Busan Redevelopment Costs, Additional Contributions and Local Unsold Homes: A Review of the Apartment Market

Several sources of pressure are converging in provincial real estate markets, including Busan. Rising redevelopment construction costs and additional contributions from association members, completed-but-unsold homes, and high interest ratesare all weighing on the market at the same time.

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The source explains that mortgage interest costs have increased since the Bank of Korea raised its base rate in 2026. Combined with population decline and young people moving to the Seoul metropolitan area, this has also prompted discussion of a possible prolonged downturn in provincial apartment markets.

Demand may differ within Busan, between preferred residential areas such as Haeundae, Suyeong, and Dongnae and outlying areas. Rather than treating all of Busan as a single market, it is worth assessing conditions in each area.

One major factor that can increase the burden on association members in Busan redevelopment projects is rising construction costs.

THE IL, the redevelopment project in Daeyeon 3 District in Nam-gu, is a large complex of 4,488 homes being built by Lotte Engineering & Construction and HDC Hyundai Development Company.

In 2023, the association general meeting approved a proposal to adjust construction costs from 4,395,000 won per 3.3㎡ to 6,385,000 won. This is an increase of about 45.3% over the original amount.

According to the source, at the time of a November 2026 report, the construction companies had requested about 183.9 billion won in additional construction costs and had applied to Busan City for mediation of the cost dispute.

Even if construction costs rise, the burden on association members may increase if revenue from general sales is insufficient to cover them.

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For other redevelopment projects, such as in Uam-dong, it is important to consider not only construction costs but also financing costs and projected sales revenue. In particular, the construction cost increase requested by the construction company and the additional contributions that association members will actually have to pay may not be the same amount, so they should be checked separately.

According to the Ministry of Land, Infrastructure and Transport’s September 2026 housing statistics cited by the source, there were 65,941 unsold homes nationwide, including 27,549 completed-but-unsold homes.

Of the completed-but-unsold homes, 23,067 were in provincial areas, accounting for 83.7% of the total.

In the September 2026 figures presented by the source, the nationwide number of completed-but-unsold homes fell from the previous month. Busan’s figure also declined from 2,969 to 2,455, while Gyeongsangnam-do’s increased from 2,973 to 3,067. It is important to account for differences in regional trends.

If completed homes remain unsold, construction companies may take longer to recover their funds, increasing pressure to offer discounts or dispose of remaining inventory.

Discounted sales may cause dissatisfaction among people who purchased earlier. If listings with negative premiums appear nearby, that could also affect price expectations for newly built apartments in the area.

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As a past example, the source cites the 2024 case in which 121 unsold homes at Villiv Heritage in Suseong-gu, Daegu, were put up for public auction at a value of about 200.9 billion won. Projects facing deteriorating financial conditions may also be exposed to the risk of collateral property being sold at public auction or through foreclosure. However, it cannot be concluded that unsold homes alone will immediately lead to a public auction or a PF failure.The scale of the risk varies depending on each project’s borrowing structure, collateral terms, and other factors.

One structural pressure on provincial real estate markets is the potential weakening of the underlying demand for housing.

Busan faces population-structure changes driven by young people moving to the Seoul metropolitan area, low birth rates, and an aging population. If the supply of new apartments exceeds local demand from actual residents, existing homes may also face price competition.

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The burden of loan interest may add to these pressures.

The source reports that the Bank of Korea raised its base rate by 0.25 percentage points in both July and August 2026, then held it at 3.00% per year on October 22. It also mentions the possibility of another increase in November, but the actual rate decision should be confirmed from subsequent announcements.

For example, if the interest rate on a 300 million won mortgage rises from 4% to 5%, the simple interest calculation shows an annual increase of 3 million won, or an average of 250,000 won per month.

This excludes principal repayments. Actual payments vary depending on the repayment method and loan terms.

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High interest rates can reduce homebuyers’ borrowing capacity while also increasing financing costs for redevelopment associations. As a result, the burden of sales prices may rise due to increasing construction costs, while actual purchasing power weakens because of higher interest rates.

A quick recovery in Busan’s real estate market may be difficult for reasons beyond the economy. Multiple factors—including construction costs, population structure, interest rates, and unsold homes—are at play.

New apartments in well-located areas may be able to maintain relatively steady demand, but price recovery may be slower in areas with concentrated supply or a weak employment base. This describes a possibility; actual trends vary depending on local conditions.

Association members in redevelopment projects should consider not only the estimated proportional rate but also additional construction costs, financing costs, general sales revenue, and whether they will be able to fund the final payment when moving in.

When assessing provincial apartment markets going forward, it is important to look beyond how far prices have fallen and check whether actual buyer demand is recovering.

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Until a decline in unsold homes, a recovery in transaction volumes, and interest-rate stability are all confirmed, it is prudent to review cash flow and prepare for the possibility of further declines rather than investing with excessive borrowing.

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