State-Owned Land Sold 18% Cheaper Than Private Market Price...Criticism of 'Underpriced Sale'

KDI Presents Study on 'Efficiency of State-Owned Property Sales and Policy Challenges'

[Asia Economy Sejong=Reporter Kwon Haeyoung] It has been revealed that real estate owned by the state was sold at prices approximately 18% lower than private real estate market prices. This 'undervaluation sale' phenomenon occurred as assets were sold through private contracts instead of competitive bidding.

On the 25th, the Korea Development Institute (KDI) announced the study "Efficiency of State-Owned Property Sales and Policy Tasks" and revealed these findings after analyzing state land sales data from 2007 to 2018.

KDI explained, "State-owned land was found to be traded at prices about 18% lower per unit area than expected prices in private transactions," adding, "When narrowing down the location categories for each parcel (the unit of land analysis), the results show that state-owned land is sold at prices approximately 18?23% lower per unit area than private transaction prices."

This indicates that inefficient sales lead to a reduction in revenue from real estate sales, which constitutes the majority of income from state property operations.

According to the report, over the past five years, state real estate sales revenue based on the general account averaged 1.1 trillion won annually. This accounted for 82.3% of last year's general account operating revenue.

The method of selling state land was found to be primarily through private contracts rather than competitive contracts. Although the State Property Act stipulates competitive contracts as the basic principle for property sales, exceptions allowing private contracts are recognized through enforcement ordinances. The proportion of private contracts in state land sales increased from 75% in 2013 to 92% in 2018. From 2018 to 2021, the average annual proportion of private contracts reached 97%.

KDI stated, "Since state-owned land is being sold mainly through private contracts at prices lower than those in the private sector, it is necessary to rationally review the exception rules for private sales," and added, "It is also time to consider transitions such as introducing market principles into the use of state and public real estate, including government office buildings, for the efficient use of state real estate."

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