Capital Region Officetel Yield Rises for the First Time Since Statistics Began

February annual rate 5.21%, up 0.01%P from previous month... Impact of price decline over rental income increase

[Asia Economy Reporter Donghyun Choi] Last month, the yield on officetels in the Seoul metropolitan area turned positive for the first time since statistics began in 2018.

According to the Korea Real Estate Board's "Officetel Price Trend Survey" on the 5th, the yield on officetels in the Seoul metropolitan area last month was 5.21% per annum, up 0.01 percentage points from the previous month. This is the first time since the monthly published statistics were first compiled in 2018 that the yield on officetels in the metropolitan area has risen. Thanks to the upward trend in the metropolitan area, the nationwide officetel yield also turned positive for the first time last month.

The officetel yield announced by the Real Estate Board is an "income yield" that considers only net operating income relative to the investment amount, distinguished from "capital yield," which reflects asset value increases such as land and buildings. The income yield is calculated by dividing the total annual monthly rent by the purchase price minus the deposit.

However, this improvement in yield is interpreted as due to a drop in purchase prices rather than an increase in rental income. Even if monthly rent or deposits do not rise, if the denominator?the purchase price?falls, the yield structure increases. In fact, the purchase price index for officetels in the metropolitan area fell 0.08% from the previous month last month. This is the first decline in four months since October last year. The monthly rent price index in the metropolitan area has remained flat for two months this year. When broken down by area, small to medium-sized units under 40㎡, preferred by single-person households, saw declines in both purchase price and monthly rent price indices. Conversely, medium to large units over 40㎡ saw increases in both purchase price and monthly rent price indices. A specialist in income-generating real estate said, "While supply is excessive for small to medium units, medium to large units are gaining demand due to their scarcity and recent attention as alternatives to apartments."

By region, last month, the officetel yield in Incheon was 6.53%, significantly higher than Seoul (4.83%) and Gyeonggi (5.35%). Incheon ranks third in officetel yield among the six metropolitan cities, following Gwangju (7.87%) and Daejeon (7.06%). Experts analyze that Incheon's high yield is because officetel prices are cheaper compared to Seoul and Gyeonggi, while the monthly rent prices in areas adjacent to Seoul do not differ much from Seoul. In fact, the median price of officetels in Incheon is 99.39 million KRW, less than half of Seoul's 206.48 million KRW, but the median monthly rent is 439,000 KRW, about 61% of Seoul's 722,000 KRW. Supported by this investment attractiveness, Incheon's officetel yield has been on an upward curve since May last year.

Researcher Hyuntaek Cho of the Commercial Information Research Institute said, "Officetels do not require subscription savings accounts and can avoid various loan regulations, so investment for rental income purposes that bypass recent regulations is increasing." He added, "In Incheon, interest is growing around the Seoul Metropolitan Express Railroad (GTX) and business districts, and in Seoul, the subscription market around downtown and station areas is heating up, so investment interest in good locations remains strong."

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