'Hard to Cover Bank Interest with Officetel Monthly Rent'... Rental Demand Declines
by Roh Kyungjo
Published 17 Apr.2023 15:56(KST)
Updated 17 Apr.2023 16:38(KST)
Officetel Monthly Rent Falls 0.18%
Sale Prices Decline for Third Consecutive Quarter... "Relative Advantage Decreases Due to Housing Regulation Easing"
The decline in officetel sale prices has widened for the third consecutive quarter, and monthly rents have also turned downward.
According to the officetel price trend survey announced by the Korea Real Estate Board on the 17th, the nationwide officetel sale prices in the first quarter of this year (as of April 1) fell by 1.19%, a larger drop compared to the previous quarter (-0.82%). This marks a decline for three consecutive quarters since turning negative in the third quarter of last year (-0.24%).
Seoul continued its downward trend with a -0.81% drop, following the third quarter (-0.01%) and fourth quarter (-0.59%) of last year. The Real Estate Board explained, "The relative advantage decreased due to high interest rate trends and a slowdown in the real estate market amid relaxed housing regulations," adding, "Demand shifts caused by falling housing prices also played a role."
The metropolitan area also fell by 1.15%, with the decline widening compared to the fourth quarter of last year (-0.72%). In Gyeonggi-do, officetel sale prices dropped 1.54% during the same period due to demand contraction from increased loan burdens and a wait-and-see attitude amid uncertainty. In Incheon, although demand for small units in prime locations remained steady, prices fell 1.16%, mainly for medium-to-large and older units, influenced by new supply in land development districts such as Yeonsu-gu.
Provincial areas also declined by 1.24%. Amid a real estate market recession, both investment and actual demand decreased, and with a backlog of pre-sale units, the market remained buyer-favorable, leading to declines centered in Daegu (-1.58%) and Busan (-1.38%).
Officetel jeonse (long-term lease) prices also remained weak due to a pronounced shift toward monthly rents following high interest rates and the migration of rental demand caused by falling apartment jeonse prices. Nationwide officetel jeonse prices fell 1.25% in the first quarter, a larger drop than the previous quarter (-0.82%).
Due to decreased rental demand, nationwide officetel monthly rents also turned downward, falling 0.18% in the first quarter. In Seoul, monthly rents rose 0.11% in the fourth quarter of last year but fell 0.05% again in the first quarter of this year.
The nationwide average officetel yield was recorded at 4.90%. By region, Daejeon had the highest yield at 7.08%, while Seoul had the lowest at 4.37%. The ratio of jeonse prices to sale prices nationwide was 84.8%. Sejong had the highest ratio at 92.8%, and Busan the lowest at 80.5%. The jeonse-to-monthly rent conversion rate was 5.81%.
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