Sale Prices Rise... Basic Construction Cost Increased by 2.05% Again

Regular March Notice of Basic Construction Cost under the Pre-sale Price Ceiling System
Effective from the 1st

The 'standard construction cost' used to calculate the sale price of apartments subject to the price ceiling system will rise again. This reflects recent increases in labor and material costs, making a rise in sale prices inevitable. Concerns are being raised that the number of unsold homes, which has already surpassed 70,000 units due to weakened buyer demand combined with rising prices, may increase further.

[Image source=Yonhap News]

The Ministry of Land, Infrastructure and Transport announced on the 28th that it will raise the upper limit of the standard construction cost by 2.05%, effective from the 1st of next month, considering changes in prices of major construction materials such as rebar and ready-mixed concrete (Remicon), as well as labor costs. Accordingly, the upper limit of construction cost per 1㎡ (for buildings between 16 and 25 floors, with exclusive area between 60 and 85㎡) will increase from 1,904,000 KRW, announced in September last year, to 1,943,000 KRW. The revised standard construction cost will apply to complexes that submit applications for resident recruitment approval from March 1 onward.

The standard construction cost is one of the components used to calculate the sale price of multi-family housing subject to the price ceiling system. It is regularly announced every six months on March 1 and September 15, reflecting changes in construction costs. However, if the price of major construction materials changes by more than 15% three months after the announcement, an additional announcement of the standard construction cost is made to reflect this.

This announcement is the regular March update, adjusting the standard construction cost by 2.05% compared to the September announcement last year, reflecting recent changes in construction material prices and labor costs. By major factors, the increase in direct construction costs due to rising material prices and labor costs was 1.21 percentage points, and the increase in indirect construction costs linked to this was 0.84 percentage points, showing a greater impact from direct construction costs.

The increase in the standard construction cost was mainly due to the rise in direct construction costs (1.21 percentage points) caused by higher prices of raw materials and labor, and the linked increase in indirect construction costs (0.84 percentage points).

Regarding major construction materials, the price of Remicon recently surged by 15.2%, prompting an irregular announcement in February to reflect the impact of Remicon prices on the standard construction cost.

According to the Ministry of Land, Infrastructure and Transport, Remicon prices rose the most (15.2%), and the upward trend in plywood formwork prices (7.3%) was also reflected. Labor wage rates increased in the order of concrete workers (3.91%), special workers (2.64%), and general workers (2.21%).