Public Rental Housing in Pangyo Blooms Late Amid Soaring House Prices... Capital Gains Exceed 800 Million Won

Sale Conversion Ending This Month, Bots 3 Complex Prices Near Surrounding Market Levels
Baekhyeon 2 Complex Large Units Soar Up to 2.2 Billion KRW
"Expect Faster Sale Conversion of Other Public Rental Housing Due to Rising House Prices"

As housing prices in the Pangyo New Town area have risen sharply, public rental apartments undergoing sale conversion in this area have also seen market price gains exceeding 800 million won in some cases. At the entrance of Botdeul Village Complex 3 in Sampyeong-dong, Pangyo New Town, where the sale conversion will be completed on the 15th of this month, a banner opposing the sale conversion price calculation based on the appraised value is displayed by residents.
Photo by Ryu Taemin

[Asia Economy Reporter Ryu Tae-min] The prices of public rental apartments in Pangyo New Town, Seongnam, Gyeonggi Province, which had conflicts between the project implementer Korea Land and Housing Corporation (LH) and residents over the sale conversion price, are soaring to unprecedented heights. As the prices of nearby sale apartments in the new town surged, it was found that the market price of public rental apartments also rose by as much as 850 million KRW above the sale conversion price.

According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system on the 4th, an 84.69㎡ (exclusive area) apartment in Botdeul Village 3 Complex in Sampyeong-dong, Pangyo New Town recorded a sale price of 1.6 billion KRW in January, setting a new record. This price is 750 million to 850 million KRW higher than the appraised value of 750 million to 850 million KRW for the same area.

The prices for other areas in this complex also showed significant market gains. A 74㎡ unit in this complex was traded for 1.48 billion KRW in January, selling for up to 790 million KRW more than the appraised price. The January sale price for a 59㎡ unit was 1.3 billion KRW, about 600 to 700 million KRW higher than the appraised value.

Botdeul 3 Complex is a ‘10-year public rental housing’ completed in 2009, and the sale conversion began in March last year. The sale conversion period is one year and ends on the 15th of this month. As of this date, 175 out of 870 households have completed sales registration. The 10-year public rental apartment system allows residents to live for 10 years paying rent below market price and receive priority purchase rights at the time of sale conversion. The sale conversion price is calculated based on an appraisal considering the surrounding market prices at the time of conversion.

At the time of the appraisal for sale conversion of Pangyo public rental housing, there was controversy over the high sale price. LH set the sale conversion price based on the appraisal price at the time of conversion, not the construction cost demanded by residents. According to local real estate agencies, the appraisal amounts for Botdeul 3 Complex in January last year were approximately ▲59㎡ 580 million to 690 million KRW ▲74㎡ 690 million to 790 million KRW ▲84㎡ 750 million to 850 million KRW, which was about 70-80% of the sale prices of the nearby Botdeul 4 Complex at that time. However, due to the sharp rise in housing prices since then, these public rental apartments now form price ranges similar to surrounding apartments.

The nearby Baekhyeon Village 2 Complex shows a similar trend. Also a 10-year public rental, this apartment with 101.83㎡ started sale conversion in August last year and was sold for 2.08 billion KRW in January. Considering the sale conversion price for this area was around 1.2 to 1.3 billion KRW, a market gain of 700 to 800 million KRW occurred. A 118.65㎡ unit in this complex was also traded for 2.2 billion KRW in December last year, about 700 million KRW higher than the appraisal price.

The representative of A Real Estate Agency in the area said, "At the start of sale conversion, the market gain was only 100 to 200 million KRW, but as apartment prices surged last year, the market gain increased," adding, "Recently, demand for relatively affordable rental apartments has also greatly increased, making the sale prices almost comparable to nearby complexes."

Ham Young-jin, head of Zigbang Big Data Lab, said, "As the market gain grows, existing residents’ dissatisfaction with the sale conversion price will decrease," and added, "This could also serve as an opportunity to increase the acceptance rate of sale conversion for other public rental housing."