Korea Land and Housing Corporation (LH) will raise the purchase price of semi-basement dwellings. Three years after casualties occurred due to flooding in semi-basement dwellings, LH has been buying these properties, but as performance has been sluggish, it has decided to offer higher prices. With the increase in the purchase price of semi-basement dwellings, it is expected to attract some semi-basement owners who have been hesitant to sell due to pricing. However, concerns have been raised that the acquisition performance of the semi-basement dwelling purchase project may not significantly improve given that LH's acquisition conditions remain stringent.
According to the National Assembly and LH on the 6th, it has been confirmed that LH is working on improving the price estimation system to boost the performance of its semi-basement dwelling purchases.
The government launched the semi-basement dwelling purchase project after flooding in these areas caused casualties during heavy rainfall in 2022. LH is in charge of the practical aspects of this project in order to improve the living conditions of disaster-vulnerable households and to gradually eliminate semi-basement dwellings in urban areas. The purchase methods for semi-basement dwellings include buying existing homes and new construction agreements.
LH previously determined the purchase price by adding 90% of the reconstruction cost to the land valuation amount. However, in the future, it will add 100% of the reconstruction cost. The reconstruction cost refers to the appropriate cost calculated by considering the current real estate as newly constructed or developed at the price point. In simpler terms, this means increasing the purchase price of semi-basement dwellings to attract more sellers.
An LH official noted, 'To enhance the semi-basement purchase project starting this year, we are pushing for a system improvement to raise the building value in the purchase price estimation to 100%,' adding, 'The intention is to reflect the price more accurately to encourage sale applications.'
The reason LH is trying to raise the purchase price for semi-basement dwellings is due to its lackluster acquisition performance. Despite the directive from Minister of Land, Infrastructure and Transport Park Sang-woo, stating, 'The government needs to actively purchase semi-basement dwellings that are unsuitable for living and pose flooding risks,' LH has only acquired 97 semi-basement dwellings from the second half of 2022 to last year. Given that there are about 270,000 semi-basement dwellings in the metropolitan area, LH's acquisition performance is quite minimal.
However, there are also concerns that the recent price increase will not activate the semi-basement dwelling purchase project. Even if LH raises its purchasing prices, there is little incentive for the owners of semi-basement dwellings or property owners to sell to LH when considering potential future development value.
In particular, the fact that LH's requirements for purchasing semi-basement dwellings remain stringent is cited as a factor that makes it hard to expect an activation of the purchase project. LH's purchase criteria include: semi-basement (basement-level) multi-family, multi-unit, or row houses; an area of 16㎡ to 85㎡; dwellings that received building permits within the last 20 years; and dwellings where the primary use of the semi-basement (basement-level) is registered as a dwelling in the building register.
Among these requirements, multi-family dwellings only allow for the purchase of the entire unit, not partial purchases, making it difficult to obtain consent from other residents if necessary, which complicates applications to purchase semi-basement dwellings. Additionally, the stipulation that only buildings less than 20 years old are eligible for purchase makes it challenging to sell aging semi-basement dwellings to LH.
There are also claims that LH's lack of active engagement in purchasing semi-basement dwellings exacerbates the situation. LH did not set a target quantity for purchases last year. A member of the National Assembly's Land, Infrastructure and Transport Committee criticized, 'The absence of a business target suggests a lack of willingness to actively pursue the project.' An LH official explained, 'The purchase plan for this year (for semi-basement dwellings) has yet to be confirmed.'