Corporate restructuring real estate investment company (CR REITs) is accelerating efforts to resolve local problematic unsold dwellings. Following the launch of CR REITs No. 1 last month, a CR REIT has applied for registration to purchase unsold apartments in the Gwangyang area. The Ministry of Land, Infrastructure and Transport expects that 1,800 unsold dwellings will be resolved through CR REITs by next month.
According to the Ministry of Land, Infrastructure and Transport on the 15th, JB Asset Management submitted an application to the ministry the previous day for the CR REITs business registration to buy unsold dwellings located in Gwangyang, Jeollanam-do. This CR REIT plans to purchase 275 unsold units from a total of 332 apartments by Hanla Construction.
CR REITs are structured to gather funds from multiple investors to purchase unsold dwellings, operate them as rentals, and sell them for profit when the real estate market recovers. As the local unsold problem became serious, the ministry revived the CR REITs system last year for the first time in a decade since 2014.
The first CR REIT, named JBYSK No. 2, completed its registration last month and purchased 288 unsold apartments in Daegu's Suseong District at a discounted price. The CR REIT, having completed the purchase process at the end of last month, is now seeking tenants. The plan is to find tenants for four years before converting to sale prices compared to market rates.
Concerns had been raised that if CR REITs purchased unsold apartments at discounted prices, conflicts might arise with the existing apartment owners. However, since CR REITs did not sell the bought apartments in the short term but sought tenants through rentals, there was not much backlash from existing owners. Furthermore, it seems that the existing residents had fewer objections because resolving the unsold dwelling issue would facilitate apartment complex management and promote the development of commercial districts due to an influx of population.
A Ministry of Land, Infrastructure and Transport official noted, 'If the construction company sells the unsold dwellings at a discount, there could be complaints from owners as house prices drop continuously. However, regarding CR REITs, I have not heard of residents' backlash as they are not selling the purchased apartments but renting them out.'
As CR REITs registration has picked up speed recently, the ministry expects that 1,800 unsold dwellings will be resolved through CR REITs by the first half of this year. In 2009, CR REITs purchased 2,100 unsold dwellings, and in 2014, they bought 500 unsold units.
Korea Land and Housing Corporation (LH) is also in the process of selecting target apartments for the purchase of 3,000 unsold dwellings. LH will conduct document reviews and field surveys on 3,536 housing units from 58 companies that applied for the unsold apartment purchase project after the local completion and will select eligible homes through purchase reviews next month.
Houses that pass the purchase review will undergo a verification process for the desired selling price. The desired selling price will be calculated by reflecting an adjustment range of –4% to 2% based on 83% of the appraised value, depending on the period of being unsold.
At the LH board meeting held last month, discussions were held on the local unsold dwelling purchase project, stating, 'Thorough demand surveys and inspections for defects are necessary to ensure the supply of quality dwellings,' and emphasized the need to establish effective operating measures for the purchase review committee to minimize future vacancies through accurate demand forecasting and supply.
The number of problematic unsold dwellings nationwide was counted at 25,117 units as of March. This is the largest figure in 11 years and 7 months since August 2013 (26,453 units). In particular, the problematic unsold dwelling issue is deepening, especially in the regions. The number of problematic unsold dwellings in the local area is 20,543 units, which is a 7.1% increase compared to the previous month.