Some Places Use Land Purchase Costs, Others Use Official Land Prices?... Controversy Over Double Standards in Land Development Costs

Urban Development Districts Sold at Purchase Price vs Private Residential Land Priced Near Official Land Value
Double Standards in Land Cost Calculation Fuel Growing Controversy Over Sale Prices

Due to Competitive Land Bidding, Deok-eun District Sale Prices Soar
Matching Apartment Prices in Mapo
"Supply Method Improvement" Government Moves to Evolve

Industry Criticizes "Unreasonable Policy"
Ahead of July Private Residential Land Sale Price Regulation, Calls to Align Land Costs with Market Prices

[Asia Economy Reporter Lee Chun-hee] The controversy over the high sale prices of two complexes in the Deok-eun District has expanded into a broader debate surrounding the land cost, a key factor in determining sale prices. Industry insiders express dissatisfaction, noting that unlike urban development districts where land purchase costs are directly applied, private land costs continue to be calculated based on officially announced land prices, which will likely prolong disputes over appropriate sale prices.

According to industry sources on the 24th, the average sale price per 3.3㎡ for 'DMC Riverpark Xi (A4 Block)' and 'DMC Riverforet Xi (A7 Block)' in Deok-eun District, Goyang City, Gyeonggi Province, which opened their cyber model houses and began sales schedules that day, were set at 25.83 million KRW and 26.30 million KRW respectively. For an 84㎡ (exclusive area), DMC Riverpark Xi is priced between 810.8 million KRW and 885.9 million KRW, while DMC Riverforet Xi ranges from 823.5 million KRW to 899.1 million KRW.

Compared to 'Jungheung S-Class' (A2 Block) supplied in the same district last November, which was priced between 546 million KRW and 629 million KRW for the same area, these prices are up to about 300 million KRW higher. They are also higher than the sale prices of 'Hoban Summit Mokdong' in Yangcheon-gu, a central area of Seoul, which ranged from 722.5 million KRW to 807.8 million KRW. The recent actual transaction prices for similar-sized units in 'Sangam World Cup Park 9 Complex' in Sangam-dong, Mapo-gu, Seoul, are also at a comparable level. This has led to evaluations questioning whether there is any advantage in sales if prices are similar to existing apartments in Seoul.

Ultimately, the controversy over sale prices in Deok-eun District exposes the problems of government policies that regulate apartments on public land through the sale price ceiling system and effectively control private land through the Korea Housing & Urban Guarantee Corporation (HUG)'s sale guarantees, maintaining price policies that fall far short of surrounding market prices.

The possibility of such high sale prices lies in the unique characteristics of Deok-eun District. Unlike typical public land where land prices are set by the Korea Land and Housing Corporation (LH) or local corporations and allocated by lottery bidding, Deok-eun District is an urban development district where price-competitive bidding occurs during land sales. Although subject to the sale price ceiling system, if land prices are high in the competitive bidding process, the calculated land cost increases, inevitably raising housing sale prices. In fact, the winning bid prices for A4 and A7 blocks were approximately 18.15 million KRW and 17.29 million KRW per 3.3㎡, about 1.5 times higher than the 12.01 million KRW for A2 block.

Facing criticism, the Ministry of Land, Infrastructure and Transport has also stepped in to mitigate the situation. They announced plans to improve the supply method in urban development project districts, with speculation about switching from competitive bidding to a lottery system similar to land districts.

However, fundamental issues are pointed out regarding the sale price calculation of apartments on private land rather than urban development districts. This is due to the unrealistic land cost calculation under the private land sale price ceiling system, which will be applied from the end of July. The industry argues that unlike public land where land costs can be lowered because the government develops the land, it is reasonable for private land costs to be similar to nearby land market prices. In response, the Ministry of Land explains that under the Housing Act, land costs for sale price ceiling system housing on private land are calculated based on appraisal values, so there is no problem.

However, there is a catch. Although the Ministry claims that appraisal values differ from officially announced land prices, in practice, it is difficult to see a meaningful difference between the two. According to the current 'Regulations on the Calculation of Sale Prices for Multi-family Housing,' land costs outside public land are calculated based on the standard land official price. It also stipulates that "development gains that are not realized or concretized as of the application date should not be reflected."

Given that officially announced land prices are significantly lower than actual market prices, dissatisfaction among reconstruction and redevelopment associations is inevitable. Although the government recently announced plans to raise the realization rate of official land prices, including land, the realization rate for this year remains only 65.5%. Some reconstruction and redevelopment associations are considering post-sale strategies, hoping for recent high official land price increases, but this is not easy either. Even if sales occur 2-3 years later, the initially low official land prices compared to market prices mean there is little financial benefit considering funding burdens.

Even if land costs rise, local government sale price reviews pose challenges. There are ongoing issues in many public land areas where sale prices are determined through local government sale price review committees. A representative from a construction company that recently proceeded with sales according to the review results said, "At one point, we even considered administrative litigation but ultimately gave up," expressing frustration that "sale prices are often cut for various incomprehensible reasons."

This content was produced with the assistance of AI translation services.