Apartment Investment Frenzy... Construction Companies Seize the Moment with Bold Pricing

Double the Sale Price of Non-Price Ceiling Apartments
Sewoon Prugio The Botanic Reaches Up to 60 Million KRW per 3.3㎡

#. Daewoo E&C is constructing ‘Sewoon Prugio The Botanic’ in the Sewoon District, scheduled for sale this month. The complex consists of officetels and urban-type residential housing, totaling 564 units. Market rumors suggest that the price per 3.3㎡ will exceed 60 million KRW. Previously, in May, the price of the mixed-use apartment ‘Sewoon Prugio Hericity’ in the same district was set at 29.06 million KRW per 3.3㎡.

Due to the huge popularity of subscription applications for residential facilities such as officetels and residential lodging facilities (saengsuk), which are considered loophole or variant income-generating real estate, prices have been more than twice as high as those of regular apartments. This is because they are not classified as housing under the Building Act and thus can avoid the application of the price ceiling system. In this situation, construction companies appear to be actively raising prices by delaying sales or considering leasing before sale.

According to the industry on the 13th, Lotte Construction’s residential lodging facility ‘Lotte Castle Le West’ in the Magok District of Seoul caused a subscription frenzy despite controversy over its high price, closing all units last month with an average competition rate of 657 to 1. Lotte Castle Le West sparked controversy as an apartment substitute more expensive than apartments. The price for an 84㎡ unit is up to 1.61 billion KRW. At 45.02 million KRW per 3.3㎡, it is more than 20% higher than the average apartment price in Magok-dong this month (36.92 million KRW). Compared to last year’s highest price of 700 million KRW for an 84㎡ apartment in ‘Magok Complex 9’, it is more than twice as expensive.

The officetel market is no exception. The residential officetel ‘Dongtan 2 New Town Daebang Elyum Lake Park’ offered by Daebang Construction in July recorded a competition rate of 29.8 to 1, with 10,686 applicants for 358 units, despite the highest price of 947.6 million KRW for an 84㎡ unit. This price is about 30 million KRW higher than the ‘Dongtan Station Dietre Prestige’ officetel released a month earlier. At that time, the company set the highest price for an 84㎡ officetel at Dongtan Station Dietre Prestige at 916.6 million KRW, causing controversy over high prices. Considering that the same-sized apartment in the same complex supplied in May was subject to the price ceiling system with a maximum price of 488.67 million KRW, the difference is nearly double.

The reason these non-apartment products are popular seems to be that, unlike apartments, they do not require subscription savings accounts and have no re-winning restrictions, allowing people to apply without burden. While apartments mainly select winners based on a point system, winners are chosen by lottery for these products, and anyone aged 19 or older can apply regardless of region, with no resale restrictions. Additionally, no subscription savings account is needed, and they are not subject to loan regulations such as LTV (loan-to-value ratio). Even if selected, they are not counted as housing, so acquisition tax and capital gains tax surcharges can be avoided.

Despite controversy over high prices, construction companies are competitively releasing these niche products to avoid apartment regulations such as the price ceiling system. In fact, non-housing units such as residential lodging facilities and officetels have increased sharply since the inauguration of the Moon Jae-in administration in 2017. Last year, 2,257 residential lodging units were sold in Seoul, an increase of 89.98% over four years since the current government took office. During the same period, officetel sales increased by 8.36% to 9,141 units compared to 2017.

There are even criticisms that tricks such as delaying sales to raise prices are rampant. The sale of the residential lodging facility ‘Sewoon Prugio Gravity’, originally scheduled for June, has now been postponed to this month. Some are considering leasing first and then converting to sale. Referring to the past success of Hannam The Hill, the recently subscribed private rental apartment ‘Suji-gu Office Station Lotte Castle Hive L’ recorded a competition rate of 227 to 1.

Song Seung-hyun, CEO of City and Economy, said, “Because housing supply such as apartments is not smooth and subscription barriers are high, it is difficult to own a home, so demand is concentrated on niche non-housing products,” adding, “Construction companies also prefer these because they can secure the number of units while avoiding regulations such as the price ceiling system.” He added, “However, if regulations on general housing such as apartments are eased in the future, demand may shift back to housing.”

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