Real estate developers and auction company CEOs hold high expectations of inter-Korean economic cooperation projects the President Moon Jae-in government will implement. They gesture for solidarity and success at a round-the-table talk at Hana Auction headquarters in southeastern Seoul. (seen from right) CEO Park Chang-hee of JS Auction,; Senior Executive Vice President Kim Bo-min of Hyundai Auction,; CEO Yoo Min-jong of Korea Auction,; CEO Kim Kyung-hee of OK Ayland Auction,; CEO Kim Boo-gon of Hana Auction,; CEO Kim Dong-jae of Hyundai Auction,; and CEO Sun Hyung-duk, of Daehan Auction Corp.

CEO Yoo Min-jong of Korea Auction. (Photos: NewsWorld)

The inter-Korean detente is poised to be full-blown following the historic April 27 inter-Korean summit that took place at the inter-Korean border area of Panmunjom. Several walks of life in South Korea, including the real estate and auction markets, are pinning high hopes that inter-Korean economic cooperation projects the President Moon Jae-in government will implement will bring about an economic bonanza for South Korea, struggling to find new economic breakthroughs.
NewsWorld covered a round-table talk with CEO Yoo Min-jong of Korea Auction and CEOs of its subsidiaries on such topics as the current status and outlooks of the real estate and auction markets at Hana Auction headquarters in southeastern Seoul on July 20.

Question: The President Moon Jae-in government is implementing policies to promote inter-Korean economic cooperation following the historic April 27 inter-Korean summit. Would you tell our readers on what mid- and long-term benefits the inter-Korean economic cooperation policies will bring in the real estate and auction markets?

CEO Yoo Min-jong of Korea Auction: Eyes from both the whole of Korea and the world are glued to the improving of inter-Korean relations. It is true that the expectations on the latest inter-Korean detente are running high unlike the previous governments, which attempted to mend inter-Korean ties.
Inter-Korean exchanges have emerged as major issues of several walks of life in South Korea. Such topics as ways of discussing unification, reunion of families separated between the two Koreas, cooperation in social and cultural sectors, and balanced economic development and cooperation have been capturing people’s minds.
In particular, inter-Korean economic cooperation takes on more significance. Tremendous changes are now happing in the real estate market, particularly in the in inter-Korean border area in which transactions and transaction prices surging day by day to the extent that I, who has been with the real estate industry for more than 20 years, may be surprised.
Currently, demand, riding on rash investment rush is peaking at Paju, Yeoncheon, and even to the districts like Cheorwon, raising prices of parcels on the market to more than a two- and a three-fold jump.
Paju, among the border areas, has topped in terms of land price increase rate, overtaking Sejong and Jeju.
The border areas, whose development has been so far restricted, may be still purchased at cheaper prices than other areas. Even though development plans remain uncertain, it is a sure thing that mid- and long-term investment opportunities have been opened up. Speaking honestly, there are many cases in which lots put on the block has been withdrawn, put on hold or even they has been already transacted before an auction process begins.
In the Paju area, there are some cases of lots that have changed hand at higher auction price than their appraisal prices, making me spend sleepless nights.

Q: What impact will inter-Korean road and railway economic projects have?

CEO Yoo Min-jong of Korea Auction : The two Koreas have recently conducted a joint inspection on the inter-Korean connection along the Gyeongui Line and Donghae Line. The beginning is the half of the whole.
The Gyeongui (Seoul-Shineuiju) Line will be modernized, and a project to connect the disconnected part between Gangneung and Jaejin of the Donghae Line will be done as part of efforts to connect Busan and Europe via North Korea and the Siberian cross-continent railway of Russia.
Such railway projects are essential for the establishment of inter-Korean industrial complexes and designation of special zones for inter-Korean economic cooperation.
The Unification Ministry and Gyeonggi-do provincial government are considering the establishment of an industrial complex that will house companies related to inter-Korean economic cooperation on a sprawling area of about 5 million pyeong (16.5 million sq. meters), five times wider than the Gaeseong Industrial Complex, in the Paju area.
Paju, a geologically better location from North Korea to bring North Korea laborers, has been highlighted as an economic special zone of the area, and it is expected to rise to a global economic city to attract foreign companies, including Chinese, not as a general industrial complex. Paju couldn’t’ be better compared to Ulsan and Pohang where companies moved into industrial complexes to grow ito a city.
Current ly, the land market is considered to in a starting point in which it sees demand for investment move fast so that the operator of each branch is struggling to seize up the golden opportunities – might be the last one.

CEO Sun Hyung-duk, of Daehan Auction Corp

Q: What benefits road and railway projects, to be implemented for inter-Korean economic cooperation, will bring to the real estate and auction markets?

CEO Sun Hyung-duk, of Daehan Auction Corp.: Road and railway are integral parts of upcoming inter-Korean economic cooperation projects. They will be not only capable of transporting cargoes over land, but also they will be dramatic in the time and economical perspective. In particular, they will bring about tremendous changes in the real estate market. The northern sphere of the Seoul metropolitan area, which has remained to be backward, will undergo great changes. The railway networks will emerge as a new transportation means to promote culture, industry, logistics, and tourism exchanges by connecting South Korea and North Korea, China and even Russia.

Q: What impact the SMG’s plan to develop Yongsan will have on the auction market?

CEO Sun Hyung-duk, of Daehan Auction Corp.: The so-called Yongsan Master Plan, including massive development projects at the center of the capital, is to be unveiled in August. A commissioned survey, which had been extended twice, has been completed as of the end of June. The plan calls for developing a 3.39 million square-meter area covering between Bongnae-dong, Jung-gu, Seoul, and the Hanggang Road district in Yongsan on a gradual stage. The area surrounding KORAIL’s maintenance depot site is to be set as a zone in which international office building and integrated medical facilities will be constructed.
It is to include massive development projects between Yongsan and Seoul railway stations. Seoul Mayor Park Won-soon said the covered upper part of the railway section will be used to build MICE complexes and shopping centers, as Rive Gauche in Paris was renewed as a district to house such facilities as a university campus, a library and a hospital. The Seoul Railroad Station will be renewed as the starting point and last stop of the future trans-Eurasian railway network.

