More Expensive Than Apartments, '6000 to 1' Subscription Frenzy... Severe Market Overheating and Distortion

Lifestyle Accommodation 'Lotte Castle Le West'... Frenzy Despite High Prices
Substitutes for Apartments More Expensive Than Apartments Due to Price Ceiling System Emerge

Perspective view of the residential lodging facility 'Lotte Castle Le West'

Lotte Construction's residential lodging facility "Lotte Castle Le West," supplied in the Magok district of Seoul, sparked a subscription frenzy despite controversy over its high sale price, with all units fully subscribed. Amid government regulations controlling apartment sale prices, alternative apartment products (officetels, urban lifestyle housing, residential lodging facilities) priced higher than apartments are expected to continue emerging.

According to industry sources on the 29th, Lotte Castle Le West recorded an unprecedented 575,950 applications (based on website subscription entries) for 876 units during the public subscription held from the 25th to the 27th, resulting in an average competition rate of 657 to 1. Lotte Castle Le West is a residential lodging facility located in CP2 Block within the Magok Special Planning Zone, Gangseo-gu, Seoul. It consists of 5 buildings ranging from 6 basement floors to 15 above-ground floors, with a total of 876 units sized between 49 and 111 square meters.

The highest competition rate (6,049 to 1) was recorded in Group 5 (111㎡), demonstrating its high popularity. The competition rates for other groups were ▲Group 1 (49?63㎡) 622 to 1 ▲Group 2 (74㎡) 397 to 1 ▲Group 3 (84?88㎡) 507 to 1 ▲Group 4 (100㎡) 4,943 to 1 ▲Group 5 (111㎡) 6,049 to 1, with all types showing triple-digit competition rates.

Lotte Castle Le West sparked controversy over its high sale price as an apartment alternative priced higher than apartments. The sale price for an 84㎡ unit reached up to 1.61 billion KRW. At 45.02 million KRW per 3.3㎡ (one pyeong), this is more than 20% higher than the average apartment price in Magok-dong this month (36.92 million KRW). The sale price for 49㎡ units ranges from 810 million to 962 million KRW, and for 84?88㎡ units from 1.444 billion to 1.718 billion KRW. Compared to the highest sale price of 700 million KRW for 84㎡ apartments in the "Magok 9 Complex" launched last year, this is more than twice as expensive.

However, unlike apartments, no subscription savings account is required, and there are no restrictions on re-winning, making it easier for investors to apply. While apartments mainly select winners based on a point system, residential lodging facilities select winners by lottery. With only 10% of the contract amount paid upfront, the sale rights can be resold, attracting many investors seeking short-term profits.

The officetel market is no exception. For example, the "Dongtan Station Dieter Prestige" officetel, which held subscriptions in June, set the sale price for an 84㎡ unit at 916.6 million KRW. This is more than twice the price of apartments of the same size in the same complex subscribed to last month (440.34 million to 488.67 million KRW).

The phenomenon of alternative products such as residential lodging facilities, officetels, and urban lifestyle housing being priced higher than apartments is attributed to government price controls such as the price ceiling system and the Housing & Urban Guarantee Corporation (HUG)'s high price review. To avoid strict regulations, construction companies are actively supplying these alternatives.

However, since these are alternative products rather than apartments, investors are advised to exercise caution. When the real estate market contracts, the first to be affected are markets for residential lodging facilities, officetels, and urban lifestyle housing. In the future, profits from resale of sale rights may not be as high as expected, or it may become difficult to sell the sale rights themselves.

Meanwhile, Lotte Castle Le West will announce winners on the 29th and conduct official contracts at the model exhibition hall for three days from the 30th to September 1st. Contract terms are 10% deposit, 60% interim payment, and 30% balance. After paying the first 10 million KRW deposit, the remaining deposit can be paid in installments within one month, allowing resale of the sale rights.

The model exhibition hall is located at 226 Yangjae-dong, Seocho-gu, Seoul (opposite Costco Korea Yangjae branch). To prevent the spread of COVID-19, it operates by prior reservation only, with temperature checks and frequent eco-friendly disinfection measures to ensure visitor safety through thorough hygiene and quarantine management. Move-in is scheduled for August 2024.

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