Rising Construction Costs in South Korea Propel Apartment Prices to Record Highs
In South Korea, the construction industry faces escalating costs due to increased prices for raw materials, leading to a significant rise in apartment prices across the region.
Over the past two years, South Korea's construction sector has been grappling with soaring raw material costs, resulting in substantial increases in basic construction costs. The trend, which saw hikes in 2023 and 2022, has pushed basic construction expenses to record highs, directly impacting the pricing of new housing developments. In particular, the cost of key materials such as ready-mixed concrete (remicon) and cement has risen, with remicon prices in the Seoul metropolitan area increasing by 5.6% in January alone. This has led to an overall 12% increase in cement prices and an 8% rise in aggregate prices compared to the previous year.
These rising costs have a direct correlation with the surge in apartment prices, as evidenced by the Housing Urban Guarantee Corporation (HUG)'s report on private apartment prices in the Seoul metropolitan area. January saw a 16.4% year-on-year increase, with prices reaching 25.01 million won per 3.3 square meters, marking an unprecedented level. Regions outside Seoul, such as Gyeonggi Province and Seoul itself, witnessed even steeper price hikes.
Despite concerns over high initial pricing, several new developments have reported complete sales within months of launch, indicating a robust demand amidst escalating prices. This trend underscores the challenges and dynamics within South Korea's real estate market, as construction costs continue to influence housing affordability and availability.
Source: Maeil Business Newspaper
