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Surging apartment transaction prices show an increase

Posted July. 27, 2023 08:16,   

Updated July. 27, 2023 08:16


The Apgujeong Zone 3 Reconstruction Association in Seoul, Gangnam-gu has appointed Huirim Architects Consortium as the designer for the project. However, there have been issues regarding the proposed floor area ratio. The Seoul city government has set a limit of 300 percent. Still, Huirim presented a design proposal with a higher floor area ratio of 360 percent, which clearly violates the relevant law. In response to this violation, the Seoul city government reported the matter to the police and issued an order of rectification to suspend the public contest. Huirim, on the other hand, claims that it had adjusted the floor area ratio to 300 percent just before the vote of the association members, asserting that it did not commit any wrongdoing. However, the Seoul city government remains concerned about potential unlawful conduct related to the association’s operations, citing that there is currently no design firm appointed for the reconstruction of Apgujeong Zone 3, and announced their intention to investigate to determine if any unlawful activities have taken place.

In November 2022, Daewoo Construction emerged as the contest winner for the reconstruction contract of Hannam Zone 2 in Yongsan-gu, with the total contract amounting to 790 billion won. As part of their proposal, Daewoo Construction said they would construct apartments with an eased height limitation. The current height limit in the Hannam New Town area is 90 meters, but Daewoo Construction proposed increasing it to 118 meters. Their plan entails building apartments starting from the 20th-floor level, but they committed to add seven floors to maximize their potential profits. Daewoo Construction also submitted a letter of promise, stating their intent to abide by the association's voting results if they could not secure the desired change in the height limitation. The construction company expressed that they would negotiate with the Seoul city government until 2025 when construction is scheduled to commence, an agreement between the two parties has not yet been reached.

Recently, there has been a concerning trend where numerous redevelopment and reconstruction companies are winning bids for design or construction projects by offering conditions that violate existing standards. These companies are capitalizing on the government’s deregulation efforts, coupled with the recovery of housing prices, to propose plans that could maximize profits for association members, which has resulted in chaos and uncertainty in the market. The situation is particularly alarming as large-scale redevelopment projects are initiated one after another throughout Seoul, with the total project costs estimated to be a significant sum of 36 trillion won. The fear that similar confusions and violations of standards may recur in other reconstruction and redevelopment projects persists.