Standard Construction Cost Under Sales Price Cap Rises 4.07%... Reflects Increased Safety Investments [Real Estate AtoZ]

2,237,000 Won to 2,328,000 Won Per Square Meter
Indirect Construction Cost Criteria Improved, Up 9.77%
Applies to Projects Applying for Resident Recruitment Approval from September 15

The standard construction cost, which serves as the calculation basis for apartment sales prices subject to price caps, will increase by 4.07% just two months after the previous adjustment.

On September 14, the Ministry of Land, Infrastructure and Transport announced that the standard construction cost will rise by 4.07% from 2,237,000 won per square meter to 2,328,000 won per square meter, effective from September 15. This applies to apartment buildings with 16–25 floors and exclusive floor areas ranging from 60 to 85 square meters. The construction cost per square meter will increase by 91,000 won compared to the previous amount.

For a housing unit with an exclusive area of 85 square meters, the basic construction cost for above-ground floors will rise by approximately 10,190,000 won per unit. When converted to cost per 3.3 square meters, this means an increase of about 300,000 won, from 7,380,000 won to 7,680,000 won.

Seoul reconstruction site. Photo by The Asia Business Daily

The standard construction cost is used as a reference for setting apartment sales prices in all public housing sites and in regions subject to the private land price cap system, including Seoul’s Gangnam, Seocho, Songpa, and Yongsan districts.

The final sales price is determined by local government sales price review committees by combining the standard construction cost, land acquisition cost (land price), and additional construction costs (extra charges). The Ministry of Land, Infrastructure and Transport regularly announces the construction cost every six months (on March 1 and September 15 each year), and makes ad-hoc adjustments when the prices of major construction materials surge.

The main reason for this construction cost increase is the rise in indirect construction costs due to strengthened safety management protocols. The standard now reflects the new criteria for indirect construction costs announced by the Public Procurement Service in April, in line with the government's policy support for safety investments in construction projects.

As a result, the indirect labor cost ratio rose from 14.6% to 18.1%, and the other expense ratio was adjusted from 6.0% to 6.9%. In detail, the indirect construction cost increased by 9.77%, from 604,000 won to 663,000 won.

The standard construction cost has been adjusted three times this year. In July, an irregular adjustment was made after the March regular announcement, as the price of high-strength reinforcing steel rose by 18.6% as of early June. If the prices of major construction materials fluctuate by more than 15% three months after the regular announcement, the standard construction cost is adjusted again between scheduled updates.

The new standard will apply to apartment complexes that submit applications for resident recruitment approval after September 15.

The Ministry of Land, Infrastructure and Transport stated, "We will continue to make rational adjustments to the standard construction cost by reflecting fluctuations in construction material prices, so that high-quality housing incorporating the latest technology and construction methods can be supplied."

This content was produced with the assistance of AI translation services.