Prices for Per Pyong in Apartments in Seoul Recording 11.84 Million Won

Prices of apartments for installment sales are skyrocketing. Prices of installment-sale apartments in Seoul marked over the record-breaking price of 10 million won for per pyong for the first time this year.

Construction companies attributed the skyrocketing installment apartment prices to rising land prices and other factors. However, many blamed construction companies` unreasonable price-setting practices for apartment price hike, and which are increasingly gaining the ground.

A “high altitude march” for apartment sale prices: According to Doctor Apartment, company providing apartment information, as of Feb.26, prices for per pyong in 1,132 apartment houses which were simultaneously offered for installment sales in Seoul posted 11.84 million won on average, a whopping 37 percent increase from last year (8.67 million won for per pyong).

Rate of prices increase is also much higher than the previous years, 12 percent recorded in 1999-2000, 10 percent in 2000-01, and 19 percent in 2001-02. This year`s rising rate marked a double increase compared to that of 1999, 5.91 million won for per pyong.

In particular, among those apartments for installment sales in Seoul, “Dong-yang Paragon” apartment in Bangbedong, Suchogu, Seoul was sold at 16.50 million won for per pyong, recording the highest sale price this year.

Skyrocketing apartment sale price is not the sole trend in Seoul, resulting in simultaneous rises in certain areas. Prices of apartments for installment sales in the Gyonggi district and in the Incheon district rose by 24 percent and 25 percent, respectively, this year. In Busan, price for per pyong this year stood at an average of 6.13 million won, 34 percent up from the previous year. Recently, prices for per pyong in some installment apartment sales are in the 7 million range, including price of the “World Merdiang” in Gujedong, Busan.

Causes and problems for the skyrocketing installment apartment sale prices: construction companies are insisting that it is unavoidable for them to raise installment apartment sale prices because of the rising prices of land, labor, and materials.

Kim Ja-hae, secretary general of “Citizens` group for study on consumer issues”, pointed out, “The problem is that construction companies are setting their installment apartment prices based on the highest apartment prices in the surrounding areas.”

When the housing-sale market is flourishing, it is natural that rights to sell installment apartments are traded at premium prices, which are much higher than initial prices set for installment apartments. In light of the fact, the logic here is that benefits of premium prices are taken away from consumers because construction companies are adding premium prices to the overall apartment sale prices.

Furthermore, it is believed that high prices of installment apartments are boosting other apartment prices in the surrounding areas and which is also inflating installment apartment prices, showing a vicious circle of rising apartment prices.

Kwak Chang-suk, executive director of Doctor Apartment, said, “There are price manipulations found as a result that some real estate brokers are not putting apartments for sale at the market until installment apartment prices are set at higher prices.”

In response, a construction company official said, “Recently-built apartments are showing a remarkable improvement in various ways, including improvements in finishing materials, electric appliances, and security systems. Therefore, it is unreasonable to demand that constructions companies lower installment apartment prices in regardless of such price hike factors.”

Ji-Wan Cha cha@donga.com