Seoul Installment Sale Apartment Yields 40 Percent Profit

The Seoul Metropolitan Development Corporation (SMDC) made 4.74 million won per pyong while distributing 40-pyong apartments in Sangam, Mapo. This number reaches nearly 40 percent of its market price.

The SMDC announced yesterday that the original distributing price of Sangam, Mapo’s 40-pyong apartment development, distributed last November at a price of 1.21 million won per pyong, became 7.362 million won.

The SMDC’s first announcement of the original distribution price was made because of the mounting demand of public groups and public opinion. Furthermore, it is purported that public pressure to announce the distribution price of the private construction company will increase after this. According to the SMDC, the original distribution price per pyong includes 3.059 million won for site purchasing (41.6 percent of the price), 3.401 million won for construction (46.2 percent of the price) and 0.9 million won for the rest (12.2 percent of the price). The SMDC explained the existence of a big difference between the original distribution price and the distribution price by saying, “With a low distributing price, speculation aiming for market price difference will occur and the tenant receives most of the development profit. Therefore, the metropolitan area needs to get hold of the market price difference and use it for the public good.”

However, Kim Seong-gyu, the president of SMDC, added, “It was possible for us to announce our original distributing price because we do not aim for profit making. Publicizing private companies is up to the industry.”

Following this, Kim Ja-hae from the “Citizens group for researching consumer problems” commented that “the original distributing price was higher than expected. We will demand private companies to announce theirs as well.” However, the private construction industry replies that the SMDC’s announcement of the price cannot be applied to them. Ministry of Construction and Transportation official Jung Chang-soo said, “The announcement of the original distribution price is not right. I worry about a re-occurrence of a past case where restrictions on the distribution price brought a distortion of housing market.”

Sangam’s 40-pyong apartment development contains a total of 162 households and was completely sold out by last November.

Ji-Young Chae Cheol-Yong Lee yourcat@donga.com lcy@donga.com