Recently, rising construction costs have increased the burden on reconstruction and redevelopment business associations. Experts noted that conflicts over construction costs between builders and associations could lead to delays in supply and increases in sale prices.
According to the maintenance industry on the 15th, the Jamsil Jinju Apartment reconstruction association plans to hold a general meeting on the 14th to discuss the increased construction costs. They will review a proposal to raise the construction contract amount from 1.3229 trillion won to 1.3818 trillion won, an increase of 588 billion won. The complex had already increased construction costs in December 2021 and July 2024 due to rising raw material prices and design changes.
An official from the Jamsil Jinju Apartment housing reconstruction maintenance business association said, "The costs incurred from adding landscaping facilities to the reconstruction complex have led to this." They noted that while a general meeting regarding the cost increase is forthcoming, the mood within the association is not bad.
In the Noryangjin District 8, the builder, DL E&C, proposed to raise the construction cost from approximately 4.98 million won per 3.3 square meters to 8.82 million won. An association official said, "We are negotiating construction costs with DL E&C, while also holding discussions internally within the association."
Many construction sites are facing variables related to rising construction costs, driven by recent price increases and design changes. Concerns are raised that this year will also see increased construction costs due to rising raw material prices. According to the construction cost index calculated by the Korea Construction Technology Institute, it recorded 130.26 in November of last year, which is a 29.0% increase compared to 100.97 in November 2020, before construction costs significantly rose. This index serves as a standard for analyzing price fluctuations in construction costs, reflecting economic indicators like producer price indices related to direct construction expenses for materials, labor, and equipment.
Experts pointed out that if conflicts arise between associations and builders due to rising construction costs, there could be delays in projects, and the likelihood of a subsequent increase in sale prices is high.
Moreover, starting in June, the strengthening of design standards for zero-energy buildings will be implemented, and various regulations will follow, including not granting completion permits if inter-floor noise standards are not met and mandating the installation of electric vehicle fire safety facilities. This further amplifies concerns over rising construction costs.
Professor Ko Jun-seok from Yonsei University noted, "The rise in construction costs leads to instances where construction is halted during the negotiation period. Representative cases include Dunchon Jugong and Daecho District 1." He further stated, "If conflicts cause prolonged halts in construction, it ultimately leads to delays in supply. The construction industry must be cautious to avoid excessive competition when bidding for projects."
There is also a continued suggestion that the government and local governments should take the initiative in providing policy support and mediation. Song Seung-hyun, CEO of Urban and Economy, said, "When conflicts arise between associations and builders over construction costs, it hinders supply, so it is necessary for the government or local governments to intervene." He added, "While the autonomy of private projects is important, from a larger scope, leaving the situation as it is, such as construction delays, could be seen as neglect and coordination is needed."
In fact, last July, the Seoul city government reached agreements on construction costs for three locations, including Jamsil Jinju, Daecho District 1, and Cheongdam Samik Apartments, which had been embroiled in conflicts over increased construction costs. Coordinators of maintenance projects in Seoul, comprised of experts in urban administration, urban maintenance, law, tax, and accounting, play an effective role in mediating conflicts by forming consultation bodies with parties involved in disputes and proposing appropriate adjustments based on feedback and analysis of conflict causes.