The officetel market has evaded the household debt regulations of June 27 but is still unable to escape from the transaction stagnation. While apartment transactions have declined due to lending restrictions, it is pointed out that investors' preference for non-dwelling properties has decreased and that it's difficult to benefit from the situation due to high prices compared to demand.
According to the real transaction system of the Ministry of Land, Infrastructure and Transport, from June 28, when the June 27 measures were implemented, to the 26th of last month, the total number of officetel transactions in Seoul was tallied at 827 over four weeks. This is a decrease of 24.6% (270 transactions) compared to the 1,097 transactions during the four weeks prior, from May 30 to June 27.
With the June 27 measures, the limit on household mortgage loans in the metropolitan area and regulated zones is capped at 600 million won, and registration of residence within six months after receiving a loan has become mandatory. Conditional loans for the transfer of ownership have also been banned, making the so-called 'gap investment' difficult as tenants use their deposit to pay the remainder. For multiple homeowners, household mortgage loans are completely blocked.
These lending restrictions apply only to apartments, multi-family homes, and townhouses, which are classified as 'dwellings' under housing law. Officetels, classified as 'quasi-dwellings,' are excluded from the regulations. As a result, expectations are rising that officetels will benefit from increased investment demand since they are not affected by major regulations such as restrictions on mortgage loans exceeding 600 million won and prohibitions on loans before ownership transfer.
However, contrary to expectations, demand for officetels has decreased, leading to a reduction in transaction volume. Although apartment transactions have become difficult, investment demand aimed at increasing the value of officetels has not risen. Investors perceive officetels not as products yielding value appreciation but as opportunities to earn revenue from rent.
The fact that prices are high compared to demand for officetels is also seen as a reason for the drop in recent officetel transactions. According to the Korea Real Estate Board (REB), the selling price of officetels in Seoul was approximately 27.13 million won per pyeong (approximately 3.3 square meters) in the second quarter of this year, nearing 30 million won. In urban areas, the selling price per pyeong reached 32.99 million won.
In particular, high-end officetels, which had numerous units for sale in the Gangnam area, are struggling to resolve the unsold units issue due to excessively high selling prices. The 'Lunid Seocho' officetel in Gangnam's Seocho District has seen a surge in unsold units and has moved into public auction. Although it was planned to sell 156 units, 100 units have gone to auction. The selling price was around 3 billion won for 65 square meters.
The 'Odette Odeu Dogok,' located in Dogok-dong, Gangnam District, Seoul, aimed to be a luxury residential product, with plans for six basement floors and 20 above-ground floors, comprising 84 units. However, due to the high selling price, there was a limit to demand, resulting in a failure to attract interest. It began selling in 2020 but remained largely unsold even after its completion, leading to the public auction of all 84 units and 24 auxiliary facilities last year.
Go Jun-seok, a professor at Yonsei University's San-nam Business School, noted, "Regardless of the lending restrictions, the officetel market has been losing popularity for some time. Among investors, there is a growing perception that officetels, which require dependency on rental revenue without the expectation of price appreciation, have diminished investment value," and added, "In particular, while high-end officetel sales once enjoyed popularity in the Gangnam area, extremely high prices formed relative to demand, resulting in oversupply."
As demand for apartments has contracted due to lending restrictions, the overall real estate market has stagnated, leading to the forecast that the demand for non-apartment markets such as officetels will not recover for some time. Seo Jin-hyung, a professor at Kwangwoon University's real estate law department, stated, "Although officetels were not included in the June 27 measures, restrictions on household loans are blocking the flow of funds in the real estate market as a whole, leading to reduced transactions," and added, "As acquiring funds becomes difficult, investment demand inevitably shrinks in the current situation."