Pangyo Apartments to be 9.0-9.5 million Won per Pyong

It is forecasted that the selling price for apartments in Pangyo, a new city in the Gyeonggi province, will be set at 9.0 to 9.5 million won per pyong for apartments with private-unit areas of 25.7 pyong or under, beginning this June.

According to the Ministry of Construction and Transportation Ministry (MOCT) and the Korean Institute of Construction Technology on Monday, January 31, the standard construction expense was provisionally decided, which is to be applied to the ceiling price system (cost linkage system), at 3.4 to 3.5 million won per pyong.

It has been known that the MOCT requested research services regarding construction expense from the Institute, which is expected to be announced on February 3, and the government will make decisions according to the announcement.

The ceiling price system will be applied to apartments with private-unit areas of 25.7 pyong (typically a 32-pyong apartment) or those constructed in a public residential lot, and this system will be carried out for the first time in the new city of Pangyo.

In addition to the standard construction expenses for a “25.7-pyong or under” Pangyo apartment, the land price, the construction expenses for an underground parking lot, an incentives system (a system which increases the sale price by a certain level for environment-friendly and outstanding consumer satisfaction firms) and expenses for the options of finishing material also need to be factored in. When totaling the above, the cost amounts to 8.82 to 9.57 million won per pyong.

The bond bidding system will be applied to middle to large sized apartments of areas over 25.7 pyong; thus, the sale price will be set according to the face value of the bond presented by the firm when supplying the housing lot. However, when compared with the apartment prices of Bundang, Sungnam City and the Gangnam area, construction firms are expecting the sale price per pyong for middle to large sized apartments in Pangyo to be 15 to 18 million won.

Meanwhile, controversies between construction firms and civic groups regarding the standard construction expenses are expected.

The civic groups and demanders are saying that an average of 3.4 million won per pyong for the standard construction expense leaves too much profit for the construction firms. They analyzed the construction expenses to be 2.6 to 2.9 million won per pyong, and when adding the advertising expenses and profits, 3.2 million won per pyong is sufficient.

Kim Hak-su, director at World Construction Co., replied, “The standard construction expense of 3.4 million won per pyong amounts to a mere 3.15 million won per pyong when converted into construction expenses applied once the firm receives an order.”

* Ceiling Price System: system for setting the ceiling of the sale price based on the standard construction expenses presented by the government.

Eun-Woo Lee libra@donga.com