“No more high-price purchases”… LH revises purchase price standards for rental acquisitions

Ministry of Land and LH to Announce System Improvement Plan This Month
Considering Purchase Based on 'Cost' Instead of 'Market Price'

The criteria for determining the purchase price of housing in the acquisition rental business promoted by Korea Land and Housing Corporation (LH) will be significantly strengthened.

This is a measure to prevent recurrence of the controversy over high-priced purchases that arose when some apartments with unsold units due to high pre-sale prices were purchased at the end of last year.

On the 12th, the Ministry of Land, Infrastructure and Transport and LH prepared a plan to improve the system for calculating the purchase price of newly built apartments and other completed housing for the acquisition rental business, which is scheduled to be announced within this month.

First, LH's existing housing acquisition rental business calculates the purchase price based on surrounding market prices and actual transaction prices, but it is known that a plan to purchase below cost level rather than surrounding market prices is currently under review.

Also, for the new construction acquisition rental business, which involves building new buildings through prior agreements and purchasing them, a plan to differentiate the purchase method by purchasing at the appraised value is also under consideration.

Currently, appraisal companies are selected by one each from the seller and LH, and the purchase price is determined by averaging the amounts calculated by the two appraisers, but in the future, the seller's selection of the appraisal company will be excluded, and the company will be selected based on recommendations from the Appraisers Association to ensure objectivity.

LH is also considering introducing an external review system that entrusts the acquisition rental review, previously conducted by internal staff, to external experts.

This acquisition rental business system improvement plan aims to strengthen the purchase price calculation criteria further to respond to public sentiment as a measure to prevent recurrence of the controversy over LH's high-priced purchase of apartments with high pre-sale prices that arose in December last year.

In December last year, LH purchased 36 units of the Cantavil Suyu Palace apartments (exclusive area 19?24㎡) in Gangbuk-gu, Seoul, and 28 units of the Antilia Jayang officetel in Gwangjin-gu for about 18 billion KRW, sparking controversy over compensating for a specific developer's market prediction and pre-sale price setting failure with taxpayers' money.

These apartments and officetels were sold at prices more than 30% higher than the surrounding market prices, which further cooled public opinion.

In particular, the appropriateness of the purchase prices of these apartments and officetels was also controversial. At that time, LH stated that for Cantavil Suyu Palace, the purchase price was between 210 million and 260 million KRW, which was a 15% discount from the appraised value. They explained that the purchase was made cheaper than the surrounding market prices by the amount of the discount. However, since the 20㎡ (C type) unit was sold for 208 million KRW in August last year, it was pointed out that the purchase price was higher than the actual transaction price.

In the case of Antilia Jayang, all units have an exclusive area of 25㎡, and the purchase price per unit is known to be between 342 million and 357 million KRW, but since there were no previous transactions, it was difficult to compare actual transaction prices.

Minister of Land, Infrastructure and Transport Won Hee-ryong also criticized through his SNS and other channels, saying, "If it were my own money, I cannot understand if I would have bought it at this price," and raised issues with the purchase method, calling for system improvements.

Meanwhile, Cantavil Suyu Palace in Gangbuk-gu, Seoul, which caused controversy when LH purchased it, was offered for the ninth non-priority subscription on the 10th and 11th with discounts of up to 35%. A total of 359 people applied for 134 units, recording an average competition rate of 2.7 to 1. However, for the 19㎡ A type, 14 people applied for 15 units, and for the 20㎡ A and 20㎡ B types, which had 2 and 3 units respectively, no applications were received.

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