As Seoul apartment prices surge, prices of large officetels in Seoul that can substitute for residential use are also on the rise.
According to KB Real Estate on the 11th, the rise in large-size officetels centered on Seoul and Gyeonggi Province is driving overall officetel price gains.
In particular, among the Seoul metropolitan area's sale price change rates by size, only large units (0.44%) rose, while very small (-0.13%), small (-0.17%), medium (-0.07%), and medium-large (-0.02%) fell. The decline widened from the previous month for very small, small, and medium sizes, while only large sizes saw bigger gains, extending a 12-month streak of increases.
Large-square officetels are similar to apartments in size, have comparable interior layouts, and recently have been allowed to install balconies, boosting demand for alternative residential purposes. By contrast, small-size officetels used for leasing remained weak.
Transaction volume also increased. According to the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system, Seoul officetel transactions from January to July this year totaled 7,505, up 19.22% from the same period last year (6,295).
With prices and transaction volume rising together, record-high transactions also appeared. According to the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system, the exclusive area 74㎡ unit at "Doosan We've Pavilion" in Susong-dong, Jongno District, Seoul, changed hands for 695 million won on 26th of last month. That is up 70 million won compared with a transaction for the same size in February this year at 625 million won.
An exclusive 104㎡ unit at the high-end mixed-use officetel "Daewoo World Mark Yongsan" in Yongsan District, Seoul, set a record-high transaction at 1.855 billion won in Aug. This is 65 million won higher than the previous transaction price.
Although transaction prices in the real estate market rose mainly for apartments, tighter lending regulations on apartments prompted some demand to shift to officetels. On Jun. 27, the government announced a household debt management plan limiting mortgage loan caps to 600 million won. Recently in succession, it also cut the loan-to-value ratio (LTV) in regulated areas to 40%. However, officetels are classified as non-residential, placing them outside the scope of these regulations. In addition, holding an officetel allows buyers to retain non-homeowner status in subscription applications.
A supply shortage also played a role. According to Real Estate 114, the average annual number of officetel move-ins over the past 10 years was 71,986 units, but this year it is expected to plunge to 37,420 units and next year to 12,310 units. Seoul is also projected to fall from the 10-year average of 17,141 units to 4,456 units this year and 1,417 units next year.
However, compared with apartments, officetels have more common areas such as hallways and lobbies, resulting in a lower exclusive ratio for the same floor area. As a result, even large-square units are difficult for families of three to four to occupy for long periods, and high maintenance fees remain a drawback.
Ko Jun-seok, chief professor at Yonsei University Sangnam Institute of Management, said, "The impact of recent lending regulations is significant, and with apartment jeonse and monthly rents rising sharply, some end-user demand appears to be moving to large officetels," adding, "However, compared with apartments, the lower exclusive ratio, higher maintenance fees, and limits in community facilities are drawbacks that weaken price growth potential."