CEO Kim Dong-jae of Hyundai Auction

Senior Executive Vice President Kim Bo-min of Hyundai Auction

Q: What impact the U.S. interest rate hikes will have on the Korean real estate and auction markets?

Senior Executive Vice President Kim Bo-min of Hyundai Auction: So far, the U.S. low-interest policy is aimed at boosting investment and spending, not depositing money at banks, thus invigorating the real estate.
The U.S. government has relied on pump-priming policies. Expecting inflation stemming from the low-interest policy, the United States has begun to increase interest rates to siphon off money from the market.
In the case, hot money into Korea will be drawn into the United States, so Korea is forced to raise interest rates to stem capital outflow. Currently, Korea’s outstanding household debts have swollen to more than 1,400 trillion won.
Interest rate hikes may lead to a reduction in spending and sluggish investment, stemming from a drop in disposable income, and make the real estate market go into a recession mode. Experts said the U.S. interest rate hikes would have a limited impact on the Korean real estate market, but bring an adverse impact on borrowers burdened with of lots of loans in a long-term perspective.
But the auction market is expected to come in the opposite direction. The excessive burden of replaying principles and interests, caused by interest hikes is expected to boost land lots on the block, thus invigorating the real estate auction market.

CEO Kim Kyung-hee of OK Ayland Auction

Q: Pls touch on the current status and future outlooks of the real estate and auction markets.

CEO Kim Kyung-hee of OK Ayland Auction: Currently, the Korean housing market appears to be taking a downward, declining path after passing a peak. About 1 million units have been planned to be built during between 2017 and 2019.
The President Moon Jae-in government plans to build a combined 2.3 million units, 70,000 more units each year, including 200,000 units, to be constructed each year — for a combined 1 million units for five years – according to its housing welfare roadmap. As market prices are determined by demand and supply, the housing market is forecast to see prices plunge somewhat greatly. Price fluctuations are most likely to vary according to where housing units are built.
The housing auction market is expected to deliver a big blow to so-called gap investors. In particular, the land auction market is predicted to undergo difficulties. The reason is that land is limited with the forest area of the Seoul metropolitan area declining continuously.

CEO Kim Boo-gon of Hana Auction

Q: What economic benefits will inter-Korean economic cooperation projects  bring and what about real estate outlooks?

CEO Kim Boo-gon of Hana Auction.: Inter-Korean economic cooperation projects will bring about tremendous changes to not only North Korea but also South Korea. Speaking simply, they will not only bring a combination between North Korean labor and resources and South Korea’s technology, but also exporting of South Korean goods and services both by sea and overland will reduce logistics costs by between 20 percent and 40 percent.
They will also have a great impact of the reorganizing of industrial complexes. Industrial complexes and logistics centers have been built around ports for exporting their produce. With the upcoming opening of export routs overland and transporting of North Korean labor, resources and logistics, Paju, Yeoncheon and Cheorwon will emerge as industrial and logistics enters.
The districts are considered to be optimal for companies wanting to use Incheon port by sea and the trans-Eurasian railway overland. The areas could offer industrial sites at prices one-fifth to one-tenth compared to those located on the south of the Han River, optimal for SMEs.
Inter-Korean economic cooperation has already become an unchanging trend, and the real estate and auction markets of the border areas are expected to bring about tremendous changes. With the rushing of companies and investors, things for transactions have already been in short supply, with land prices skyrocketing by 200 percent to 500 percent in some areas in few months.

CEO Park Chang-hee of JS Auction

Q: What impacts so-called real estate ownership and comprehensive real estate taxes will have on the real estate and auction markets?

CEO Park Change-hee of JS Auction: Real estate ownership and comprehensive real estate taxes are targeting some upper stratum as penalty ones. Refusal to pay the taxes is expected in an initial stage of levying, but it’s burdensome to appeal for public sentiment. Tax rates are not high for them to stand compared to the holding of their assets. Due to the taxes, none would give up real estate as one of asset management portfolios.

About Daehan Auction Corp.
The nation’s top experts with Daehan Auction Corp. promise transaction price differences or future investment values by selling land lots we’ve secured through court or general auctions at cheaper prices than current ones. We’re devoting ourselves to offering expertise consulting services so that customers can reap high profits in a trustworthy fashion.

About OK Ayland Auction
Our company’s land lots put on the block or on the market for being financially strapped may be purchased at cheaper prices than current transaction ones. Investors who afford 10 billion won and 30 million won in money turn to OK Ayland Auction as good opportunities.

About Hyundai Auction
Considering that future interests and tax policies of the progressive government (remaining four-year term and nine years in case of reelection) may give a negative signal to the real estate market, I bet that we need to build diverse business models on a gradual basis and I come to my conclusion that it is desirable to purse integrated real estate consulting services.

About Hana Auction
Hana Auction is a company that walks along with customers. We’re committed to managing their assets in a safe fashion through thorough analysis and after-sale management.

About JS Auction
JS Auction is an auction company operating in Nowon, Gangbuk, and Dobong, the northeastern ward areas of Seoul, which are considered to fall behind in awareness of real estate investment, investment information and investment opportunities among the Seoul areas.
Despite unfavorable conditions and grievances in market exploration, executives and staff members of JS Auction are armed with well-organized teamwork and a mission of spreading asset value opportunities to the Gangbuk area (north of the Han River).