As the nationwide construction boom continues in South Korea, there has been a surge in unsold new apartments. Due to increased labor and construction costs, construction companies and trust companies are conducting public auctions at much lower prices than the original sale price to cover their expense claim. In Daegu, this has sparked a conflict among residents, with some blocking the move-in of those who purchased units through public auctions.
The apartment complex in question is the Believe Heritage, located in Suseong-gu, Daegu. In February, a resident purchased a unit in the complex for nearly KRW 300 million (approx. $255,000) less than the original price. However, he could not enter his new home since other residents blocked the entrance. When he said, “I’m trying to get into my house at [undisclosed unit],” a resident guarding the entrance blocked him, asking, “Your house? Why?” The confrontation triggered at the entrance escalated, eventually involving the police. Existing residents, who purchased their units at 25% higher prices, demand that those who bought through public auctions also pay the same price.
The conflict surrounding the post-sale apartment complex in Daegu stems from the failure to extend the maturity of a KRW 140 billion (approx. $119 million) real estate project financing loan. Unable to extend the loan, the construction and trust companies had no choice but to sell the post-sale apartments at much lower prices through a public auction process.
In particular, the sold units in the Believe Heritage complex in Suseong-gu, Daegu were only 25 out of 146 units. That’s a dismal 17.12% sales rate. As the unsold units continued to pile up, the extension of the project financing maturity failed, and they needed to gather new residents through public auctions. During this process, existing residents, who could not accept the price reduction, expressed their grievances. They argue that the value of their property has decreased due to the lower prices at which the apartments were sold through public auctions.
In response, the residents convened an emergency committee, stating, “We signed contracts trusting in the high value and large construction company of the Heritage brand. It’s unfair that we are now suffering financial losses.” They added, “We hope to reach a mutual agreement and coexist.”
However, a mutual agreement seems unlikely. The construction company maintains that they sold the units through a legal public auction and sees no problem, which continues the intense conflict between the existing residents and the construction company.
As a result, criticism emerged as existing residents continued their protest. The man who purchased it through a public auction is living in a rental home and has to move this month. However, the existing residents have been refusing to let him move in for a month, putting him at risk of ending up on the street.
Furthermore, the unsold new apartments problem is expected to worsen nationwide, raising concerns about similar conflicts in other regions, including Daegu. An SBS report conducted research through a real estate big data company based on the registry and building register of approximately 1.97 million cooperative houses in new apartment complexes since 2017. The result says about 30,000 units were unsold. The unsold units are not owned by individuals but are held by construction companies or sales agencies.
However, according to data released by the Ministry of Land, Infrastructure and Transport this year, the number of unsold apartments was reported at 13,630, causing controversy. According to SBS, the Ministry failed to accurately verify the number of unsold apartments, resulting in almost double the error. Experts point to the voluntary reporting by construction companies as the reason for the discrepancy in the Ministry’s data. If a construction company decides to misrepresent the number of units, incorrect results are inevitable. Therefore, many real estate experts insist on amendments to related laws by the government and the National Assembly to determine the number of unsold apartments accurately.
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