A panoramic view of Hongje District 3, Seodaemun-gu, Seoul on the 22nd. Reporter Han Joo-hyung Recently, there has been a move in the reconstruction market to raise sales prices to compensate for the decline in business feasibility due to a sharp increase in construction costs. Until now, cooperatives had been reluctant to deal with government price controls and uncertainty about market acceptance, but now the situation has changed. The general sale price of a reconstructed apartment with a unique area of 84 m2 in Seoul’s Gangbuk district is expected to exceed 1.5 billion won.
According to the maintenance industry on the 22nd, Hongje District 3 reconstruction association recently disclosed to its members an estimate of the general member and sales prices due to changes in maintenance project costs. The sale price for union members rose from an average of 23 million won per 3.3 m2 to a range of 28 million won, and the general sale price rose from an average of 30 million won per 3.3 m2 to the range won of 42.5 million.
Hongje District 3 signed a contract with construction company Hyundai Engineering & Construction in 2020 for a construction cost of 5.12 million won per 3.3㎡, but conflict continued last year as the construction company demanded an increase to 8.9864 million. After discussing the construction cost for about a year, an agreement was reached last month at 7.84 million won per 3.3㎡. This estimate was calculated by the union and the construction company, taking into account the costs of new construction.
The general selling price of a unique 84㎡ unit, known as ‘national equilibrium’, was estimated to have won 1,038.67 million in 2020, but this time it rose 42.5% to 1,480.28 million. The sale price for union members jumped 25% from about 779.97 million won to 975.27 million.
Other equilibria were similar. The estimated overall selling price for a unique 77㎡ unit jumped 50.3% from KRW 907.21 million to KRW 1.3634 billion. The overall sales price of 59㎡ for exclusive use and 114㎡ for exclusive use was also forecast to be 1.0574 billion won and 1.989 billion won, up 43% and 42% respectively from the previous price. The union intends to begin relocation between the end of August and the beginning of September after deciding on a change in the costs of the maintenance project at next month’s general meeting.
Of course, the general selling price in Hongje District 3 is not supplied according to the estimate. Some adjustments can be made through the consent of union members and the Housing and Urban Guarantee Corporation (HUG) sales guarantee process. However, the general view is that this price will eventually become the ‘barometer’. An official in the maintenance industry explained, “Given the current situation, there is a high possibility that there will not be much change from the price estimated by the reconstruction association,” and “This means that the selling price of a 30-pyeong unit is Gangbuk is close to winning 1.5 billion.” The sale prices of recently introduced apartment complexes in the Seoul subscription market were in the range of 1.2 billion to 1.3 billion won.
Meanwhile, sites continue to appear where construction costs have increased significantly due to the ‘triple shock’ of labor costs, material costs, and financial costs.
The 22nd Shinbanpo Reconstruction Society determined the construction cost of 13 million won per 3.3㎡, the highest price ever. The union and Hyundai Engineering ended negotiations with a construction cost of 5.69 million won per 3.3㎡ at the time of the bid in 2017. However, given rising prices and material costs for nearby complexes, the price was raised significantly each time this. Shinbanpo 22nd was selected by the Seoul Housing and Communities Corporation (SH Corporation) as the subject of a ‘construction cost verification pilot project’ in February and is planned to be analyzed for about two months.
The construction cost for Sadang District 5 and Bangbae District 7 was set at 9.1 million won and 9.8 million per 3.3 m2, respectively. Until now, the sites where the construction cost per 3.3㎡ exceeded 9 million won were limited to the core areas of Gangnam, such as Sinbanpo 16th (9.44 million won), Sinbanpo 27th (9.08 million won), and Dogok Gaepo Hanshin (9.2 million won). However, now, sites such as shrines have appeared where the construction cost exceeds 9 million won per 3.3㎡.
Experts agreed on the need to resolve the phenomenon of the transmission of construction cost shocks to general sales prices, but pointed out that artificially adjusting the ‘price itself’ should be avoided.
This is because systems such as the private sale price cap system used during the Moon Jae-in administration and the HUG high sale price control zone have the risk of leading to ‘sale price control → reduction in housing supply, rapid increase in construction prices new → increase in general house prices, including construction.’
Park Hap-soo, an adjunct professor at Konkuk University’s Graduate School of Real Estate, said, “If the selling price is set incorrectly, there is a risk of further exacerbating the housing supply shortage,” and added, “We need investigate this. the underlying factors that determine house prices, such as interest rates and labor costs.”
[손동우 기자 / 한창호 기자]
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