Archive for the ‘Real Estate Management Law’ Category

What real estate investments in Pyongyang tells us about the North Korean economy

Tuesday, October 30th, 2018

By Benjamin Katzeff Silberstein

A few days ago, Daily NK reported that apartment prices in Pyongyang have fallen by significant proportions over the last few months. They first wrote about it in Korean last week:

평양 소식통은 26일 데일리NK와의 통화에서 “평양에서 아파트 가격이 많이 눅어(떨어)졌는데, 이상하게도 아파트 건설은 줄어들지 않고 오히려 늘고 있다”면서 “중심 구역뿐만이 아니라 낙랑구역이나 서성구역 등 외곽 지역에서도 많이 올라가고 있는데, 내가 본 것만 7개다”고 말했다.

소식통은 이어 “돈주(신흥부유층)가 돈 내고 건설해서 팔아먹는데 창전거리나 려명거리에 있는 아파트처럼 멋지게 올라가고 있다”면서 “아파트 건설은 보통 20~30명의 군인이 동원돼 건설 중이며 30층짜리 아파트도 있고 종류가 다양하다”고 덧붙였다.

이달 초 본지는 올해 6월까지 20∼30만 달러(이하 면적 230㎡)를 유지해왔던 평양의 중심지역인 중구역 및 대동강 주변 아파트 가격이 8월에 5만 달러 이상 하락한 것으로 파악됐다고 보도한 바 있다.

이처럼 아파트 가격의 폭락에도 불구하고 아파트를 건설하는 데는 신규 아파트의 경우 고가로 거래되기 때문에 투자가치가 있다고 판단하는 것으로 분석된다.

본지가 지난 4월 입수한 탑식 아파트 경제 타산서(북한식 공사 손익계산서)를 조사한 결과 40세대가 사용할 수 있는 아파트(한국의 빌라, 총 12층 기준)를 건설할 때 약 23만 달러(약 2억 4000만 원)의 수익을 내는 것으로 나타났다. (▶관련 기사 바로 가기 : 경제타산서 입수…”40세대 아파트 건설·분양시 23만달러 수익”)

또한 지난 10년간 아파트 가격이 지속 상승, 돈주들에게 많은 부를 안겨준 점도 한몫 하는 것으로 보인다. 아울러 한반도 평화 분위기 속에 향후 대북제재가 해제되면 다시 아파트 가격이 상승할 것이라는 기대 심리도 작용한 것으로 관측된다.

And in English here, yesterday:

Despite the fall in North Korean real estate prices, apartment construction has not slowed down, report sources in the country.

“The prices of apartments in Pyongyang have fallen a lot, but strangely the construction of apartments has continued and even increased,” said a Pyongyang-based source on October 26. “There’s apartment construction going on in central Pyongyang and in the city’s suburbs, like the Rakrang and Sosong districts. I’ve seen seven apartment construction sites myself.”

A separate source in Pyongyang added, “The donju (nouveau riche) are financially supporting these apartment construction projects and then selling the apartments to buyers. There are really nice ones being constructed, similar to those in Changchon Street and Ryomyong Street. Twenty to thirty soldiers are usually mobilized to build them. There are 30-story apartments and others of varying heights.”

Daily NK reported earlier this month that the price of apartments in central Pyongyang, including in Jung district and those near the Taedong River, had fallen from a high of 200-300,000 dollars in June this year to around 50,000 dollars in August.

However, local investors still appear keen to build the apartments because they can be sold for significant profits.

According to an analysis of a North Korean construction profit-and-loss statement Daily NK obtained in April, apartments that can house 40 families (around 12-stories tall; similar to South Korean “villas”) can make a profit of around US $230,000 US dollars (around 240 million South Korean won) [from rent].

The continued rise in apartment prices over the past 10 years has helped the donju accumulate a lot of wealth, which appears to be one factor in the continued construction of apartments. And as tensions on the Korean Peninsula have dissipated, there may also be the expectation among investors in the country that international sanctions will be lifted, which would again lead to a rise in apartment prices.

