Temporary Exclusion of Officetel from Housing Count... Construction Industry Cheers, Market Remains Cold

"Expectations for a Rebound in the Construction Market" VS "Just a Housing Price Boost for Speculators"

"We express our gratitude for the government's efforts to expand housing supply and revive the economy."

"The government is selling unsold officetels like discounted products left over at a mart."

On the 10th, when the government announced regulatory relaxations and tax support measures for officetels and urban-type residential housing as part of the ‘Measures to Expand Housing Supply and Supplement the Construction Economy for National Housing Stability,’ the responses from the supply side, the ‘construction industry,’ and the demand side, the ‘market,’ were divided.

The government decided to exclude multi-family houses completed between this month and the end of next year with exclusive areas of 60㎡ or less, priced under 600 million KRW in the metropolitan area and 300 million KRW in other regions, as well as collective housing excluding apartments, urban-type residential housing, and officetels, from the housing count used to calculate acquisition tax, capital gains tax, and comprehensive real estate holding tax.

This policy was introduced as officetels and urban-type residential housing, which had gained popularity as ‘apartment substitute products’ benefiting from the previous government's focus on regulating apartments, turned into burdens. These apartment substitute products saw demand plummet due to the impact of interest rate hikes chilling real estate investment sentiment and the lifting of many apartment regulations last year. The contraction in demand for these non-apartment projects has shaken the overall housing construction market and real estate finance sector.

In fact, a project site in a provincial area went bankrupt due to financial liquidity problems caused by unsold officetels. The construction company responsible for the project is also under financial pressure, and rumors of a ‘workout’ are circulating in the market, indicating a difficult situation. Several similar cases are known among provincial officetel and urban-type residential housing projects.

Seoul’s situation is not as severe as in the provinces but is still unfavorable. Recently, ‘Mafi (minus premium)’ sales rights worth tens of millions to hundreds of millions of KRW have been appearing frequently. The transaction freeze is also serious. The number of officetel sales transactions in Seoul last year was about 7,000, a drop of more than 45% compared to 2022. Compared to 2021, it plummeted by over 60%.

As the difficult situation continued, the construction industry began to call for regulatory relaxation for non-apartment small housing such as officetels and urban-type residential housing, citing the increase in single-person households. Eventually, the government accepted their demands and included the exclusion of these small housing units from the housing count in the measures.

The related industry immediately welcomed the government policy, expecting it to reverse the sluggish construction market. The Korea Housing Association and the Korea Housing Builders Association supported the policy, stating, "Rapid supply of various housing types and demand recovery are expected to lead to a quick market recovery." The Korea Construction Association also said, "The inclusion of innovative regulatory reform measures to revitalize reconstruction and redevelopment projects and small housing supply in areas with the highest demand in the city center is expected to make the policy of expanding housing supply highly feasible."

However, the market’s response differs from that of the construction industry. First, existing owners argue that the policy is discriminatory because it is temporarily applied for two years starting this month, and non-homeowners complain that it is merely a price boost for speculators.

An owner who signed a contract for an officetel last year said, "What kind of real estate policy is this, discounting like fish sold at a mart?" and raised their voice, "If you are going to lift regulations, lift them all; why set a period and discriminate?" A citizen expressed concern, saying, "Many officetel and urban-type residential housing owners acquired them not for actual residence but for rental income, so if regulations are relaxed like this, speculation will flourish again and housing prices will rise."

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