Slight Increase in Officetel Yields as the 'Monthly Rent Era' Arrives

January to November last year: 1.12%p increase
Era of monthly rent begins with base rate hike
Will officetel buying surge with government regulation easing?

[Image source=Yonhap News]

[Asia Economy Reporter Kim Min-young] It has been revealed that officetel yields are on the rise. Due to the impact of the base interest rate hike, the decrease in jeonse (long-term lease) and the advent of the monthly rent era have naturally led to an increase in officetel yields.

On the 5th, real estate research firm Realtoday analyzed data from the Korea Real Estate Board and found that nationwide officetel yields showed an upward trend for six consecutive months as of November last year. As of November last year, the nationwide yield was 4.82%, with 4.65% in the metropolitan area and 5.53% in provincial areas.

This is due to the increase in demand preferring monthly rent over jeonse, influenced by the base interest rate hikes that have continued since last year. According to an analysis by real estate brokerage firm Jiptos of actual jeonse and monthly rent transactions in Seoul and Gyeonggi areas up to November last year, the proportion of monthly rent transactions in the metropolitan area in 2022 was 48.9%, up 5.6 percentage points from 43.2% in 2021. The share of monthly rent transactions has continuously increased since last year, reaching 50.4% in the fourth quarter. This means that more than half of all lease transactions are monthly rent.

As interest rates steadily rose, increasing the burden of jeonse loan interest, the shift to monthly rent progressed, causing officetel rental yields to rise accordingly. In fact, the nationwide officetel monthly rent price index showed a monthly upward trend last year, rising 1.12 percentage points from 101.87 in January to 103.01 in November last year.

With the government recently announcing comprehensive regulatory easing measures on taxation and loans, attention is focused on whether officetel buying demand will revive. This is because the easing of multi-homeowner loans and heavy taxation has improved buying conditions.

A Realtoday official stated, "As the base interest rate rises, making it difficult to bear the interest on jeonse loans, demanders are trying to convert their living spaces to monthly rent," adding, "With the government's successive easing of real estate regulations, the officetel rental market is expected to become a strategic investment destination that can generate profits even in the current environment."

On the other hand, there are also forecasts that officetel buying demand will not suddenly recover due to this regulatory easing. This is because interest rates are likely to rise further. Since the interest rate hike is the main cause of the real estate slump, if the interest rate hike march does not stop, there are limits to this regulatory easing leading to actual transactions.

Due to the recent continuous interest rate hikes and economic downturn, officetel transactions have sharply decreased, and sales prices are also declining. According to KB Kookmin Bank, the average sales price of officetels in Seoul in November last year was 305.49 million won, down from 305.54 million won in October. This is the first time since April 2020 that Seoul officetel sales prices have declined.

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