"Housing Prices Cheaper Than Land Prices"... Ministry of Land Responds to Board of Audit and Inspection's Criticism, "Gradual Improvement Underway"

Current Situation Around Sangil-dong 300 Area

[Asia Economy Reporter Moon Jiwon] It has been revealed that the phenomenon of official price inversion, where the land price is assessed higher than the combined value of land and housing prices, occurred in approximately 228,000 detached houses nationwide. This happened because the Ministry of Land, Infrastructure and Transport's criteria for calculating official prices of houses and land are not reasonable. The Ministry stated on this day in response to the Board of Audit and Inspection's criticism that "it will be gradually improved."

The Board of Audit and Inspection released the audit report on the 'Operation Status of the Real Estate Price Public Announcement System' on the 19th. It compared and analyzed the official prices of detached houses and land nationwide announced last year. The audit target included only land and detached houses, which determine individual real estate prices by setting standard real estate (standard land and standard houses) prices. Apartment complexes and other multi-family housing, which are surveyed comprehensively, were excluded.

According to the Board of Audit and Inspection's report, about 5.9% of detached houses nationwide, totaling 228,475 units, had individual house prices (land + house) lower than the individual official land price for the corresponding land. Cases where the individual official land price was more than twice as high as the individual house price reached 2,419 units.

The cause of such 'price inversion' was analyzed to be due to different departments within local governments calculating official prices for land and houses separately, applying different land characteristics such as land use to the same land.

Regarding this, the Ministry of Land, Infrastructure and Transport explained, "The inversion phenomenon where the official price of land attached to individual houses is higher than the official price of the individual house has occurred due to the official ratio applied to housing official prices."

It added, "Since the 2020 official prices, the application of the official ratio has been abolished and is being gradually improved. If the inversion phenomenon is corrected all at once, there is a problem that housing official prices could rise sharply, so we plan to gradually improve it together while enhancing the realization rate of official prices."

The Board of Audit and Inspection also pointed out that the sample size of the Ministry's standard real estate (500,000 land parcels and 220,000 houses) is insufficient. It explained that it would be appropriate to increase the sample numbers to 600,000?640,000 land parcels and 230,000?250,000 houses.

The Ministry said, "Since additional budget is required to expand the sample size as recommended by the Board of Audit and Inspection, we plan to consult with the financial authorities during the budget allocation process."

It continued, "Regarding the inadequacies of the 2019 individual official prices pointed out in the audit, we will notify each local government to comprehensively review the appropriateness of official prices, and if corrections are necessary, we will support and supervise measures according to the Real Estate Public Announcement Act."

The Ministry added, "To improve the issues pointed out in this audit, we plan to further enhance the accuracy and reliability of official prices by additionally utilizing Geographic Information Systems (GIS) for characteristic surveys, strengthening the linkage between related databases such as registries, and the individual official price calculation system."

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