Fast-Track Reconstruction Reviews Become New Normal; Relocation Remains a Challenge

*Editor's Note: 'AI PRISM' (Personalized Report & Insight Summarizing Media) is an 'AI-based personalized news recommendation and summarization service' developed with support from the Korea Press Foundation. It selects and provides six customized news items by reader type.

1. "We Want to Be Like Eunma"…Fast-Track Reviews Become Reconstruction 'New Normal'

Key Summary: As Eunma Apartment received approval roughly 40 days after filing its business implementation plan approval application, expectations for shortened project timelines at major Seoul reconstruction complexes have risen. Fifteen complexes passed integrated reconstruction reviews in the first half of this year, including Sinbanpo 2nd, Banpo Mido 1st, Apgujeong District 2, and Jamsil Woosung 1st, 2nd, and 3rd, while Yeouido Sibeom Apartment applied for business implementation plan approval in late March, ahead of Eunma, and is awaiting results. The Seoul Metropolitan Government is structuring the permit speed race through the introduction of comprehensive evaluations of district maintenance projects. However, some point out that if major complexes in the Gangnam area enter the relocation stage simultaneously, large-scale relocation demand will arise, requiring measures for relocation cost loans and construction cost burdens.

2. Variable Mortgage Rates Rise…Burden Grows on Real Demand Buyers

Key Summary: With COFIX based on newly handled amounts in June rising to 3.05%, entering the 3% range for the first time in one year and five months, further increases in variable mortgage rates have become inevitable. Fixed and hybrid mortgage rates at the five major banks stood at 4.68% to 7.39% per year as of the 13th, with the upper limit 1.16 percentage points higher than at the end of last year. Banks' own rate hikes have continued, with NH Nonghyup Bank raising variable and fixed rates by 0.2 percentage point each last month and Woori Bank ending up to a 1.1 percentage point preferential rate. If the possibility of a base rate hike by the Bank of Korea's Monetary Policy Committee is added, the annual interest burden per borrower is estimated to increase by an average of approximately 296,000 won.

3. Basic Construction Cost Up 26% in 5 Years…Sales Prices in Gangnam, Yongsan to Rise Further

Key Summary: The Ministry of Land, Infrastructure and Transport made an irregular 0.77% adjustment to the basic construction cost from 2.22 million won to 2.237 million won per square meter, reflecting a surge of about 18.6% in high-strength rebar prices as of early June following the regular notice in March. As a result, the basic construction cost, which was 1.774 million won in March 2021, has risen 26.1% over five years. This adjustment applies to complexes that apply for occupant recruitment approval after July 15, 2026, and is expected to act as an upward factor for sales prices in Gangnam, Seocho, Songpa, and Yongsan districts subject to the price ceiling. Because actual sales prices are decided by the sales price review committee based on a comprehensive assessment of land costs and additional costs beyond the basic construction cost, they do not necessarily match the extent of the increase.

4. PF and Sales Guarantees Expanded to 100 Trillion Won Annually…"We Will Restart Stalled Projects"

Key Summary: The Korea Housing & Urban Guarantee Corporation (HUG) announced a plan to supply housing supply-related guarantees, including PF, maintenance projects, and sales guarantees, at a scale of 100 trillion won annually through 2029. This is an expansion from the annual average of 88 trillion won during 2022-2024. In the second half, guarantee products supporting relocation costs and share payments for residential regeneration innovation districts, and guarantee products supporting maintenance project cost loans for small and medium construction firms with low credit ratings, will be launched. Special guarantees for non-apartment supply will also apply with eased conditions, including the abolition of construction capability ranking limits, a reduction in the equity pre-injection ratio, and a 20% reduction in guarantee fees. In the case of the Seoul Metropolitan Government's Youth Safe Housing, improvements to the guarantee-first, loan-repayment-later method have enabled the supply of 3,500 unoccupied households after completion.

5. Yongsan Najin Shopping Center Transforms into AI and ICT Business Hub…26-Story Complex Breaks Ground Next Year

Key Summary: The Seoul Metropolitan Government is pushing to develop an AI and ICT business complex with a total floor area of 155,202㎡, spanning nine basement floors to 26 above-ground floors, on the site of Najin Shopping Center Buildings 17 and 18 and the Yongsan parking building, with a goal of breaking ground in 2027 and completing in 2030. In March, a building review also passed for a new industry business facility with a total floor area of 97,857㎡, spanning eight basement floors to 28 above-ground floors, in Special Planning Zone 10 in the area of the adjacent Najin Shopping Center Buildings 19 and 20. An open lounge will be placed on the lower floors and new industry business facilities on the upper floors, and the site will be connected three-dimensionally with surrounding development areas through the newly built Cheongpa-ro to Yongsan Station elevated public pedestrian passage and a 5-meter-wide public pedestrian passage. As linked development with the Yongsan International Business District begins in earnest, analysts say medium- to long-term attention is required for changes in nearby real estate value.

6. President Lee Jae-myung Orders Swift Preparation of Supplementary Measures for Leveraged ETFs

Key Summary: President Lee Jae-myung ordered swift preparation of supplementary measures as stock market volatility expanded and investor losses grew following the launch of single-stock leveraged ETFs for Samsung Electronics and SK hynix. The Financial Services Commission (FSC) decided to expand the National Growth Fund from 150 trillion won to 200 trillion won and increase the annual investment scale from 30 trillion won to 40 trillion won. It reaffirmed the policy of not adjusting this year the 1.5% relative to nominal growth rate, which is the household debt total management target, and decided to extend the period for reflecting performance bonuses when calculating DSR from the existing two-year average to three years, in order to prevent surges in loan limits from performance bonuses at large firms such as Samsung Electronics and SK hynix.