Gangnam Rebuilding Prices Drop as Non-Gangnam Seoul Hits Records

* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six news items tailored to each reader type.

1. Gangnam Reconstruction Prices Fall Hundreds of Millions as Mapo-Yongsan-Seongdong and Outer Districts Set Records

Key summary: Actual transaction prices at high-end Gangnam reconstruction complexes hit directly by the Aug. 3 tax overhaul have fallen by as much as 1 billion won from their previous sales in a string of cases. A 76.9-square-meter unit at Eunma Apartment in Daechi-dong sold for 3.02 billion won this month, 320 million won below the previous month, and an 82-square-meter unit at Apgujeong Hyundai 5 traded at 5.1 billion won, down 1 billion won from February. By contrast, a 59-square-meter unit at Mapo I-Park Forest in Sinsu-dong, Mapo District, set a record high at 2.145 billion won, as complexes along the Han River belt north of the river and in outer Seoul maintained their upward momentum. Seoul apartment prices have risen for 85 straight weeks, matching the longest streak on record, but the pace of gains narrowed for a fourth consecutive week from 0.29% to 0.13%, and experts say regional divergence driven by the intensity of tax and lending rules is likely to continue for some time.

2. With 61 Trillion Won Gone From Project Financing and Permits Halved, "The Supply Cliff Will Deepen"

Key summary: Of the 202.8 trillion won that financial firms recovered or wound down in project financing from the second quarter of 2024 through the first quarter of this year, only 141.5 trillion won was newly supplied, meaning 61.3 trillion won disappeared from the market. Outstanding main project financing at builders ranked within the top 100 by construction capacity nearly doubled over the same period, from 7.9 trillion won to 15.7 trillion won, while the figure for those outside the top 100 fell more than 90%, from 6.1 trillion won to 500 billion won, underscoring a sharp polarization. Outstanding bridge loans also fell to 10 trillion won in the first quarter of this year, down 5 trillion won from two years earlier, blocking the supply pipeline for early-stage projects. Although the government expanded public project financing guarantees to 86 trillion won, critics say it is not enough to unclog the flow of money on the ground.

3. "Deposits Up 200 Million Won and People Sign Without Looking": Relay Reconstruction in Songpa Sparks Jeonse Crisis

Key summary: On top of the three complexes currently relocating — Garak Samick Mansion, Garak Miryung and Samhwan Garak — once Jamsil Woosung 4 and Hanyang 3 begin moving out next month, relocation demand from 2,826 households across five complexes will hit at once. The jeonse price for an 85-square-meter unit at Kumho Apartment in Garak-dong has climbed from 580 million to 770 million won early this year to an asking price of 950 million won now, and jeonse listings in Songpa District plunged 65% from 3,904 in February to 1,368 as of the 25th. The jeonse price index has also risen a cumulative 9.41% for the year, 4.07 percentage points higher than the cumulative gain over the same period last year. With reconstruction association members unable to find jeonse nearby moving beyond Wirye and Hanam as far as Dasan New Town in Namyangju, forecasters say knock-on effects on the Gyeonggi jeonse market are unavoidable.

4. Four Years After the Legoland Crisis, Small and Midsize Builders' Supply Down 30%

Key summary: Small and midsize builders, which supplied 169,000 units in 2021 before the Legoland crisis, provided just 69,000 last year, a plunge of 58.8%. Their share of total presales also shrank by more than 20 percentage points, from about 57% to 35.7%. Supply from small and midsize builders through September of this year rose 19% from a year earlier, but most of it was a push-out of presales from permits obtained in the past, far from an expansion in net supply, the report said. A total of 641 general construction firms nationwide filed for closure this year, up 32.4% from the same period last year, and with early-stage bridge loans in the provinces completely blocked, normalizing supply from small and midsize builders is expected to take considerable time.

5. U.S. Treasury Yields at 5% Become the New Normal: "30-Year Will Top 6% This Year"

Key summary: With the U.S. 10-year Treasury yield hovering around 5.10%, it rose to 5.22% on the 24th, the highest since June 2007. In a Bloomberg survey of 173 financial market experts, 53% said the 30-year Treasury yield would break through 6% this year, signaling the first such move since 2000, during the dot-com bubble. Surging demand for funds for AI infrastructure investment, a spike in international oil prices driven by U.S.-Iran tensions, and a widening federal budget deficit are cited as structural drivers of higher rates. Because prolonged high global rates could push up domestic mortgage rates and project financing costs, analysts say leveraged investment strategies need to be reconsidered.

6. Provincial Builder Closures Jump 37% in a Year as Trust Firms Absorbing Bad Debt Sink Into Losses

Key summary: From January through Sept. 27 this year, public notices of closure filings by general construction firms in the provinces totaled 418, up 63.9% from 255 in the same period last year. Taewang E&C, the third-largest builder in the Daegu area, entered rehabilitation proceedings after about 110 billion won in project financing guarantee obligations materialized, and cash and cash equivalents at 12 midsize builders ranked 30th to 100th by construction capacity fell 13.2% in a year while short-term borrowings rose 4.4%. Net trust account loans at 14 real estate trust companies swelled to 9.5165 trillion won in the first half of this year, and a net loss of 158.6 billion won in the second quarter turned the first half to a cumulative deficit of 82.7 billion won. With the fallout from bad project financing spreading beyond builders to trust firms, normalizing existing project financing sites is expected to take considerable time.