The Ministry of Land, Infrastructure and Transport (Minister Noh Hyung-wook) announced that the basic construction cost would be announced on September 15th in consideration of price changes such as construction materials and labor costs since the announcement in July 21st.
As a result of this announcement, the upper limit of the basic construction cost used to calculate the sale price of apartment houses to which the sale price ceiling system is applied will increase by 3.42% from September 15th. Accordingly, the upper limit of construction cost* per supply area (3.3㎡) is adjusted from 6,649,000 won to 6,879,000 won.
* The upper limit of construction cost per supply area (3.3㎡) is calculated assuming 16 to 25 floors or less, exclusive area of 85㎡, supply area of 112㎡, and basement floor area of 39.5㎡ per household
The Ministry of Land, Infrastructure and Transport regularly adjusts the basic construction cost every six months (3.1 days per year, September 15th every year) to reflect factors of increase and decrease in construction costs.
However, in July, the price of high-strength rebar, a major construction material, surged (up 32.87%), and the basic construction cost rose by 1.77% to 6,649,000 won per supply area (3.3㎡) on an irregular basis.
In this notice, it is decided to increase the basic construction cost by 3.42% compared to the previous notice (July ’21) to reflect changes in the price of construction materials and labor costs other than high-strength rebar, which were not reflected in the notice in July.
By factor, the increase in indirect construction cost due to the recent rate change* used in calculating indirect labor costs by the Public Procurement Service (PPS) among the 3.42% increase was 2.09%p, and the increase in direct construction cost due to changes in labor costs and major construction material prices was 1.10%p. The increase in labor costs was a major factor.
* Indirect labor cost rate: 7.9% → 12.6% of direct labor cost (Public Procurement Service, ‘21.4)
** Factors affecting the basic construction cost compared to the previous announcement (‘21.7)
Ground floor rise 3.42% = indirect construction cost 2.09%p + direct construction cost 1.10%p + other 0.23%p
Basement floor 3.62% rise = indirect construction cost 2.29%p + direct construction cost 1.33%p
The revised notice will be applied from September 15, 2021 or after application for resident recruitment approval.
Basic construction cost is applied when calculating the sale price (housing land cost + housing site additional cost + basic construction cost + construction additional cost) of a house to which the sale price cap is applied. The impact is expected to be lower than the increase in the basic construction cost.
The Ministry of Land, Infrastructure and Transport will continue to support homeless people to buy their own homes at affordable prices through a smooth housing supply, and to provide high-quality apartments using the latest technologies and materials, reflecting changes in construction material prices, etc. We plan to make reasonable adjustments.
The revised notice can be found on the website of the Ministry of Land, Infrastructure and Transport after September 15, “Information Field/Law Information/Administrative Rules” or at the National Law Information Center.
