Seoul Officetel Average Price Surpasses 300 Million Won... But Demand Drops Causing Transaction 'Ice Age'

First Surpassing 300 Million Since 2010 Statistics
Transactions Fall Below 3,000 Cases

A view of an officetel in downtown Seoul (Photo by Yonhap News)

[Asia Economy Reporter Ryu Taemin] Since last year, the average sale price of officetels in Seoul, which had been soaring alongside apartments, has surpassed 300 million KRW for the first time ever. However, recently, due to the impact of loan regulations and interest rate hikes reducing profitability, coupled with the housing market entering a recession, the officetel transaction market is also showing signs of freezing.

According to the KB Real Estate monthly officetel statistics on the 7th, the average transaction price of officetels in Seoul in May was recorded at 301.69 million KRW. This is the first time since related statistics began being compiled in July 2010 that the price of officetels in Seoul has exceeded 300 million KRW. This is an increase of 2.34 million KRW compared to the previous month’s 299.35 million KRW, and a rise of 23.27 million KRW compared to one year ago (278.42 million KRW).

Officetel prices have steadily increased in tandem with the rapid rise in apartment prices. In 2020, the annual increase was only 13.16 million KRW, but last year, the annual price rose by 24.81 million KRW, nearly doubling the growth rate. This is because officetels have been regarded as substitutes for apartments, attracting strong demand.

By region, the downtown area including Jongno-gu, Jung-gu, and Yongsan-gu showed the largest increase, rising by 42.06 million KRW (11.9%) over one year. Following that, the southeastern area including the Gangnam 3 districts rose by 27.07 million KRW (9.0%), followed by the southwestern area (25.05 million KRW), northeastern area (15.93 million KRW), and northwestern area (10.91 million KRW) in order.

The rise in officetel prices continues in the metropolitan areas such as Gyeonggi and Incheon as well. The average transaction price of officetels in Incheon increased from 143.98 million KRW to 172.59 million KRW over one year, a rise of 28.61 million KRW (19.8%). During the same period, Gyeonggi’s price rose from 259.86 million KRW to 283.07 million KRW last month, an increase of 23.22 million KRW (8.9%).

Impact of Loan Regulations and Interest Rate Hikes... Transaction Market Freezing

However, recently, as the outlook for the housing market has darkened, the officetel transaction market is also showing signs of slowing down. According to the Korea Real Estate Board’s officetel price trend data, the transaction volume of officetels in Seoul fell below 3,000 cases, from 3,682 cases in May last year to 2,993 cases in November last year. Subsequently, it dropped to 2,324 cases in January and was recorded at 2,530 cases in March.

In addition, officetel loans have been restricted from this year with a total debt service ratio (DSR) limit of 40%, further reducing demand. Moreover, the continuous interest rate hikes recently, along with the fact that residential officetels are included in the housing count and thus subject to increased tax burdens such as comprehensive real estate tax, have contributed to a decrease in profitability, which is also considered to have affected the market.

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