A housing reconstruction site in Seoul in April. [Herald DB]
A housing reconstruction site in Seoul in April. [Herald DB]

As rising raw material costs driven by the war in the Middle East weigh on the construction industry, the basic construction cost applied under the price ceiling on new apartments has risen 0.77 percent from the previous official figure.

The Ministry of Land, Infrastructure and Transport issued an off-cycle adjustment Wednesday, setting the basic construction cost at 2.237 million won ($1,490) per square meter to reflect higher rebar prices. The new figure represents a 0.77 percent increase from the 2.22 million won per square meter announced in the previous regular notice on March 1.

The basic construction cost is one of the components — alongside land cost, land surcharges and construction surcharges — that make up the pre-sale price ceiling for apartments subject to the price ceiling system. It is issued on a regular basis every six months, on March 1 and Sept. 15 each year. The system also allows for an off-cycle adjustment when the price of a major construction material moves by 15 percent or more within three months of a regular notice, so that cost fluctuations can be reflected in pre-sale prices in a timely manner.

This adjustment was triggered by a roughly 18.6 percent rise in the price of high-strength rebar — one of the key construction materials — measured from the March 1 regular notice to early June, three months later.

The revised figure applies to complexes that apply for pre-sale approval on or after Wednesday. The actual pre-sale price for each development will be determined by local government pre-sale review committees, which take into account the basic construction cost, land cost and other additional charges.

Jang Woo-cheol, the ministry's housing policy director, said he hoped the adjustment "will help ease the difficulties facing housing construction sites, where costs have surged due to the war in the Middle East and other factors," adding that the ministry would "provide comprehensive support to resolve supply-side difficulties on the ground."

The price ceiling on new apartments currently applies to public housing sites as well as private developments in designated areas including Gangnam, Seocho, Songpa and Yongsan-gu.


hwshin@heraldcorp.com