Full article/source:
Apartment construction remains steady despite fall in real estate prices
Moon Dong Hui
Daily NK

The dynamics at play here tells us something very interesting and important about the current state of North Korea’s economic system. For all the developments and changes over the past couple of decades, and particularly under Kim Jong-un, basic functions of a regular market economy, such as formal channels for investments, through which people can see their savings grow in value (or shrink, in bad times). In North Korea, however, private investments technically remain illegal. Housing is one area where they’ve become standard practice and more or less regularized, despite the judicial murkiness of it all.

So when housing prices decline, what are people going to do, if they don’t want to keep their money laying around passively? Keep putting them into housing. After all, a lower profit is better than no profit. This dynamic can’t last forever, but as of now, the fact that investment opportunities are still relatively few may be keeping a bubble alive that already burst.


First real estate auction held in Kaesong Industrial Complex

Sunday, July 18th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No.10-07-15-3

A real estate auction was held in the Kaesong Industrial Complex for the first time since the joint inter-Korean project was launched. According to the Kaesong Industrial District Development Committee, factory plots (20,472.7 ㎡) in the stage-1 area of the KIC were being auctioned off on July 12. A government source stated, “Land in the KIC has been sold before, but this is the first I know of land rights being auctioned off.”

The company currently on the plot was awarded land rights and permission to build a factory after signing a contract with the North Korean Central Special Development Guidance Bureau. The land rights being auctioned off run until April 12, 2054. It is not known why the land rights are being auctioned off, but it appears that the company currently holding rights to the plot have some financial difficulties, forcing them to sell.

The rights are estimated to be worth more than 1.37 billion won, and the auction is set to close on the 23rd of July. The sale is being handled by the Kaesong Industrial District Management Committee. The committee is handling the sale in accordance with the rules set forth on May 10 by the KIC real estate management office. These rules established a seven-member committee of lawyers and other specialists to handle the auction and sale of real estate within the industrial complex.

After the sinking of the ROK warship Cheonan, Seoul authorized more flexible management of South Korean workers in the KIC in order to help companies avoid financial losses in the complex. The government also increased the amount of the inter-Korean cooperation fund from 50 trillion to 60 trillion won in order to ease financial concerns of South Korean companies operating joint ventures, and announced that loans to 183 companies involved in processing-on-commission, as well as 530 other trading companies, would be made at 2 percent.

This move by the government highlights the fact that South Korean companies in the KIC continue to tread on rocky financial footing, despite the announcement by the Ministry of Unification that emergency management stability funds would be made available.

Following the sinking of the Cheonan, the number of South Korea workers in the KIC on any given weekday was reduced from more than 1000 to around 500, and this has caused companies to produce less, have higher costs, and see lower buyer interest. While Seoul tries to keep the industrial complex open, it is also looking into the laws on the Mount Keumgang tourism project, seeking ways to aggressively assist companies involved in the joint scheme.


Hamhung’s (future) residential construction

Monday, July 12th, 2010

I have previously posted about residential construction in the DPRK in Ryongchon (here) and Pyongyang (here and here).

Apparently Hamhung is on the government’s list of urban areas that need to be rebuilt. KCNA reported on May 2o:

After touring Hamhung City, [Kim Jong-il] examined a miniature of the city construction layout plan and other plans for the development of major economic fields in South Hamgyong Province and guided the work in this domain on the spot.

Underscoring the need to build Hamhung City under a long-term plan by thoroughly applying the socialist principle, the principle of popular character as it is the industrial city with a large number of workers, he specified the orientation and ways to do so.

Here is a photo of Kim Jong-il inspecting that very miniature mentioned in the KCNA piece.



Click image for larger version

Here is a Google Earth satellite image of this same area as it appears today–taken from the same angle:


The ghost of Ceauşescu is lurking.  Who knows if they will ever get around to completing this task, but it is apparent they intend to remake Hamhung in the image of Kwangbok Street or Rakrang in Pyongyang.

