Is 'Raemian One Bailey' Sale This Year Unlikely?

Demand for Reassessment of Korea Appraisal Board Land Prices Continues Amid COVID-19 Setbacks
Contract Schedule and Model House Viewing Dates Postponed

[Asia Economy Reporter Choi Dong-hyun] "Raemian One Bailey" in Banpo-dong, Seocho-gu, the biggest focus of the new housing supply market in Gangnam area, Seoul, is expected to face delays in its sales schedule due to consecutive setbacks. Following the recent demand by the Korea Appraisal Board to reassess the land cost, the viewing schedule of the model house and the contract schedule for union members have also been postponed due to the impact of the novel coronavirus (COVID-19), making sales within this year uncertain.

According to the industry on the 27th, the One Bailey union notified union members yesterday that the originally scheduled model house viewing for union members on the 30th has been postponed to November 10th. The contract schedule for union members was also pushed back from the originally planned November 16th to November 30th. However, the drawing for union members’ unit numbers will proceed as planned on the 29th. This apartment complex is a combined reconstruction of the existing Sinbanpo 3rd and Gyeongnam Apartments, with a total of 2,990 households, of which 224 are for general sale.

The schedule change is understood to be due to a recent COVID-19 confirmed case at the model house of "Ray County," a redevelopment project in Geoje 2 District, Yeonje-gu, Busan, developed by a consortium of Samsung C&T, Daelim Industrial, and HDC Hyundai Development Company. With a confirmed case at the model house, which attracts many visitors, related authorities ordered strengthened quarantine and supplementary measures, and Samsung C&T has begun implementing improvements. A Samsung C&T official explained, "We are preparing as much as possible with the goal of sales in December."

However, the industry views sales within this year as virtually impossible due to setbacks in the pricing process. The Korea Appraisal Board recently notified a reassessment of the land cost appropriateness for One Bailey. According to the "Regulations on the Calculation of Sale Prices for Multi-family Housing," enacted in October last year, housing subject to the price ceiling system supplied in private land areas must have the land cost appraisal report received from an appraisal institution reviewed by the Korea Appraisal Board. One Bailey submitted a land cost appraisal report for pricing under the price ceiling system after considering that the 48.91 million KRW per 3.3㎡ price suggested by the Housing and Urban Guarantee Corporation (HUG) was inappropriate, but it was rejected once. One Bailey is currently working on recalculating the land cost, but it is expected to be difficult to pass the Korea Appraisal Board’s review. The union is reportedly aiming for a sale price in the mid to high 50 million KRW per 3.3㎡ range, considering surrounding land prices. There is a conflicting atmosphere between claims that sales should have been conducted according to HUG standards and arguments that, given the small number of general sale units, the project should switch to post-sale.

Meanwhile, the appraisal industry holds the view that the Korea Appraisal Board’s demand for reassessment of land costs for price ceiling system projects is excessive. Since the appraisal firms recommended by the local government and the association already conduct dual reviews, the Korea Appraisal Board’s additional review is seen as a redundant regulation. An official from the Appraisal Association explained, "Since the implementation of the price ceiling system, eight projects have been judged by the Korea Appraisal Board as having inappropriate land cost calculations," and added, "We plan to soon release a statement calling for improvements to the system’s irrationalities."