Starting July, Appraised Values Also Used for Home Price Calculation
HUG to Select 5-6 Appraisal Firms
Increased Workload, but Small Firms Concerned About Dominance by Large Companies
Starting next month, the appraised value calculated by appraisal corporations will also be used as a standard for determining house prices in the Villa Jeonse Deposit Return Guarantee provided by the Housing and Urban Guarantee Corporation (HUG), leading to mixed reactions within the appraisal industry. Concerns have been raised that, according to HUG's corporate selection criteria, there will be a concentration toward large corporations, potentially excluding small and medium-sized firms.
According to the Ministry of Land, Infrastructure and Transport on the 19th, from July onwards, when subscribing to the Jeonse deposit return guarantee, the house price can be calculated using the appraisal value from appraisal corporations directly commissioned by HUG.
The appraisal industry is welcoming the increase in workload. An industry insider stated, “The Ministry of Land expects 20,000 to 30,000 objections annually, so the total volume of work is expected to increase,” adding, “This will particularly benefit large corporations capable of conducting large-scale appraisals.”
However, concerns have been voiced among small and medium-sized firms and individual offices. There are criticisms that HUG’s selection criteria favor large corporations, which could further narrow the position of smaller companies.
An appraiser operating an individual office in Seoul expressed, “Appraisal accidents such as overvaluation occurred mainly in some large corporations that conducted thousands of Jeonse deposit insurance appraisals, yet I worry that the actual benefits will be reaped by the large corporations.” Another industry insider explained, “If the qualification requirements were based on appraisal experience or HUG work performance, it would be one thing, but if the criteria include nationwide organizational networks or scale, small and medium-sized firms or individual offices will be unable to participate at all.”
The Jeonse Deposit Return Guarantee is a system where HUG repays the deposit to the tenant if the landlord fails to return it, and later recovers the amount from the landlord. Currently, it is only available for houses where the Jeonse deposit is 126% or less of the publicly announced price. For example, if a villa’s publicly announced price is 100 million KRW, the Jeonse deposit must be 126 million KRW or less to subscribe to the guarantee. Under the recent reform, landlords can choose to have the house price calculated based on either the publicly announced price or the appraisal value recognized by HUG within the ‘126% rule.’ The appraisal value is calculated by appraisal corporations selected by HUG.
Regarding the corporate selection criteria, HUG stated, “We are conducting final reviews and plan to announce the criteria soon,” adding, “It is highly likely that the process will be conducted through a public offering.”
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