Will the 'Sale Price Control' Blocking Housing Supply Be Eased...Inevitable Growing Pains

Minister Noh Hyung-wook's Policy on Regulating Sale Prices
Opaque and Arbitrary Controversy... Industry Expectations
However, Price Hikes Cause Discontent Among Waiting Applicants
Burden of Admitting Policy Failure Due to Unilateral Price Control

The government has announced its intention to improve the price ceiling system for apartment sales and the high-priced sale management system, raising expectations that the private housing supply, which has been stifled by excessive regulations, will gain new momentum. However, if the regulations are eased and sale prices rise, there could be strong backlash from those waiting to apply for housing, and since this goes against the original policy direction of the current administration, it is expected that there will be difficulties in preparing an effective reform plan.

According to the Ministry of Land, Infrastructure and Transport (MOLIT) and industry sources on the 10th, Minister Noh Hyung-wook mentioned the high-priced sale review system and the price ceiling system at a meeting with housing supply agencies the day before, stating, "We will review whether there are any obstacles to private housing supply and promote system improvements." This is the first time the government has acknowledged problems with the price ceiling system and hinted at the possibility of easing it. MOLIT is reportedly already internally starting to work on reform plans for the price ceiling system.

The government's regulation of sale prices was introduced to prevent construction companies from setting excessively high prices and to reduce the housing cost burden on the public, but there have been many criticisms that artificial price controls and a 'rough-and-ready' calculation method hinder smooth private housing supply. In the case of the price ceiling system, apartment sale prices are calculated by adding land costs, basic construction costs, and additional costs, focusing on keeping prices at about 70-80% of market value, which has led to complaints about severe 'price suppression.'

Minister of Land, Infrastructure and Transport Noh Hyung-wook is speaking at the 2nd Housing Supply Agencies Meeting held at the Korea Housing Builders Association in Yeouido, Seoul, on the afternoon of the 9th. [Image source=Yonhap News]

In particular, although the additional cost items are intended to flexibly consider the characteristics of individual projects, the price review committees under local governments often reject a significant portion of these costs without reasonable criteria during the review process, causing controversy. The Board of Audit and Inspection also pointed out in its audit results released the day before on complexes in Gwacheon City subject to the price ceiling system that "appropriate disclosure is not being made, as specific amounts and calculation bases for each item are unknown." Park Jae-hong, president of the Korea Housing Builders Association, said, "There is great confusion in the industry because the criteria for recognizing sale prices differ by city, county, and district."

Within the industry, there is hope that if MOLIT specifies the guidelines for price review and blocks arbitrary price adjustments by local government review committees, reasonable sale prices can be established. It is also anticipated that complexes like Dunchon Jugong in Gangdong-gu, Seoul, with 12,032 units, where supply has been delayed due to failure to calculate appropriate sale prices, will accelerate sales, thereby revitalizing urban supply. When the final-stage redevelopment projects in Seoul begin releasing units, the supply effect is expected to be significant.

However, if the easing of regulations leads to higher sale prices, strong opposition from applicants waiting for housing and civic groups is expected. The government, which has promoted price control policies for housing stability for low-income households, will inevitably face criticism for breaking policy consistency again ahead of the presidential election. Many analysts believe that since this essentially acknowledges past policy failures and side effects, a radical reform will be difficult. Lee Eun-hyung, senior researcher at the Korea Construction Policy Institute, said, "Improving the high-priced sale management system and establishing review standards for the price ceiling system ultimately means raising sale prices," adding, "It will be difficult for demanders such as applicants waiting for housing to agree."

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