The price of public housing in Incheon Gyeyang A6, initially estimated at 400 million won during the pre-application phase in 2023, has now exceeded 550 million won in the main application this year. With the basic construction cost, which is subject to the price ceiling system, rising by over 22% in four years, concerns have been raised about the financial burden on pre-applicants.
On September 20, an analysis by Aju Economy of the pre-application and main application announcements for Incheon Gyeyang A6 by the Korea Land and Housing Corporation (LH) revealed that all ten housing types offered in the pre-application phase had higher average sale prices in the main application than the estimated prices at that time.
The most supplied housing type, the 59-square-meter A type, had 419 units available, with an estimated sale price of 382.62 million won. The average sale price in the main application this year is 534.90 million won, an increase of 152.28 million won (39.8%). The 84-square-meter A type saw a difference of 186.63 million won (35.4%), rising from 527.77 million won to 714.33 million won.
The price difference between the estimated sale prices during the pre-application and the average sale prices in the main application for the ten housing types (ranging from 59-square-meter A to 84-square-meter B) varies from a minimum of 100.4 million won to a maximum of 186.63 million won, with increases ranging from 26.7% to 39.8%.
Increases in main application prices are not limited to A6. An analysis by the National Assembly Budget Office of LH data found that among 31 blocks with 16,556 units that completed the main application by the end of June last year, 30 blocks with 16,182 units had actual sale prices higher than the estimated prices during the pre-application phase, accounting for 97.7% of the total units. Nineteen blocks with 9,877 units saw prices rise by more than 10% compared to the estimated prices.
Some pre-applicants have also withdrawn due to project delays or rising prices. Out of a total of 50,425 pre-applications, 10,693 (21.2%) were canceled.
Construction costs, which influence sale prices, are on the rise. According to the Ministry of Land, Infrastructure and Transport's regular announcement on the basic construction cost for the price ceiling system on September 14, the basic construction cost for multi-family housing with a floor area of 60 to 85 square meters has increased from 1,904,000 won per square meter in September 2022 to 2,328,000 won this month. This marks an increase of 424,000 won per square meter, or 22.3%, over four years.
The basic construction cost is a component used to determine the price ceiling for housing subject to the price ceiling system. When actual construction costs, such as material and labor costs, rise, the government reflects these increases in the basic construction cost.
The rise in basic construction costs also affects sale prices, requiring pre-applicants to secure more funds. In response, LH is supporting pre-applicants whose main application has been delayed by more than six months by reducing the down payment ratio from 10% to 5% and allowing them to pay 30% of the second installment of the mid-term payment at the time of that payment instead of the usual two installments of 15% each.
A representative from the National Assembly Budget Office stated, "While this approach may not lower the sale price itself, it can alleviate the initial financial burden for genuine buyers when prices exceed expectations or when the main application is significantly delayed. We can further consider measures to secure time for funding before occupancy by lowering the down payment ratio or postponing the mid-term payment timing for projects delayed beyond a certain period, while increasing the proportion of the final payment."
* This article has been translated by AI.
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