HUG to Improve High Price Screening System... Effective from Next Month 1st

[Asia Economy Reporter Ryu Tae-min] The Korea Housing & Urban Guarantee Corporation (HUG) plans to implement partial improvements to its high-priced housing price review system starting from the 1st of next month.

The HUG high-priced housing price review system is part of the housing sales guarantee review tasks. Since there is a risk of multiple projects experiencing non-occupancy at the time of move-in due to high housing prices after the issuance of sales guarantees, this risk management measure aims to proactively respond to such guarantee risks by setting appropriate sales prices.

Since the related system was introduced in 2016, HUG has made two improvements last year. This latest improvement aims to prevent supply delays due to changes in business conditions such as recent raw material price increases and to reflect additional field demands.

The main improvements include ▲improving the criteria for calculating nearby market prices and introducing a material cost addition system ▲simplifying the review procedures ▲full disclosure of detailed criteria in the high-priced housing price review score sheet ▲partial disclosure of review information through appeals.

First, in calculating nearby market prices, the selection of projects within 20 years after completion will be changed to prioritize projects within 10 years after completion. Other conditions besides the completion date will be applied as before.

Additionally, to minimize delays in housing supply caused by rapid market changes such as recent raw material price surges, a material cost addition system has been newly established. If the increase rate of the latest basic construction cost in the price ceiling system at the time of sales guarantee issuance is higher than the average increase rate of the basic construction cost over the past three years, a certain amount will be added to the review ceiling. From the implementation of this system until the next regular announcement (September), an addition rate of 0.32% will be applied.

For redevelopment projects, the procedure of conducting two high-priced housing price reviews at the time of redevelopment project loan guarantee issuance and sales guarantee issuance will be simplified to only one review at the time of sales guarantee issuance, shortening the guarantee issuance period and accelerating the progress of redevelopment projects.

To enhance predictability for housing developers, the detailed calculation criteria and scoring standards for each item in the review score sheet will be fully disclosed. To improve acceptance of review results, a review and confirmation procedure for the results will be established. To prevent sales delays due to appeals, applications will only be accepted under specific conditions.

Kwon Hyung-taek, President of HUG, stated, “This system improvement focused on reflecting voices from the field,” and added, “The improved system is expected to mitigate market shocks caused by rapid changes in business environments, create a stable housing supply environment, and contribute to enhancing the residential welfare of the public.”