International Law

More Property Craziness Under MBnomics

Since the election of Lee Myung-bak, property prices have firmed or increased a little on the hope that punitive tax policies of the Roh administration will be repealed (part of the “MBnomics” he’s promising). Now a complex coming onto the market in the Ttukseom district—which abuts the “Seoul Forest” park—hopes to test the willingness of the market to absorb luxury apartments north of the Han River (English Dong-A Ilbo today).

Property watchers are looking for the Ttukseom apartments to sell for W45 million per pyong (3.3 sq. m. or 36.4 sq. ft.)—that’s US$1300 per square foot of gross floor space. (Note that Korean apartments can have usable floor space ratios of 70% or less; I’ve seen 55% in complexes with lots of facilities.)

But is there enough demand?

The construction industry says it will take almost one year to sell all of the apartments. Builders will seek to create a well-known luxurious community by drawing famous people. This is why they did not flinch when only one qualified buyer expressed interest in purchasing an apartment from Daelim Construction since the company began selling its luxury apartments Tuesday.

And if Korea’s wealthy will pay those kind of prices to live in Ttukseom, that will mean Gangnam apartments will be even pricier:

Real estate brokers in the posh Gangnam district of Apgujeong-dong, a neighborhood across the Han River from Ttukseom, say that if consumers are willing to pay 45 million won per 3.3 square meters in Gangbuk, the price of Apgujeong-dong homes could rise to at least 50 million won per 3.3 square meters.

That would make the 43-pyong size that I live in sell for up to W2.15 billion (US$2.27 million) if it were in Gangnam. In my crummier neighborhood close to the Kwanghwamun Central Business District area, that size is going for W680-800 million (US$720,000-850,000)—a bargain! (Let’s buy two.)

This is crazy. I really need to sell my apartment and put cash in my pockets before the crash. Or buy in a cheaper market, like London, Manhattan, or Tokyo. I saw you can get a 43-pyong three-bedroom brownstone apartment in the Upper East Side for the bubble price of US$1.7 million. All I need now is an US$800,000 mortgage…

Full post as published by Korea Law Blog on March 05, 2008 (boomark / email).