The government has initiated follow-up measures to the "Rationalization Plan for the Operation of the Sale Price System" announced after the 1st Real Estate-Related Ministers' Meeting held on the 21st.
The Ministry of Land, Infrastructure and Transport announced on the 27th that it will conduct a legislative notice (June 29 to July 11, 2022) and administrative notice (June 29 to July 11) for the amendment of the "Regulations on the Calculation of Sale Prices of Multi-family Housing" and the establishment of the "Standards for Calculating Essential Costs in Maintenance Projects, etc."
The main content of this amendment and establishment is the institutionalization of improvements related to the Sale Price Ceiling System, as announced in the "Rationalization Plan for the Operation of the Sale Price System" on June 21.
First, essential costs incurred during the promotion process of maintenance projects, etc., will be allowed to be reflected in the sale price.
In maintenance projects promoted in urban areas, additional costs are incurred in the land acquisition process such as relocation and eviction of existing residents, but these were not reflected in the sale price calculation, which was considered unreasonable.
Therefore, essential expenses such as residential relocation costs, moving costs, business loss compensation, eviction lawsuit costs, relocation financing costs, and essential expenses for general meetings incurred during the promotion of maintenance projects, etc., will be added to the land price surcharge applied to sites other than public land.
Specific cost calculation standards will be detailed by establishing the "Standards for Calculating Essential Costs in Maintenance Projects, etc.," a notification by the Ministry of Land, Infrastructure and Transport.
Additionally, the irregular adjustment items of the basic construction cost will be updated and adjustment requirements added.
The basic construction cost system allowed for irregular adjustments in addition to the regular notifications in March and September each year when material prices surged, but due to strict requirements, it was limited in reflecting recent material price increases caused by supply chain disruptions.
To enable more timely reflection of material cost surges in the sale price, major materials currently subject to irregular adjustments such as PHC piles and copper pipes will be replaced or added with window glass, reinforced plywood flooring, and aluminum formwork, which have recently accounted for a larger proportion of the basic construction cost.
In addition to a 15% increase in a single item, new requirements will allow irregular adjustments within three months of the regular notification if the combined increase rate of the top two materials (ready-mixed concrete and rebar) is 15% or more, or if the combined increase rate of the bottom three materials (window glass, reinforced plywood flooring, aluminum formwork) is 30% or more.
Kim Young-han, Director of Housing Policy at the Ministry of Land, Infrastructure and Transport, said, "Through this amendment, essential costs involved in housing supply can be reasonably reflected, which is expected to increase supply in urban areas and expand opportunities for homeownership among non-homeowning low-income households."
The legislative and administrative notice period for this amendment and establishment is from June 29 to July 11, 2022, and after review by the Office for Government Policy Coordination, it is expected to be implemented from mid-July.
The full text of the amendment and establishment can be found on the Ministry of Land, Infrastructure and Transport website under 'Information Plaza / Legal Information / Legislative Notice & Administrative Notice.' Opinions on the amendment can be submitted via mail, fax, or through the Ministry's website.
Meanwhile, the Ministry of Land, Infrastructure and Transport expects the sale price to increase by approximately 1.5 to 4% due to this improvement plan. According to the simulation of the impact on sale prices in maintenance projects provided by the Ministry, in the case of the C redevelopment project site, the sale price per 3.3㎡ will rise from 24.4 million KRW to 24.59 million KRW, an increase of 2.3% (550,000 KRW). This includes relocation interest (100,000 KRW), eviction lawsuit costs (60,000 KRW), general meeting expenses (40,000 KRW), and the increase in basic construction costs (90,000 KRW).
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