Office-tel Uptrend Also Slows Down

Last Half of Last Year Saw a Brief Rise in Sale Prices... Increase Slowed After 5 Months

[Asia Economy Reporter Donghyun Choi] The Seoul officetel market, which had been enjoying a windfall after the government's December 16 real estate measures, is also slowing down. Although idle funds in the market briefly shifted to niche markets due to ultra-strong loan regulations and increased property taxes, the upward trend in officetel transaction prices has also weakened after five months as apartment prices showed weakness.

According to the 'Officetel Price Trend Survey' by the Korea Real Estate Board on the 4th, the monthly increase rate of the Seoul officetel transaction price index last month was 0.13%, down 0.05 percentage points from the previous quarter. The trend of expanding the increase rate for five consecutive months since turning upward in August last year appears to be slowing. By region, only the southeastern areas such as Seocho, Gangnam, Songpa, and Gangdong districts maintained the previous month's increase rate at 0.1%, while all other regions saw a decrease in the increase rate compared to the previous quarter. The average transaction price of officetels in Seoul last month was 228.85 million KRW.

Seoul officetels began to attract attention in early the second half of last year following the government's plan to introduce a private land price ceiling system. Due to concerns about supply contraction, medium to large officetels near workplaces gained popularity as substitutes. From August to December last year, the increase rate of medium to large officetels over 40㎡ (exclusive area) in Seoul was 1.01%, significantly surpassing the 0.32% increase rate of small officetels under 40㎡. The Bank of Korea's cuts in the base interest rate in July (from 1.75% to 1.50%) and October (from 1.50% to 1.25%) last year also acted as positive factors.

However, last month, the price increase of medium to large officetels sharply slowed. The transaction price index increase rate for medium to large officetels in Seoul was 0.19%, about half of the previous month's 0.36%. According to the Ministry of Land, Infrastructure and Transport's actual transaction price system, a 244㎡ unit at 'Lotte Castle President' in Gongdeok-dong, Mapo-gu, was sold for 1.565 billion KRW on the 9th of last month. This is about 200 million KRW cheaper than the listed market price of 1.75 billion KRW on Naver Real Estate. Similarly, a 100㎡ unit at 'Boutique Monaco' in Seocho-dong, Seocho-gu, was traded at 1.17 billion KRW, lower than the asking price of 1.2 billion KRW. The occurrence of some urgent sales seems to have reduced the overall price increase of officetels.

Officetel yields are also declining. Last month, the yield on Seoul officetels was 4.83% annually, falling for three consecutive months since November last year. Medium to large units recorded 4.33%, while small units recorded 5.01%. Industry insiders say that officetel yields generally need to exceed 5% annually to be profitable when considering financial procurement costs. However, the prices of jeonse (long-term deposit lease) and monthly rent, which are the basis for officetel income, continued to rise for eight and five consecutive months, respectively.

Experts predict that the officetel market will show polarization this year. While demand will concentrate on officetels near subway stations in Seoul and the metropolitan area, there is a high possibility of undersupply in outlying areas. Hyuntaek Cho, a researcher at the Commercial Information Research Institute, said, "If apartment supply contracts further due to additional government measures, officetels near well-connected subway stations will continue to maintain steady popularity."

This content was produced with the assistance of AI translation services.