Presale prices for new apartments in Seoul are climbing sharply as a shortage of new supply collides with rising construction costs driven by surging raw material prices and labor costs. In some cases, the presale price for the same-sized unit has jumped by as much as 400 million won ($290,000) within months, even for complexes with comparable location, scale and brand.
According to the Korea Real Estate Board's Cheongyakhome application portal on the 11th, two complexes set to open first-priority general subscription on the 18th — Summit Clavion (Singil District 10) in Yeongdeungpo and Chungjeongno Station Xi Rene in Seodaemun — have each set their top presale price for units with 59 square meters of exclusive floor space in the high 1.8 billion won range, drawing criticism over the pricing.
At Summit Clavion, the presale price for a 59-square-meter unit is close to the 1.885 billion won top price set for an 84-square-meter unit at The Sharp Singil Central City (Singil District 3), a nearby complex sold five months earlier in March. That makes it about 400 million won more expensive than a comparable 59-square-meter unit at the earlier complex. Chungjeongno Station Xi Rene, a 299-unit development next to Chungjeongno Station, is seen as comparable to Gongdeok Station Xi Rene (177 units), which was offered in April near Gongdeok Station in Mapo. Yet its presale price for a 59-square-meter unit has risen by more than 100 million won in just four months.
Analysts point to the higher land costs from rising Seoul property values and the increase in construction costs from higher material prices as reasons for the surge. Industry officials, however, see it as a result of a situation in which even high presale prices mostly sell out, as a shortage of new apartment supply in Seoul combines with housing insecurity caused by tight jeonse and monthly-rent markets. Indeed, when The Sharp Singil Central City held its general sale in March, 7,233 people applied for 227 first-priority units, an average of 31.9 to 1, while Gongdeok Station Xi Rene closed at an average of 79.99 to 1, with 6,639 people vying for 83 units.
One industry official noted that when a nearby presale wraps up successfully with high competition, the next complex tends to set its price somewhat higher. "For complexes not subject to the price cap on new homes, the standards for setting construction costs are not strict, so builders such as redevelopment associations can pass construction cost increases directly on to buyers," the official said.
Interest is expected to concentrate further on The Sharp Singil Central City, which will hold an additional subscription on the 18th for 67 units returned by association members. The complex, a large development of 2,054 units, is seen as competitively priced. Another industry official said that with new construction scarce in Seoul and housing insecurity growing amid tight jeonse and monthly-rent markets, most new supply is being absorbed even at fairly high presale prices, adding that the upward trend in presale prices is likely to continue for some time.
