Kyungsillyeon "SH Corporation's Wirye New Town Sale Yields 370 Billion KRW Unfair Profit"

Kyeongsilryeon Press Conference on the 26th Urging SH Corporation to Stop Overpriced Sales in Wirye
"Own Investigation Finds Inflated Construction Costs... Appropriate Sale Price is 12.5 Million Won"

View of Wirye New Town (Asia Economy DB)

[Asia Economy Reporter Onyu Lim] The Citizens' Coalition for Economic Justice (CCEJ) claimed on the 26th that the Seoul Metropolitan Government and Seoul Housing and Communities Corporation (SH Corporation) gained unfair profits exceeding 370 billion KRW through apartment sales in Wirye New Town.

On the same day, CCEJ held a press conference at the CCEJ auditorium in Jongno-gu, Seoul, stating that the sale prices of the apartments in Wirye New Town, for which SH Corporation recently announced tenant recruitment, are significantly higher than the appropriate costs. On the 19th, the Seoul Metropolitan Government and SH Corporation announced tenant recruitment for 1,676 apartments in blocks A1-5 and A1-12 of Wirye New Town, Songpa-gu, Seoul. Applying the price ceiling system, the average sale price is set at 19.81 million KRW per 3.3㎡ (pyeong), with apartments of about 30 pyeong expected to be sold in the 600 million KRW range.

SH Corporation calculated the sale price per pyeong at 19.81 million KRW by setting the land cost at 12.34 million KRW per pyeong and construction cost at 7.47 million KRW per pyeong. CCEJ argued that "this sale price is much higher than the appropriate cost calculated independently."

CCEJ explained that SH Corporation calculated the land cost by applying a 10% addition for financial costs and charges to the land development cost of 11.3 million KRW per pyeong disclosed for Wirye New Town, then applying the apartment floor area ratio (Wirye 200%). As a result, the appropriate land cost per pyeong was 6.5 million KRW, construction cost 6 million KRW, totaling 12.5 million KRW per pyeong as the appropriate sale cost.

CCEJ claimed, "The sale price presented by SH Corporation is 7.31 million KRW higher per pyeong," estimating that for a 30-pyeong apartment, this amounts to 220 million KRW, and for all units combined, a total unfair profit of approximately 372 billion KRW.

CCEJ also argued that SH Corporation should disclose detailed information since the disclosed construction cost of 7.47 million KRW per pyeong is higher than previously revealed costs. The construction cost for Pyeongtaek Godeok district (2017 sale) disclosed by Gyeonggi Housing and Urban Corporation (GH) was 5.6 million KRW per pyeong, and the construction cost for Gangnam disclosed by Korea Land and Housing Corporation (LH) was 5.52 million KRW per pyeong.

Referring to the promise made with the late Mayor Park Won-soon to stop public land sales and only sell buildings, CCEJ stated that the same principle should apply to Wirye New Town. A CCEJ official said, "If only buildings are sold, a 30-pyeong apartment can be sold for 180 million KRW (6 million KRW per pyeong). The land lease fee can be set at about 330,000 KRW per month by applying 2% of the land cost of 6.5 million KRW."

They added, "The equity-type installment housing ultimately sets high sale prices, meaning public enterprises and the Seoul Metropolitan Government continue to overcharge citizens," urging, "The President and the acting Mayor of Seoul should immediately order SH Corporation to stop apartment sales in Wirye New Town and ensure the land is publicly owned."

SH Corporation responded to these criticisms by stating, "There must be minimal profit within the price ceiling system to cover the construction and maintenance of rental housing for low-income residents, which incurs an average annual loss of 350 billion KRW," and added, "Public sale profits are used for public interest purposes."