Thirty-one-year-old A, who is preparing for marriage, purchased a semi-basement villa in a redevelopment area of Seodaemun-gu, Seoul, in March. After paying a deposit of 170 million won, A made the decision as the rent for their previous new villa skyrocketed to 200 million won within a year. Concerned that continuing to rent would jeopardize their chances of homeownership, A chose a redevelopment area where they could inherit membership in the association after it received approval. Although A will have to bear a future cost of about 700 million won, they believe opportunities to acquire a new apartment in Seoul at this price are rare. However, A faces the daunting prospect of living in the semi-basement villa for at least two more years until the redevelopment is completed. A described their new home as being in "a state of disrepair," recalling their shock upon seeing cockroaches scurrying around during the initial visit. Unable to live in such conditions, A renovated the flooring, wallpaper, kitchen, and bathroom. Still, A feels satisfied, stating, "In two years, I can move into a new apartment, so this level of hardship is manageable..."
As apartment prices in Seoul soar and loan regulations tighten, an increasing number of people in their 20s and 30s are turning to what is known as 'Body Tech.' This term combines the concepts of physical presence and financial investment, referring to the practice of living in older villas or apartments while anticipating future value increases from redevelopment or reconstruction projects. With the average apartment price in Seoul reaching around 1.6 billion won, young adults are finding it increasingly difficult to purchase apartments outright and are instead looking at relatively lower-priced older villas or apartments in the early stages of redevelopment.
According to an analysis by the real estate platform Dabang of the Ministry of Land, Infrastructure and Transport's actual transaction system, apartment sales in Seoul from January to May this year totaled 34,932, a 1.4% decrease from the same period last year (35,419). In contrast, sales of multi-family and multi-unit homes surged by 45.8% during the same period, reaching 19,273 transactions. The increase was particularly pronounced in areas with high expectations for redevelopment projects. For instance, the number of transactions in Gwangjin-gu rose by 95.7% compared to the previous year, while Songpa-gu and Yeongdeungpo-gu saw increases of 82.4% and 82.2%, respectively. Recently, areas like Sangye New Town in Nowon-gu and Banghwa New Town in Gangseo-gu, which are part of the Rapid Integrated Planning initiative supported by the Seoul city government, have gained attention as 'Body Tech' locations.
When purchasing housing in redevelopment or reconstruction areas, there are many factors to consider. The first step is to verify the current stage of the project. Generally, the stages of a redevelopment project include: 1) designation of the redevelopment area, 2) formation of an association by land and building owners, 3) approval of the project plan, 4) approval of the management and distribution plan, 5) relocation and demolition of existing residents, and 6) construction and occupancy of new apartments.
It is crucial to determine at which stage the membership in the association can be inherited. In speculative overheating zones, if a home is purchased before the approval of the association formation for reconstruction projects or before the approval of the management and distribution plan for redevelopment projects, the buyer can inherit membership. If a home is purchased after these points, the buyer may not receive occupancy rights and could be subject to cash settlement.
There are also exceptions that allow for the inheritance of membership after approval. In small-scale redevelopment projects, to prevent speculation, buyers generally cannot inherit membership if they purchase property after the association formation approval. However, if two years pass without an application for project plan approval and the seller has held the property for a certain period, inheritance may be permitted. Nonetheless, it is essential to consider that delays in the project or increases in construction costs and additional contributions could extend the timeline for occupancy by over ten years.
Yang Ji-young, a specialist at Shinhan Premier Pathfinder, noted, "When a redevelopment project is in its early stages, it can take a long time to progress, which may result in funds being tied up for an extended period. Even if purchasing relatively inexpensive multi-family or multi-unit homes, it is crucial to verify regulations and approach carefully."
In addition to the project stage, the feasibility of the redevelopment project itself must be assessed. Generally, larger complexes with lower existing floor area ratios and more units are more favorable for securing general sale quantities. However, if the project consists mainly of small units under 60 square meters and the land share per member is small, the required contributions may exceed expectations. The willingness of residents to proceed with the project is also a variable. If there are many elderly residents or significant opposition to additional contributions and relocation burdens, the process may be delayed, making it necessary to gauge the internal atmosphere through local real estate agencies.
Nam Hyuk-woo from Woori Bank's real estate research institute stated, "In the early stages of redevelopment projects, demand tends to increase as expectations for development rise, leading to apparent price increases. However, if specific events or delays in permits occur, demand can plummet, causing prices to drop sharply. It is essential to focus on areas with solid long-term demand." He added, "It is crucial to pay attention to the rate of resident agreement. Buying based solely on hearsay that an area has been selected for rapid integrated planning can be risky."
Auctioning is also a niche market for acquiring homes at prices lower than market value. In auctions, understanding property rights is critical. If there are existing tenant deposits or rights such as provisional registration, provisional disposition, or lien, the actual acquisition cost can significantly increase. For example, if a property is auctioned for 500 million won but has a tenant deposit of 150 million won, the actual acquisition cost rises to 650 million won. It is essential to review the auction property specifications, registration documents, and current status reports while considering the tenant's rights.
On-site verification and financial planning are also essential. Factors such as transportation, school districts, living infrastructure, surrounding development plans, as well as the condition of the building and occupancy status must be directly checked. The bidding price should be conservatively estimated, reflecting surrounding market prices, repair costs, moving expenses, and taxes. It is also important to note that the payment deadline for the auction price is typically within four weeks after the sale approval decision is finalized.
Kim Hyo-sun, a senior real estate expert at KB Kookmin Bank, remarked, "Even in auctions, apartments are often not significantly cheaper than market prices. If the price is too low, it is crucial to carefully examine how rights will be interpreted regarding the eviction process."
* This article has been translated by AI.
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