Land Compensation Prices Reach New Heights

The land compensation expenses incurred by government-sponsored projects such as new towns and highway construction have been skyrocketing since the nation’s overall land prices have surged due to an excessive number of development projects. It is concerned that the number of projects whose construction schedules will be delayed and the people’s tax burden will increase accordingly.

The recent surge in land prices resulted from the fact that the central and local governments came up with development projects in a competitive manner. An assertion is developing that some arrangements in setting up priorities among the projects are needed, and that those not considered urgent should be given second thoughts. On June 8, the Ministry of Construction and Transportation, Ministry of Planning and Budget, and the Korea Land Corporation announced that land compensation expenses for the highway between Seosuwon and Pyeongtaek, whose construction will start this month, have soared to 480 billion won, seven times the amount originally expected (65.2 billion won).

The land compensation cost for the highway between Seoul and Chuncheon on which construction started in August 2004, has increased to 475 billion won, two times the amount originally projected (224.1 billion won). It has been analyzed that the land compensation expenses for seven other highways, including the ones running between Eumseong and Chungju, Chuncheon and Yangyang, Jumunjin and Sokcho, Jeonju and Gwangyang, Mokpo and Gwangyang, Namsuncheon and Gwangyang, and Donghae and Samcheok will surge by at least two or three times.

The land compensation cost for Pangyo new town in Seongnam, Gyeonggi Province has amounted to 2,505 billion won. As a result, its total construction expense surged to 7,980 billion won, up from the 2,500 billion won the government originally had expected to pay.

The Ministry of Construction and Transportation decided to consider delaying the construction of all the highways funded by private capital, other than those between Seosuwon and Pyeongtaek, and Seoul and Chuncheon, by two to three years.

The Ministry of Construction and Transportation came up with a highly stringent policy that people living in areas where the monthly average growth rate of land prices exceeds that of the whole nation should be obliged to obtain government approval to sell land. However, experts criticize that the measure will turn out to be ineffective, as land prices in all areas subject to the measure have greatly increased without exception.

Jae-SeongHwang jsonhng@donga.com imsoo@donga.com