Apartment Sale Prices Soar... Gangnam 3 Districts' Prices to Rise Further

Jamwon Hangang Apartment seen from Gangbuk. Photo by Younghan Heo younghan@

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This year, the nationwide apartment sale prices have risen sharply compared to the previous year. According to data from Real Estate R114 on the 2nd, the average sale price per 3.3㎡ of apartments nationwide in January this year was 19.87 million KRW. This is an increase of about 15.66% (2.69 million KRW) compared to the sale price of 17.18 million KRW in the same month last year.

The increase rate of private apartment sale prices in Seoul was even higher. According to the "January Private Apartment Sale Price Trends" announced by the Housing and Urban Guarantee Corporation (HUG), the average sale price of private apartments in Seoul last month was 37.07 million KRW per 3.3㎡. This is a 6.07% rise from the average sale price of 34.95 million KRW in December last year. Compared to the sale price of 30.63 million KRW in January last year, it jumped by 21.03%.

The reason for the rise in sale prices lies in the sharp increase in construction raw material prices and labor costs. According to the Construction Industry Research Institute, the construction cost index (based on 2015 = 100) soared by 25.8% over three years, from 121.8 in December 2019 to 153.26 in December last year. Kim Ji-hye, a senior researcher at the Korea Research Institute for Human Settlements, explained, "Cement and ready-mixed concrete prices rose by more than 20% in 2022 compared to the previous year, and last year also saw an increase rate close to 10%."

The average daily wage of construction workers last year (265,516 KRW) also rose by about 7% compared to the previous year (248,819 KRW). Researcher Kim said, "Due to a shortage of skilled construction workers, labor supply became unstable, reducing construction efficiency," adding, "This caused construction delays, leading to additional site maintenance and financial costs."

From this month, the sale prices of houses supplied under the Sale Price Ceiling System (hereinafter referred to as the Sale Ceiling System) in Seoul's Gangnam 3 districts (Gangnam, Seocho, Songpa), Yongsan district, and public housing sites are expected to rise further. This is because the Ministry of Land, Infrastructure and Transport issued a regular notice on the basic construction cost applied to Sale Ceiling System housing on the 1st, which increased by 3.1% in six months. The revised notice applies to complexes that apply for resident recruitment approval after the 1st of this month.

Due to the increase in material costs such as ready-mixed concrete and labor costs, the basic construction cost (for floors 16 to 25, exclusive area 60 to 85㎡ above ground) rises by 3.1%, from the previously announced 1.976 million KRW per ㎡ to 2.038 million KRW per ㎡. This reflects the material price change rates including ready-mixed concrete up 7.2%, window glass up 17.7%, reinforced plywood flooring up 1.3%, and labor unit price change rates including general workers up 3.05%, special workers up 5.61%, and concrete workers up 4.14%.

A Ministry of Land official said, "The actual sale price should be determined at a reasonable level considering the possibility of sale within the sale price ceiling range, which includes the basic construction cost, and the surrounding market prices."

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