First Application of Revealing Building Costs to be Pankyo

It has been forecasted that the price linkage system, revealing prices of major items in detail, and an obligation bidding system will be applied as early as March of next year to the sales of apartment units at Pankyo, a new city in Gyeonggi Province.

Accordingly, the sale prices of Pankyo apartments will be lowered from the initial prospect for small apartments and increase for large apartments, expecting a polarization.

Vice Minister Choi Jae-duk of the Ministry of Construction-Transportation (MOCT) met with reporters on July 16 and said, “We are planning to consolidate the related systems (such as the price linkage system and etc) before the sale in Pankyo. As for the present, there are high possibilities that the price linkage system and obligation bidding will be applied to Pankyo.” An MOCT official said, “The reveal of major items in the sale price will be applied, starting with the Pankyo sale.”

Prior to this, MOCT and Uri Party agreed at the party-government consultative conference on July 14 to amend the housing law as soon as possible, executing the price linkage system and obligation bidding as early as the start of next year, and to reveal the major items of the sale prices.

The price linkage system will be applied to apartments on public estates that do not exceed 25.7 pyong (84.9 square meters). When considering the standard construction expense and reasonable profits, the government is practically setting the sale price, and it is expected that the sale prices will be lowered by 20 percent.

However, with the obligation bidding, the firm to buy the most obligations on apartments over 25.7 pyong in public estates will be given the lots, showing an analysis that the sale prices will rise by 20 percent.

Meanwhile, if the price linkage system and obligation bidding is applied to apartment sales at Pankyo, construction personnel expect the cost to be eight million won per pyong for apartments smaller than 25.7 pyong and at least 12 million won per pyong for those exceeding 25.7 pyong.

Kwang-Hyun Kim kkh@donga.com