible candidates for the new administrative capital, but also Chungcheong area real estate, in which speculative investment is running high, will face paralysis.”

Following the Korean Constitutional Court’s decision on unconstitutionality of the special law on new administrative capital construction (SLNACC), the Chungcheong area is facing a real estate market crisis. It is speculated that since the initial rise in price was huge, the price fall will be large as well.

Chungnam real estate prices rose by 7.17 percent for the first half of this year, which is much higher than the national average of 2.47 percent. In places like Yeongi, Asan, and Chunan, which were all possible sites of the new capital, the land price rose by 11.23 to 16 percent in the first half.

The market price of farmland in Yeongi is 200,000 won per pyong, and that of land next to roads in Jochiwon is 2,500,000 to 3,500,000 won per pyong. The price of land in these two areas rose by 200-500 percent in a year.

NMREA’s Yoon said, “Rea estate prices could fall below half of what they are worth now.” adding, “Investors are not likely to sell at a loss. Hence, deals are likely to fade away momentarily.”

Falling prices and disappearing deals are going to be the trend in the entire Chungcheong area.

Hyundo Consulting President Im Dal-ho noted, “As investors were also attracted to Yesan, Hongseong, and Cheongyang, which were considered non-real-estate transaction regions, the entire Chungcheong real estate market could be paralyzed as well.”

In Chungyang and Hongsung, real estate prices doubled within a year. And there is a hope that the government will come up with another plan for the Chungcheong area if the capital construction plan is denied.

Korea Housing Institute senior research fellow Jang Sung-soo estimated, “The price of real estate will not fall instantly as there are those who are waiting for another development plan.”

On the other hand, various regulations concerning the possible areas for the capital construction plan are expected to lessen.

Seventeen areas are either real estate transaction exceptions or are not free to give out construction licenses according to the SLNACC, including, Banpo in Gongju, Jochiwon, Yeongi and Kangnae in Chungwon. These areas are free from limitations right after the announcement of unconstitutionality.

However, due to regulations in each real estate transaction area, including high speculative area and speculative real estate area regulations imposed by the Ministry of Construction and Transportation, they will not be affected by the decision. But, they are expected to be removed systematically because they were made for the protection of speculative investment following the capital movement plan.

Scholars feel apartment prices will fall more than real estate prices since apartments are easier to sell.

In particular, notable price drops have occurred in Jochiwon and Noeun, Daejeon, which are near Yeongi, the designated site for the new administrative capital.

President Goh Jong-wan of RE Members, a real estate investment consulting firm, speculated, “Places where they have their own development plans such as Chunan and Asan will not be affected as much as those without, including Jochiwon, Daejeon and Ochang district, Chungbuk.”

At Noeun district in Daejeon, 20 kilometers away from possible new capital areas, apartment prices rose to eight to nine million won per pyong. In Jochiwon, Shinheung Jugong apartments 32-pyong in size only cost 80 million won in April, but now cost 130 million won.

President Yook Do-gun of the Korea Real Estate Agency in Jochiwon said, “It is expected that the number of apartments for sale will be like a flood starting tomorrow.”

Apartment sales plans for the second half of the year will be gloomy. According to the construction industry, there are 15,943 houses up for October to December distribution.

Doctor Apartment’s Kang Hyun-goo said, “Firms planned for distribution expecting an ‘administrative capital halo effect,’ and there are still undistributed apartments left, so parceling out will be postponed.”

Eun-Woo Lee In-Jik Cho libra@donga.com cij1999@donga.com