House + Land Price 31.2 Million Won, But Land Alone 138.99 Million Won?...Gyeonggi Province Completes Cleanup

[Suwon Ilbo=Park No-hoon Reporter] Gyeonggi Province announced on the 30th that it has completed an across-the-board cleanup of 1,488 so-called 'price reversal phenomenon residences' where individual housing prices (land + building) are more than twice lower than individual announced land prices (land only), the first in the nation.

From September 1 to November 15, the province conducted a full census and cleanup on 1,488 houses among a total of 148,824 residences where the individual housing price—combining land and house—was lower than the individual announced land price reflecting only land, in order to improve the unreasonable real estate announced price system. The cleanup targeted cases where the reversal phenomenon showed a difference of 2x or more.

Individual announced land prices and individual housing prices are standard prices determined and announced annually by the mayor, county governor, or district chief based on standard land and standard housing prices selected by the Minister of Land, Infrastructure and Transport. These prices are used for 68 administrative purposes including taxation and welfare.

The price reversal phenomenon has been pointed out as one of the major factors undermining the credibility of announced prices and causing public distrust in administration.

Price reversal phenomena mainly occur in mixed-use residential and commercial buildings located in commercial areas. This is because when there is no standard residence nearby, the individual housing price is calculated based on standard residences from other areas.

In fact, as of January 1 this year, residence B in city A had an individual housing price (land + building) of 31.2 million won and an individual announced land price (land only) of 138.99 million won (7.02 million won per ㎡), showing that the land price alone was approximately 4 times more expensive than the combined value of land and building.

This occurred because city A, lacking an appropriate standard residence near residence B, used residence C (1.58 million won per ㎡) from another area with a relatively lower announced land price as the standard residence when calculating the individual housing price, creating a typical reversal phenomenon.

In addition, there were some cases where cities and counties calculating individual housing prices failed to properly reflect changes in housing characteristics due to development.

For example, in cases of residences located on residential land within a greenbelt area, even though the designation was changed from forest land to residential land long ago, if the announced land price is calculated using the forest land standard without reflecting this change, a phenomenon occurs where the announced land price is higher than the individual housing price.

The cleanup was conducted through on-site investigations by provincial appraisers and individual housing officials, and recommendations made through consultations with city and county personnel.
Of the 1,488 houses, 732 underwent standard residence price adjustments, 718 underwent standard residence replacement and addition, and 38 underwent housing characteristic adjustments.

A provincial official said, "The across-the-board cleanup of price reversal phenomena was carried out as a measure to secure credibility in announced prices and promote equity in various administrative tasks such as taxation and welfare," and added, "We will also advance an across-the-board cleanup of residences with a reversal ratio of 100% or less so that announced prices can be properly disclosed."

Meanwhile, the province has continuously recommended improvements to the real estate announcement system to the central government to address institutional problems with individual housing prices, including: delegation of individual real estate supervision authority to provincial governors, integrated operation of individual real estate (land + housing) announcement schedules, requesting characteristic mismatch corrections for standard real estate, and additional selection of standard residences.