10 Billion KRW for the Same Unit Size? Apgujeong District 2 Large-Unit Owners Struggle with Soaring Contributions [Real Estate AtoZ]

Construction Costs Up 15% from Last Year
Proportional Rate Drops from 61% to 42%
50-Pyeong Units See Contributions Rise by About 600 Million Won Year-on-Year

A member of the reconstruction association who owns a 50-pyeong (exclusive area of 152㎡) unit in Apgujeong District 2, Gangnam-gu, Seoul, will have to pay approximately 1 billion KRW (about 10 billion won) in additional contributions if they wish to receive an apartment of a similar size (53 pyeong) after the reconstruction. This is about 650 million KRW (about 6.5 billion won) more than the estimated contribution calculated last year. The sharp increase in the members' financial burden is attributed to the limitations in securing profits from general sales due to the price ceiling system, as well as a significant rise in construction costs.

According to the maintenance industry on September 20, the Apgujeong District 2 reconstruction association recently informed members of the estimated contributions based on the results of the fourth preferred unit size survey. The sales prices for association members were set to range from a minimum of 200 million KRW to a maximum of 18.3 billion KRW (for penthouses), depending on the unit size.

By unit size, the contributions for 50-pyeong members have surged. For example, if an owner of a 57-pyeong (171㎡) unit in Shinhyundai 11th complex moves to a similar size, the 58-pyeong (140㎡) unit, the estimated contribution has risen from 585.47 million KRW last year to 753.78 million KRW this year, an increase of nearly 200 million KRW. For owners of a 56-pyeong (170㎡) unit in Shinhyundai 12th complex applying for the 58-pyeong (140㎡) unit, the estimated contribution is set at 1.0503 billion KRW, up about 460 million KRW from last year's estimate of 585.4 million KRW. If the owner of this unit wishes to move to the largest available unit excluding penthouses, the 84-pyeong (204㎡) unit, they will need to pay 3.2361 billion KRW, which is about 700 million KRW more than last year's estimate of 2.52767 billion KRW. Even if downsizing to a 48-pyeong (116㎡) unit, an additional contribution in the 200 million KRW range is required. However, for the 35-pyeong unit, the estimated contribution remains at a similar level to last year, around 200 million KRW, if applying for the same size.

With these estimated contributions rising sharply compared to last year, association members are expressing strong dissatisfaction. Despite the asset values used as the basis for sales price calculations increasing due to soaring housing prices throughout the year, members find it difficult to understand why their contributions have risen so dramatically. The contribution amount is calculated by subtracting the member’s right value-derived by multiplying the pre-development asset value by the proportionality rate (business feasibility)-from the sales price of the desired unit after reconstruction. The Apgujeong District 2 association calculated pre-development asset values based on KB market prices, and the pre-development asset values for the 56-pyeong unit in Shinhyundai 12th complex and the 57-pyeong unit in Shinhyundai 11th complex jumped from 6.1 billion KRW last year to 9 billion KRW and 9.7 billion KRW, respectively, this year.

The main reason for the increased contributions is cited as the sharp rise in construction costs. The association raised the construction cost per 3.3㎡ (one pyeong) by 15%, from 10 million KRW last year to 11.5 million KRW. As this burden was passed on to members, the proportionality rate, a key business feasibility indicator, fell from 62% to the 42% range. This is significantly lower than the average proportionality rate of major reconstruction complexes in the Gangnam area, which ranges from 80% to 100%.

Due to the application of the price ceiling system, it is not possible to raise the sales price of general units to reduce the members’ contributions. Typically, reconstruction projects offset increased construction costs with profits from general sales. The association raised the general sales price from 80 million KRW per pyeong to 90 million KRW, but this is only about 5% higher than the members’ sales price (mid-80 million KRW per pyeong).

Experts point out that this burden is especially pronounced for larger units with higher pre-development asset values. Song Seunghyun, CEO of Urban & Economy, explained, "As the total project cost increases, the rise in members’ pre-development asset values cannot offset the increased burden." He added, "For smaller units, the pre-development asset value itself is low, so even if the same rate of project cost increase is applied, the perceived burden is much less than for 50-pyeong or 60-pyeong units." He continued, "On the other hand, for larger units, the basic amount is so high that the increase is much more noticeable."

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