The benchmark construction cost used to calculate presale prices for apartments under South Korea's price cap on new homes is rising more than 4% in just two months. Higher raw material prices and a sharp increase in indirect construction costs, which now reflect expanded safety spending at construction sites, drove the revision. Private apartments in Seoul's three Gangnam districts and Yongsan District, where the price cap applies, as well as public presale units in the third-phase new towns, face growing upward pressure on prices. Non-homeowners buying a home to live in, who have planned their purchases around estimated prices quoted at the pre-subscription stage, are likely to shoulder heavier payments.
The Ministry of Land, Infrastructure and Transport said on the 14th that the government will adjust the benchmark construction cost applied under the price cap to 2.328 million won per square meter starting on the 15th. The figure applies to above-ground floors of units larger than 60 square meters and up to 85 square meters in buildings of 16 to 25 floors. That is 91,000 won, or 4.07%, higher than the 2.237 million won set in an off-cycle notice on July 15, just two months earlier. The revised standard applies to complexes that file for approval to recruit occupants on or after the 15th.
The benchmark construction cost, along with land costs and additional charges for land and construction, makes up the presale price. The government revises it regularly on March 1 and September 15 each year, and adjusts it off-cycle when prices of key building materials spike. In July, a surge in steel bar prices drove the increase. After the price of high-strength steel bars climbed about 18.6% following the regular March notice, the ministry raised the benchmark 0.77% to 2.237 million won from 2.22 million won. With another increase of more than 4% two months later, the benchmark is nearly 5% higher than the March level in just half a year. Compared with 1.829 million won in March 2022, it has risen 499,000 won, or 27.3%, over four and a half years.
Indirect construction costs are at the heart of this revision. The ministry said indirect costs rose 59,000 won, or 9.77%, to 663,000 won per square meter from 604,000 won, lifting overall construction costs. That accounts for about 65% of the total 91,000-won increase in the benchmark. The change reflects the Public Procurement Service's "2026 Standards for Applying Indirect Construction Costs in Cost Calculation," released in April under the government's policy of expanding support for safety spending at every stage of construction.
Winners of public presale units heading into final subscription face a particularly heavy payment burden. Prices quoted at the pre-subscription stage are estimates only, and final prices are set based on the benchmark construction cost and business conditions at the time of final subscription. Under this structure, the longer a project is delayed, the more of the construction cost increase is passed on to those who won units. For a home with 110 square meters counted for above-ground construction cost purposes, this revision alone adds 10.01 million won in construction costs.
In the third-phase new towns, higher presale prices are already showing up in the numbers. Units of 84 square meters in Block A6 of Incheon Gyeyang, which goes to final subscription on the 17th and 18th, are priced from 695 million won to 716 million won. That is nearly 150 million won higher than two years ago, when 84-square-meter units in Block A2 of the same Gyeyang new town were offered at 549 million won to 584 million won in October 2024.
The confirmed presale price for 84A-square-meter units in Block A-3 of Namyangju Wangsuk 2 is 732.45 million won, up 169.15 million won, or about 30%, from the estimate given at the pre-subscription stage. Units of 84 square meters in Block S-1 of Goyang Changneung are priced at 783.4 million won, 141.61 million won above the estimate. Complexes going to final subscription in the future may show even wider gaps from pre-subscription estimates as they reflect the higher construction costs.
The concern is that presale prices may keep rising. With the war in the Middle East dragging on, the construction cost index stood at 138.59 in July, up 5.8% from a year earlier and far above the 2.8% rise in consumer prices over the same period. Public construction costs could follow with a lag. That means presale prices at major public housing complexes in the third-phase new towns going on sale in the second half of this year could rise one after another.
Meanwhile, presale prices are climbing even faster in areas where the price cap does not apply. One complex has posted a price approaching 3 billion won for a mid-size unit. At "The Sharp Bundang Highest," a remodeling of the Neuti Village 4 complex in Jeongja-dong, Bundang District, Seongnam, Gyeonggi Province, the top presale price for an 84-square-meter unit was set at 2.981 billion won, a new record for units of that size. That tops the 2.9782 billion won top price for an 84-square-meter unit at "Summit The Hill" in Heukseok-dong, Dongjak District, Seoul, in May. The complex will offer 143 of its 1,149 units in general sale and begins special supply on the 21st.