Jane Jacobs is rolling in her grave.


‘Private’ real estate rentals approved, DPRK real estate management law enacted

Thursday, May 20th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-05-19-1

On November 11, 2009, North Korea enacted a ‘Real Estate Management Law’ consisting of six sub-sections and 47 articles. The new law revised the terms for sale and use of real estate, banning the unapproved rental of property and allowing the state to collect a ‘usage fee’ (rent). In addition to the law on real estate management, immediately after the North’s currency reforms at the end of last November, the government enacted or revised a total of 11 laws related to the economy, including the Food Administration Law, Agricultural Law, Goods Consumption Standards Law, and the Labor Law. This raises the question of whether the regime is strengthening its economic control mechanisms.

According to the Socialist Property Management Law of 1996, only ‘enterprises, institutes, and groups’ were allowed the use of properties, but the latest Real Estate Management Law includes individuals as those allowed to use property.

North Korea’s KCNA reported the enactment of the new law on real estate in the middle of last December, but only revealed that “basic issues of real estate’s registration and inspection, use and collection of rents are regulated,” while the more detailed contents were revealed in a three-part series of articles on the Real Estate Management Law that ran in the Minju Chosun, which was published by the Cabinet and Presidium of the Supreme People’s Assembly between March 17 and April 3.

In North Korea, where all real estate is property of the government, the sale or rent of properties between individuals or groups is, on principle, not possible, but after the July 1, 2002 Economic Management Reform Measure, the regime’s inability to provide housing led to significant growth in the size of the black market for real estate.

On a related note, during the 4th session of the 11th Supreme People’s Assembly, which opened in April 2006, a campaign to assess properties throughout the entire country and establish a system of rent was revealed, after which ‘property usage fees’ were included in the annual national budget.

Ultimately, the enactment of this law on real estate strengthens the state’s control over the socialist economy and over the country as a whole. From South Korea’s perspective, it appears the integrated land tax, property tax and other similar systems are North Korea’s attempt to prepare an important legislative precedent for expansion of the state coffers.

However, the portion of the newly-enacted Real Estate Management Law that really catches the eye is the authorization of ‘individuals’ to rent real estate. While it takes on the form of property leasing, it is also an expanded measure in that it permits individuals to use socialist property. Giving individuals the right to use real estate increases productivity and helps ease the North’s current economic woes.

According to the Minju Chosun, the new law “says one must not buy and sell real estate, and the nature and use of property cannot be changed without permission from the management authorities, so that property cannot be handed over to or lent to other organizations, enterprises, groups or individuals.”

The law also stipulates that a property rents will be paid to a ‘State Pricing Establishment Organization’, and that the intended use for the property must be registered, after which rents will be set in either goods or currency, and if rents are not paid in currency, they can be paid in kind.

In particular, this law stipulates, “Land is not to be abused or used in a way that makes it barren,” and that any historic or revolutionary landmark, or idolation of Kim Il Sung or Kim Jong Il must be thoroughly protected.

Through a special measure by the Cabinet, a National Real Estate Management Committee was established, and management offices and chains of command were established for the cabinet.


DPRK legal efforts to strengthen planned economy follow currency reforms

Monday, April 5th, 2010

Institute for Far Eastern Studies
NK Brief No. 10-04-05-1

It has recently been verified that following the currency reforms at the end of last year, North Korea passed 11 laws revising and reforming the system of government control over the economy. Among these measures is a law banning the black market sales of grain.

The North’s food administration law, revised last November 3, clearly bans the black market trade and smuggling of grains, and sets the punishment for such activities as the confiscation of the grains in question. In addition, an order was passed down stating that when food supplies are rationed to a labor management office, they are to be distributed in accordance with a worker’s efforts, position, and productivity. On the same day, a new agricultural law was passed that stated if organizations and groups that were granted land for private plots failed to meet state-set harvest quotas, the plots could be confiscated.

