Zero Interest Rate Era... Income-Generating Real Estate Attracts Attention

[Asia Economy Reporter Choi Dong-hyun] As the zero interest rate policy enters a prolonged phase and government regulations on the housing market continue, interest in income-generating real estate is growing.

According to the industry on the 23rd, the Bank of Korea lowered the base interest rate from 1.25% to 0.75% in March and further cut it by 0.25 percentage points in May, prolonging the zero interest rate policy. As it has become difficult to earn profits at bank interest levels, demand for real estate investment has significantly increased. In particular, as government real estate regulations focus on the housing market, transactions of income-generating real estate, which are relatively less regulated, are surging.

In fact, according to the Ministry of Land, Infrastructure and Transport, the volume of commercial and office real estate transactions in June was 26,050 cases, a 33.47% increase compared to the previous month (11,9517 cases). Although transactions sharply declined earlier this year due to the economic downturn caused by the novel coronavirus disease (COVID-19), they rebounded after the announcement of the 6.17 real estate policy. With this rebound, the total volume of commercial and office real estate transactions in the first half of this year was 140,432 cases, an increase of 8,975 cases compared to the same period last year (131,457 cases).

Income-generating real estate continues to soar in the real estate market. Knowledge industry centers, which are gaining attention as tax-beneficial and new investment products, recorded the highest number of approvals in the first quarter of this year. ‘Hyundai Terratower’ continues to sell out in Munjeong-dong and Gasan-dong in Seoul, and ‘SK V1’ has also seen sell-out cases around Seongsu-dong and Gasan-dong.

Living-type lodging facilities and urban lifestyle housing are attracting attention as products that combine residence and investment, maintaining their popularity. The living-type lodging facility ‘Villiv Paragraph Haeundae’ in Haeundae-gu, Busan, which held subscriptions in July, completed subscriptions with a highest competition rate of 266.83 to 1 and an average of 38.87 to 1. The urban lifestyle housing ‘Sewoon Prugio Hericity’ introduced in Jung-gu, Seoul in June recorded a highest competition rate of 34.9 to 1 and an average of 10.69 to 1.

An industry official said, “With the current base interest rate lowered to 0.5%, liquidity in the market is flowing into the safe asset of the real estate market,” adding, “Following the recent announcement of the 7.10 measures and the expectation of continued regulations on the housing market, interest in income-generating real estate will further increase.”

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