LH Revises Housing Purchase Price Calculation Method... Plans to Acquire 26,000 Houses This Year

Korea Land and Housing Corporation (LH) announced on the 17th that it will improve the operational system of its purchase rental business and purchase a total of 26,461 units this year.

By purchase method, 4,086 units will be purchased as completed housing, and 22,375 units through new construction purchase agreements. The planned purchase volume for the metropolitan area is 17,838 units.

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The improvement of the operational system for the purchase rental business aims to prevent recurrence of controversies that arose at the end of last year when some apartments were purchased at high prices. LH has prepared overall institutional improvement measures for the business by gathering opinions from experts and related organizations.

First, the criteria for determining housing purchase prices have been significantly strengthened. Previously, LH’s pricing for existing housing purchase rental projects was based on surrounding market prices and actual transaction prices, but going forward, purchases will be made below cost level rather than based on surrounding market prices.

Additionally, for the new construction purchase rental business, which involves building new buildings through prior agreements, LH plans to prevent high-priced purchases by collaborating with the Korea Association of Property Appraisers to develop a “Purchase Rental Exclusive Appraisal Guideline” that reflects business characteristics such as housing cost, market volatility, and transaction case accuracy.

Through the price system reform, LH expects the purchase price of completed housing to decrease by about 20-30% compared to before, and the purchase price of contracted new housing to decrease by about 5-10%.

The purchase review system will also be reformed. The previous purchase review process, which involved some internal staff participation, will be changed to a system where all review committee members are external experts. In particular, to strengthen the price review function reflecting market conditions, the Korea Real Estate Board and property appraisers will be added as review committee members.

To prevent fraudulent activities throughout the purchase process, a comprehensive monitoring system will be established. When a purchase application is received for housing owned by relatives or acquaintances, voluntary reporting by related employees and avoidance of purchase duties will be mandatory. During the purchase process, a “Purchase Rental Exclusive Reporting Center” will be newly established to actively encourage reporting of fraudulent activities.

Furthermore, to prevent contract concentration with specific companies, a contract limit of two cases per company will be set. The contract limit per company was established by analyzing related data such as the average number of contracts per company by year, and it is expected to lower entry barriers for new business operators in the purchase rental market.

LH will provide incentives to excellent construction companies based on LH’s quality inspection results by relaxing the contract limit.

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The integrated announcement of the purchase rental business with the improved operational system is scheduled to be made on the 18th, and detailed regional purchase announcements reflecting local conditions such as specific housing purchase criteria will be conducted sequentially.

Lee Han-jun, President of LH, said, “With this institutional improvement, we will do our best to secure quality housing at reasonable prices and provide high-quality housing to the public at affordable prices.”

Meanwhile, LH announced that as a result of an audit on the purchase of unsold housing units such as the Cantavil Suyu Palace Apartments in Gangbuk-gu, Seoul, which caused controversy due to high-priced purchases, some violations of purchase regulations were confirmed and disciplinary action will be taken. Separately, regarding the special audit currently underway to strengthen internal controls of the purchase rental business, the results will be disclosed after the audit is completed.

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