Unexpected Sale Price of One Bailey Stirs Maintenance Industry... Dunchon Jugong Also Encouraged

Ramian One Bailey's Sale Price Higher Than Expected
Complex Hesitant Due to Price Ceiling Policy 'Encouraged'
Dunchon Jugong Also Positive... Attempt to Set Sale Price

[Image source=Yonhap News]

[Asia Economy Reporters Moon Jiwon, Choi Donghyun] As the general sale price of ‘Raemian One Bailey’ (Sinbanpo 3rdㆍGyeongnam Apartment Reconstruction) in Banpo-dong, Seocho-gu, Seoul, where the price ceiling system is applied, was decided at about 56.68 million KRW per 3.3㎡, higher than initially expected, there is a forecast that reconstruction projects in the Gangnam area, which had been suppressed due to regulations, will also accelerate. The Dunchon Jugong Association in Gangdong-gu, known as the largest reconstruction since the founding of Korea, is also planning to receive the sale price assessment next month, creating an atmosphere of hastening previously halted projects.

According to the housing industry and government on the 11th, last week the Seoul Seocho-gu Sale Price Review Committee decided the general sale price of Raemian One Bailey at 56,686,349 KRW per 3.3㎡. This is 15.9% higher than the general sale price (48.91 million KRW per 3.3㎡) calculated last year by the Housing and Urban Guarantee Corporation (HUG) through high sale price screening, marking the highest price ever. This is completely opposite to the government’s initial position that the price ceiling system would lower the general sale price by about 5-10% compared to HUG’s price.

In the market, there is also an analysis that reconstruction projects in the Gangnam area of Seoul, which had been delayed due to the price ceiling system, will gain momentum. Although it is difficult to make a hasty conclusion as conditions and situations differ by complex, considering the calculation criteria of the price ceiling system, it is highly likely that similar trends will be repeated in other complexes. HUG sets prices based on nearby apartment sale prices, but the price ceiling system calculates sale prices based on land cost, construction cost, and additional costs combined.

Regarding the land cost, which played the most important role in raising One Bailey’s sale price, it is decided through various adjustments based on the standard land official price. Since the government plans to raise the official price realization rate to 90% in the future, it is explained that the general sale price set by the price ceiling system can rise to a more reasonable level than before.

Above all, the industry positively receives the government’s signal that it may somewhat ease regulations to expand housing supply. The Ministry of Land, Infrastructure and Transport said the day before, "We plan to continuously monitor the operation process of the system so that the price ceiling system does not hinder housing supply while enabling appropriate sale price setting, thereby expanding opportunities for low-income non-homeowners to purchase affordable homes."

With the higher-than-expected sale price set for One Bailey, the atmosphere among the Dunchon Jugong association members in Gangdong-gu is also encouraging. This complex also experienced delays in sales originally scheduled last year due to a lawsuit between the association and members triggered by the low sale price proposed by HUG. Although the decision on whether to sell before or after construction has not yet been made, there is speculation that the sales schedule may accelerate due to this result.

Currently operating under an acting association head system, Dunchon Jugong is calculating the expected sale price by examining the pricing method applied to One Bailey. Last year, the official land price of Dunchon Jugong was about 29.1 million KRW per 3.3㎡, and applying this year’s Gangdong-gu official land price increase rate of 9.85% results in about 32 million KRW. Rough calculations including Dunchon Jugong’s floor area ratio (273%), high donation rate, construction cost, and additional costs suggest that the sale price per 3.3㎡ will be at least 37 million KRW and possibly exceed 40 million KRW.

This is higher than the sale price proposed by HUG last year (29.78 million KRW) and the price desired by association members (at least 35 million KRW). A Dunchon Jugong association member said, "The key will be how the land appraisal value and additional costs are set, but since it has been confirmed that it is higher than the HUG proposal, we view this positively," adding, "We plan to receive the sale price assessment based on the official land price decided in February."

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