[EDITORIALS]Overpriced apartmentsWhen newly-built apartments are offered each month, controversies flare up over whether the houses are fairly priced by construction companies. Because of such debates, home buyers feel that they have been ripped off, and it is hard to keep order in the local housing market. Such repeated controversies are attributable, in part, to difficulties in calculating the building costs. But the authorities are also responsible because they have not done their best to monitor builders' suspected "overpricing."
Rekindling the overpricing debate was a recent announcement by the Citizens' Alliance for Consumer Protection, a local consumer activist group, which analyzed the costs for building new apartments offered in June 2001 in Seoul at the request of the city's government. It said that builders put the land prices at an average of 1 million won ($805) per square meter, twice as much as the actual price. The group also announced that the construction costs were marked at 1.1 million won per square meter on average, higher than the real costs by 1 million won. The Ministry of Construction and Transportation has also said that developers who built apartments in Yongin and Jukjeon, south of Seoul, earned net profits of up to 1.3 million won per square meter.
Of course, the calculation by the civic group may have some flaws, and builders may protest it. It takes unofficial expenses to win a project to redevelop an area. The use of high-quality materials would buoy apartment sales prices. In addition, builders would have to consider their business risks and financing costs. Still, such factors are not convincing enough for us to stand in favor of their arguments. Construction companies have lost consumers' trust because, without setting proper profit targets, they change sales prices as they please, taking advantage of real-estate booms. The latest analysis by the consumer group has also found that the Seoul city government is, in large part, responsible. Bubbles in prices remain intact.
Outrageous profiteering disturbs the market order. The authorities, who have rolled up their sleeves to crack down on excessive pricing of apartments, must become faithful watchdogs. And construction companies should cooperate voluntarily.