The 'Gongsi Price Crisis' Caused by Poor Management

Market Backlash Against Excessive Official Price Realization
Obvious Limits Due to Investigator Shortage 'Foreseen Insolvency'
Basis for Calculation to Be Disclosed on 29th... Difficult to Ease Complaints

[Asia Economy Reporters Kangwook Cho, Mowon Moon] The backlash surrounding the official prices of apartment complexes is intensifying. Over the past year, there have been numerous incomprehensible cases where official prices have surged by more than 90% or even exceeded market prices, leading to ongoing disputes over accuracy, objectivity, and transparency. While the government claims to have "realigned" the official prices, on the ground there is a strong nationwide collective backlash demanding that the opaque valuation criteria be corrected. Some critics argue that the government’s reckless realignment roadmap policy and haphazard price assessment have caused this situation, calling it a ‘foreseen failure.’

◆ One surveyor responsible for 26,000 households, a ‘haphazard’ assessment = According to the ‘2020 Annual Report on Real Estate Price Disclosure’ published by the Ministry of Land, Infrastructure and Transport, 520 people participated in last year’s official apartment price survey. Considering that the total number of apartment households nationwide subject to the survey last year was 13.82 million, each surveyor was responsible for over 26,500 households, covering 845 apartment buildings on average.

This year, the number of apartments subject to official pricing is 14.2 million households (as of January 1), an increase of 370,000 households. Assuming the number of surveyors remains the same as last year, each surveyor would be responsible for 27,300 households this year. Unlike single-family homes, apartment prices are directly surveyed and set by the Korea Real Estate Board. It is known that the number of surveyors for this year’s official price survey has hardly changed.

◆ Reckless realignment policy and ‘opaque system’ issues = Official prices serve as the basis for imposing various taxes such as comprehensive real estate tax and property tax. Experts point out that raising the realignment rate first without properly reviewing whether the official price system is functioning correctly is putting the cart before the horse. Some even criticize the government for attempting punitive taxation through the realignment rate, which it can arbitrarily adjust.

In fact, cases have been confirmed where only one line in the same apartment complex and building experienced official price fluctuations, while the opposite line showed no price changes. There were also cases where one building in an apartment complex saw a price increase while the adjacent building did not, and cases where prices rose differently by floor. For example, in Banpo-dong’s ‘Banpo Familia Apartment,’ Building 101 (84.12㎡) saw its official price rise 14.96% to 808 million KRW, but Building 102 (84.63㎡) increased by 29.59% to 967 million KRW, nearly double the rate.

Professor Jin-Hyung Seo of Gyeongin Women’s University (President of the Korean Real Estate Society) said, “It is problematic that official prices are assessed differently for the same property in the same location,” and pointed out, “A cooperative system should be established to allow local experts to participate in the official price assessment process, and the survey scope should be expanded.”

◆ Assessment criteria to be disclosed on the 29th... Unclear if doubts will be resolved = As public distrust over official price assessments grows, the government has decided to disclose the basic data used for official price assessments of apartment complexes nationwide on the 29th. However, the market expresses concerns that even if the assessment criteria are disclosed, it will be difficult to clearly resolve public suspicions surrounding official prices. In particular, the assessment opinion items, which are automatically generated by extracting characteristics via computer, are only indicated at the level of “evaluated comprehensively,” making it difficult for homeowners to accept the high official prices.

Professor Seo emphasized, “If budgets or manpower are insufficient, it may be necessary to consider assessing official land prices once every three years instead of annually,” adding, “Instead, the assessment should be conducted more thoroughly by reflecting land price growth rates and inflation rates.”

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