Regulatory 'Balloon Effect' Drives Officetel Popularity... Price Increase Rate Twice That of Apartment

Sales Price Increase Rate Up 23% YoY... 2.3 Times Higher Than Apartments
Up to 70% Loan, Maintaining No Home Ownership
Higher Sale Prices Than Apartments of the Same Size

[Asia Economy Reporter Ryu Taemin] The price of officetels has surged by 23% over the past year. This is attributed to the 'balloon effect,' where demand flows into officetels, which face relatively fewer regulations, as government restrictions focus on housing.

According to the Korea Real Estate Board on the 13th, the nationwide officetel sales price increase rate as of last month was 22.89% compared to the same month last year. This is about 2.3 times higher than the 10% increase rate for apartments nationwide during the same period. Officetel prices, which rose by 0.5% in 2019, showed a decline of -0.4% last year but have increased by more than 20% in just three months this year. In particular, the increase rate in provincial areas reached 33.9% this year.

Residential officetels are popular among young people who lack cash and are interested in home ownership because loan regulations are relatively lenient compared to apartments. In speculative overheated districts such as Seoul, the loan-to-value ratio (LTV) for apartments is limited to 40%, and for amounts exceeding 900 million KRW, it is reduced to 20%. In contrast, residential officetels can be financed up to 70% regardless of market price.

Other regulations are also relatively relaxed. Winning a subscription does not count toward the number of houses owned, allowing one to maintain the status of a non-homeowner. Officetel pre-sale rights are not included in the calculation of acquisition tax and capital gains tax for the number of houses owned. When disposing of pre-sale rights, the capital gains tax rate applied is the basic rate (6%~45%, with a holding period condition of over 2 years).

Officetels with pre-sale prices higher than apartment sales prices are appearing in various locations. The ‘Hillstate Dobong Station Welga’ officetel in Dobong-dong, Dobong-gu, Seoul, which was pre-sold last year, had an 84㎡ (exclusive area) priced between 737.18 million KRW and 781.97 million KRW. This is more than 100 million KRW higher than the highest actual transaction price of 619 million KRW for the nearby apartment ‘Jungheung S-Class’ 84㎡ recorded in February.

In the case of Pangyo Valley Ja-i, the pre-sale price of the 84㎡ officetel ranged from 935 million KRW to 1.073 billion KRW, which was higher than the pre-sale price of the apartment of the same size (up to 865 million KRW) sold simultaneously. At that time, the apartment was subject to the pre-sale price ceiling system and was sold at a price lower than the surrounding market price, but the officetel avoided these regulations.

Yoon Jihae, senior researcher at Real Estate 114, said, "Unlike before, the number of medium-sized officetels with two- or three-room layouts is increasing, leading to more demand as an alternative to apartments," adding, "Recently, large-scale officetels with over 1,000 households equipped with sufficient community facilities have also emerged, targeting niche markets."

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