In November and December of last year, North Korea also enacted the Real Estate Management Law, Goods Consumption Standard Law, Construction Materials Import Law, Import/Export Country of Origin Law, Waterworks Law, Labor Quantity Law, Farm Law, Sewer System Law, and the Mariner Law. Among these, the Labor Quantity Law sets the number of laborers per hourly production demands, stipulates labor contracts, and determines remuneration in accordance with worker performance. This law is unprecedented in that it allows the responsible organization or business managers or supervisors administrative and even penal authority by giving them power over labor evaluations and payment.

The Farm Law allows each farm to retain some of its harvest, and making it responsible for selling its goods to the state, while on the other hand, forbidding illegal agricultural production. This law, by strengthening state control over agricultural goods, appears to be an effort to restart the Public Distribution System.

The Real Estate Law, a mechanism to collect user fees, stipulates, “Real estate cannot be lent or left to different individuals, groups, organizations or enterprises without the permission of the applicable authority.” Along with this, the law on consumption includes a clause that links consumption of particular goods with those goods’ production in order to prevent waste, as well as a clause designed to reduce or eliminate the use of imported goods.

The law on the import of construction materials gives the government leverage in all aspects of such activity, including planning, processing, transfer, inspection, construction and testing. In addition, if someone from an enterprise or organization imports construction goods without government authorization, changes an import plan, distributes, transports, or wastes construction wares, he or she is subject to administrative punishment.

Ultimately, economic legislation enacted or revised after the currency reform appears to be aimed at strengthening the planned economic system while increasing government control over public revenue and encouraging efforts to recover without outside assistance.


North Korea revises economic management laws

Tuesday, December 22nd, 2009

Institute for Far Eastern Studies (IFES)
NK Brief No.09-12-21-1

The Korean Central Broadcasting Station (KCBS) announced on December 16 that the North Korean Supreme People’s Assembly Standing Committee has revised the North’s Real Estate Management Law, the Commodities Consumption Level Law, the General Equipment Import Law, and other laws related to economic management. This on the heels of the November 30th announcement, when authorities announced across-the-board currency reform measures, apparently in an attempt to regain control of the country’s market economy.

The KCBS reported that the Real Estate Management Law “regulates fundamental issues of real estate registration and inspection, use, and payment of user fees,” but offered no further details.

Since 2006, North Korean authorities established new offices in each city, county, and region throughout the country. These offices were responsible for surveying property, occupied and vacant, claimed by organizations and businesses, as well as recording the size of each structure on these lands.

In the mid-1990s, with the onset of serious food shortages, food rations to workers were halted and North Korean authorities from every branch and level (including the military, railway, business enterprises) were encouraged to distribute foodstuffs in ways more beneficial to themselves. These authorities planned to resolve food distribution issues through agricultural moves.

The new Real Estate Management Law appears to be aimed at labeling land used for private purposes as strategic nationalized land and strengthening the state’s ability to collect real estate taxes. However, the broadcaster failed to explain in detail how this restructuring would occur.

By enacting the Commodities Consumption Level Law, North Korean authorities can control the basis at which goods are injected into each production sector. This appears to be in preparation for taking cost-reduction measures for enterprises related to production in each region. The broadcaster explained that there were legal demands for the enactment and enforcement of regulations on the level of consumption.

The General Equipment Import Law newly regulates import plans, contracts, and the use of goods by factories, schools, hospitals, ships and broadcasters in an effort to control quality. In each sector, the measure prevents double-investment and controls consumption competition.

As these economic control measures are focused on factories and other bases of production along with importers, it appears that, in conjunction with the recent currency reform, North Korean authorities are attempting to control production quality on all levels. For example, as the North is suffering ongoing supply difficulties due to a lack of materials, the law on consumption levels is an attempt to restrict goods by forcefully managing demand. The law on imports appears to be in an effort to regulate general-use goods in light of the increased reliance on foreign equipment.