Polarization Deepens Between Seoul Metropolitan Area and Provinces in Officetel Market

A view of an officetel in downtown Seoul

As the frenzy in the officetel market, which surged last year, gradually cools down, the polarization between the metropolitan area and the provinces is intensifying. While the metropolitan area is maintaining buying demand thanks to the influx of 탈(脫)Seoul demand, the provinces are clearly entering a downward trend.

According to the Korea Real Estate Board on the 8th, the officetel sales price index in the metropolitan area has been on the rise for 17 consecutive months from November 2020 (100.06) to April this year (103.48). Since the introduction of the new sample in June 2020, there were only two instances of decline: July 2020 (100→99.97) and November 2020 (100.07→100.06). On the other hand, the officetel sales price index in the provinces has struggled to recover. It continuously declined from June 2020 (100) to March last year (99.37), then managed a rebound but did not sustain it for even a year. After peaking at 100.15 in December last year, it has been declining to 99.85 in April. By region, Daegu (7 months), Daejeon (4 months), Busan (3 months), and Gwangju (3 months) have shown continuous declines.

The rise in officetel prices in the metropolitan area is interpreted as a result of the soaring apartment prices in Seoul and a supply drought. The sales schedules of major large complexes in Seoul, including Dunchon Jugong and Imun 1 District, as well as most project sites in Seoul, are being delayed. An industry insider said, "Since the implementation of the 2020 Lease 3 Act, many metropolitan area buyers who could not afford the rapidly rising jeonse prices have turned to officetels as an alternative to apartments."

However, the economic downturn and weakened investment sentiment due to interest rate hikes and inflation could be variables. Officetel purchases typically rely heavily on loans, and with continuous interest rate hikes and strengthened loan regulations since the beginning of this year, conditions have become tougher. For example, the ‘Unjeong Prugio Parkline’ in Wadong-dong, Paju-si, Gyeonggi Province, which held a subscription on the 17th of last month, saw only 206 applications for 578 units in Complex 1. The sale price for the 84㎡ type was about 860 million KRW, and the 107㎡ exceeded 1 billion KRW, sparking controversy over high prices. An industry insider said, "Until last year, mid-term loans were smooth due to developer guarantees and low loan regulation thresholds, which encouraged investor inflow, but from this year, officetels are also subject to individual Debt Service Ratio (DSR) regulations, making loan conditions challenging. The polarization of officetels based on sale price, location, and product quality will also deepen."

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