Government Attacks Rising Reconstructing Apartment Prices from All Sides

The government is pulling out all stops to reign in the real estate market by expanding its investigation into each reconstruction union and pressing for lowering pre-sale prices, which have caused construction companies and reconstruction unions for reconstruction in Gangnam area to begin doing so.

Lee Kee-mook, chief superintendent general of the Seoul Metropolitan Police Agency, said on April 25, “There was a secret agreement between the unions and construction companies in Seongsan-dong, Mapo-gu, and suspicions of other such deals are growing in the Jamsil Siyoung area. We will expand our investigations over the entire Seoul region.”

The police is planning to investigate suspicions of bribery between the city’s construction company and public officials, price fixing, illegal activity within the reconstruction union, and involving gangs in the reconstruction process.

A high ranked official with the Seoul Metropolitan Police Agency stated, “Thirty-one police stations are currently investigating the reconstruction scam and will soon concentrate on investigating the construction company. We plan to look into not only the apartments that are under reconstruction, but also the ones that are already finished to see if there are any suspicions of fraud.”

There are approximately 30 apartment reconstruction projects in progress in areas including Songpa and Banpo, Seoul, so the police investigations will stir up the reconstruction plans.

The Ministry of Construction and Transportation (MOCT) has decided to start a full-blown investigation to find people who have instigated the price hike.

The MOCT stated that regarding apartment reconstruction projects in Apgujung-dong and Banpo-dong, which are currently planned to redo the mid-level units (floors 10~15), they will start a full-blown investigation to find the people who are stimulating speculation.

The government plans to continue the investigation into reconstruction complexes in Seoul by the end of this year, and then it will expand its investigation into Gyeonggi Province and Incheon.

Also, if it discovers something illegal about the reconstruction apartments such Jamsil Jugong, it might cancel the projects.

As the government increases the pressure, the reconstruction unions which has maintained their high pre-sell prices, has starting lowering them.

The Jamsil Jugong reconstruction union met with the Songpa District officials and construction companies, and compromised to lower the price by 540,000 won~ 750,000 won per pyeong.

Dogok Jugong 2 Apartments in Daechi-dong, Gangnam-gu also decided to lower the pre-sell price on the 32 pyeong type B units by 190,000 per pyeong.

Sang-Rok Lee myzodan@donga.com needjung@donga.com