Controversy Over High Sale Prices of Doseong and Private Rental Housing for Ordinary Citizens

Avoiding Regulations Like the Price Ceiling System
Nearby Apartment Prices Sometimes Double
Need to Establish Price Control Mechanisms

[Image source=Yonhap News]

[Asia Economy Reporter Kangwook Cho] Controversy over high sale prices is spreading regarding urban-type residential housing and private rental housing introduced to stabilize housing for low-income citizens. Since these are exempt from government price regulations such as the sale price ceiling system, supply prices sometimes reach up to twice the market price of nearby apartments.

On the 15th, according to an analysis of the ‘Status of Sale Guarantee Projects by Type’ data submitted by the Housing and Urban Guarantee Corporation (HUG) to Chun Junho, a member of the National Assembly Land, Infrastructure and Transport Committee from the Democratic Party of Korea, among 294 urban-type residential housing projects guaranteed by HUG over the past five years from 2017 to September this year, the average sale price per 3.3㎡ of the top 10 was 66.38 million KRW. This amount is about 35% higher than the average price of 49.31 million KRW for the top 10 apartment sale prices during the same period.

The most expensive urban-type residential housing with a sale guarantee was ‘The Sharp Banpo River Park’ in Banpo-dong, Seocho-gu, Seoul, with a sale price of 79.9 million KRW per 3.3㎡. ‘Lucia Dosan 208’ in Nonhyeon-dong, Gangnam-gu, and ‘Odette Od Dogok’ in Dogok-dong, Gangnam-gu, also had sale prices of 79 million KRW and 72.99 million KRW per 3.3㎡, respectively. These prices surpass the 56.53 million KRW per 3.3㎡ of the Banpo-dong Raemian One Bailey apartments, where the sale price ceiling system was applied.

Assemblyman Chun said, "The reason why the sale prices of urban-type residential housing are skyrocketing is that they are not subject to the sale price ceiling system or the high sale price review system," and added, "A price control mechanism must be established."

There were also cases where rental prices of rental apartments exceeded the sales prices of nearby apartments. According to Assemblyman Heo Young from the Democratic Party of Korea, a long-term private rental housing unit of 84㎡ (exclusive area) under construction near Suji-gu Office Station in Yongin-si, Gyeonggi-do, has an average rental deposit of 870 million KRW and a monthly rent of about 1 million KRW.

Assemblyman Heo stated, "The converted deposit for the most expensive housing type is about 1 billion KRW." Meanwhile, the sales price of an apartment A with the same area nearby was 850 million KRW in August this year, and apartment B was around 1.2 to 1.3 billion KRW, according to Assemblyman Heo.

He pointed out, "There is a high possibility of market disruption as long-term general private rental housing is supplied at prices higher than the surrounding market prices."