As demand-suppression policies to rein in home prices take effect, more buyers are turning to officetels instead of apartments in Seoul. As rising apartment prices in key areas of Seoul spill over into the officetel market, buying sentiment is recovering, centered on mid- to large-sized officetels in the city center.
According to the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system on the 15th, the number of officetel sales transactions so far this year through the day came to 8,945. That is up 12.0% from the same period last year (7,986).
Sales prices of Seoul officetels are also on the rise. According to KB Real Estate, last month the price of Seoul officetels was 330.56 million won, up 1.01% from the previous month. It is the first time in four years since Aug. 2021 that the average officetel sale price rose more than 1% from the previous month.
Officetel prices are rising mainly in the city center. Officetel prices in the city center (Jongno, Yongsan, and Jung districts) reached 414.43 million won, the highest among the zones. In particular, a wider increase centered on officetels near subway stations in Yongsan District had an impact.
They were followed by the southeastern zone, which includes the three Gangnam districts (Gangnam, Seocho, and Songpa) and Gangdong District, where officetels averaged 323.66 million won.
In the northwestern zone, including Mapo, Seodaemun, and Eunpyeong districts, officetel sale prices rose for a sixth straight month to 249.78 million won. Last month, prices increased mainly for small to mid-large officetels near subway stations in the Mapo area, leading gains in the northwestern zone.
In the southwestern zone, which includes Yangcheon and Yeongdeungpo districts, officetel sale prices were 317.25 million won, while the northeastern zone, which includes Seongdong, Gwangjin, and Gangbuk districts, recorded 204.90 million won.
In particular, among Seoul officetels, larger units are gaining popularity. Looking at last month's month-over-month change in Seoul officetel sale prices by size, the rates for extra-small, small, and medium units were 0.01%, -0.01%, and 0.04%, respectively. However, mid-large units rose 0.31% and large units 0.61%, indicating that the larger the unit, the greater the increase in sale prices.
The reason the real estate market saw apartment-focused transaction prices rise and then fall again is that tighter loan regulations for apartments prompted demand to shift to officetels. On Jun. 27, the government announced household debt management measures capping home mortgage loans at 600 million won. Recently, it also reduced the loan-to-value ratio (LTV) for regulated areas to 40%. Officetels, classified as non-residential, are exempt from these regulations.
Expectations that rental yields will rise as lump-sum deposits (jeonse) convert to monthly rent and monthly rent increases are also fueling more officetel transactions. Amid growing concerns about jeonse fraud and tighter rules on jeonse loans, more people prefer monthly rent over jeonse. As a result, there is a view that officetel rental yields will trend upward. The rental yield for Seoul officetels stood at 4.80% last month, up 0.16 percentage points from a year earlier.
Kim Hyo-seon, chief real estate consultant at NH Nonghyup Bank, said, "Regulations focused on apartments and expectations for interest rate cuts are affecting [officetel sales]," adding, "Officels are categorized as income properties where rental yield is key, and sale prices have fallen a lot recently. With rate cuts expected and monthly rents rising, rental yields are likely to improve, which could increase buying demand for officetels in good locations in Seoul."
Officetel supply is also expected to increase, not just demand. To normalize supply of non-apartment dwellings, the government will cut business loan interest rates for non-apartment construction financed by the housing & urban fund by 20 to 30 basis points (1 bp = 0.01%) and raise loan limits by 20 million won. The measure, intended to counter short-term supply contraction, will be applied temporarily through the end of 2027. As a result, business loan rates for rental-use officetels are expected to fall to 3.0% to 3.8%.