Apartments Smaller than 25.7 Pyong to Sell for 8.4 to 9.5 Million Won per Pyong in Pangyo

It has been decided that the standard construction cost will be approximately 3.39 to 3.66 million won, which will be applied to apartments whose actual areas are smaller than 25.7 pyong in public building lots.

Accordingly, it is expected that the sales prices of smaller-than-25.7-pyong apartments in Pangyo New City in Seongnam, Gyeonggi Province will be 8.4 to 9.5 million won per pyong.

The Ministry of Construction and Transportation announced on March 8 that it has decided the standard construction cost of apartments and the conditions of the issuance of national housing bonds, as the price ceiling system and the bond bidding system of land for apartments take effect March 9.

The ministry set at around 3.39 to 3.66 million won per pyong depending on the method of construction the standard construction cost of smaller-than-25.7-pyong apartments sold in public building lots, which includes construction costs, design and supervision cost, and additional cost.

Adding additional costs such as expenses for installing basement parking lots, fees for construction and sales guarantees, the actual costs will increase to around 3.96 to 4.23 million won.

Public land means the land that the Korea Land Corporation or local governments provide.

Against this backdrop, the sales price of apartments smaller than 25.7 pyong selling in November this year in Pangyo New City is expected to be around 8.39 million won (floor area ratio of 200 percent) at the lowest to 9.5 million won to the highest (floor area ratio of 150 percent). Floor area ratio means the ratio of the total area of a building to the land area.

The ministry also made it a rule to publicize five cost-related items, the building lot prices, construction cost, design and supervision costs, additional cost and markups, for any apartments sold in public land, regardless of their areas. In the land that the private sector provides, however, only those apartments that are smaller than 25.7 pyong are subject to the rule.

The ministry decided to issue the national housing bond type 3 on the condition of 10-year maturity and no interest when selling land for medium-to-large apartments which are larger than 25.7 pyong. The discount rate of the bond stands at around 37 percent, calculating from the current interest rate (10-year maturity government bond: 4.79 percent).

This means that a housing construction company can get 63 million won by selling a national housing bond type 3 at a discount price, after purchasing it for 100 million won, increasing the costs for the company.

Jae-Seong Hwang jsonhng@donga.com