Cooperative Members Move In First, Then July Sale
June Seocho-gu Sale Price Review Ahead
2021 Land Cost Assessment a Variable
Ministry of Land: "Land Cost Appraisal Only Once"
Construction Cost Based on Resident Recruitment Announcement Timing
Compensation Due to Contractor Change Also a Burden Factor
There is growing interest in the real estate market over whether ‘One Pentas,’ which is about to be sold, will break the record for the highest sale price ever. The association chose post-sale to set a high sale price in an area subject to the price ceiling system. It is also expected that the sale price will be set at a level similar to or higher than that of Maple Xi (67.05 million KRW per 3.3㎡).
According to Samsung C&T and others on the 21st, the sale of Raemian One Pentas, a reconstruction of Sinbanpo 15th, will take place in July. Sale contract holders will move in while existing association members have already moved in. This is a post-sale complex, and the sale schedule was delayed compared to the original plan. Existing association members will move in from the 10th of the same month once construction is completed in early next month.
The association applied for a sale price review to Seocho-gu last month. Although they aimed for a sale next month, the review schedule was delayed more than expected by the association and the construction company. A Seocho-gu official said, "We expect the sale price review conclusion to be made within next month." Banpo-dong, Seocho-gu, where One Pentas is located, is an area subject to the sale price ceiling system, and Seocho-gu Office will finalize the sale price after the review.
The desired sale price by the association is known to be around 73 to 74 million KRW per 3.3㎡. The industry expects that although the association wants a high sale price, it will be set at a level similar to or higher than the Maple Xi sale price.
The Sinbanpo 15th association tried to reassess the land cost, which was calculated in 2021, to raise the sale price but failed. In the Gangnam area reconstruction complexes, land cost accounts for 70-80% of the sale price, making it an important factor. Therefore, they tried to reassess the land cost to increase the sale price. The sale price of One Bailey, known as the flagship apartment in Banpo, was 56.68 million KRW per 3.3㎡. One Bailey’s land cost was 42.04 million KRW per 3.3㎡, and construction cost was 14.68 million KRW per 3.3㎡. One Pentas is known to have a lower land cost than One Bailey.
The association requested an official interpretation regarding the ‘Regulations on the Calculation of Sale Prices for Multi-family Housing, etc.,’ which contains rules related to land cost calculation. They pointed out that the regulation does not explicitly mention the number of appraisals and asked whether additional appraisals for land cost reassessment are possible. Both the Ministry of Land, Infrastructure and Transport and the Ministry of Government Legislation responded that the number of appraisals is limited to ‘one.’ A Ministry of Land official stated, "The principle is that anyone can only conduct one land cost appraisal. If there is an objection to the appraisal result, an immediate reappraisal must be conducted, but it is impossible to appraise based on market prices two years later."
A representative of a real estate agency in Banpo-dong said, "There is high interest, with more than one inquiry per day about the sale schedule and price," but added, "They decided on post-sale aiming for a sale price above 70 million KRW per 3.3㎡, but since the land cost is based on 2021, this plan may face difficulties. I understand the association is in a difficult position."
Although the association failed to reassess the land cost, the recently soaring construction costs are expected to influence the sale price increase. The construction cost used as the basis for sale price calculation is based on the time when the recruitment announcement for residents is issued. The Ministry of Land raised the basic construction cost per 1㎡ from 1.976 million KRW (as of last September) to 2.038 million KRW as of March. A construction industry official explained, "If construction costs rise during the construction period, they can be reflected in the review, so many complexes subject to the sale price ceiling system choose post-sale aiming for a high sale price."
The fact that the Sinbanpo 15th association replaced the construction company and that the former constructor, Daewoo Engineering & Construction, is expected to demand damages could also be a factor in raising the sale price. Daewoo Engineering & Construction won the third trial in a lawsuit confirming its status as the constructor and is preparing a damages lawsuit. The association is in a position where it must pay not only interest due to the delayed sale but also compensation.
Kwon Il, head of the Real Estate Info Research Team, said, "Since the government said it would consider additional costs in redevelopment projects considering inflation, there is interest in how much will be reflected and approved," adding, "Land cost is absolute, but it will be difficult to exceed 50 million KRW per 3.3㎡, and additional costs are also set within a certain ratio, so the sale price is expected to be set in the 70 million KRW range."
Raemian One Pentas will be built in Banpo-dong 12 area, Seocho-gu, with 6 buildings, up to 35 floors, and 641 households ranging from 59 to 191㎡ in exclusive area. Among them, 292 households will be sold to the general public.
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