As apartment prices in Seoul surge, the average sale price of officetels is rising in tandem. It has also surpassed the previous peak in the average sale price recorded three years ago. With the apartment market constrained by strong lending regulations, demand is shifting to officetels. In the case of large officetels in areas such as Gangnam and Mok-dong, record-high transaction deals are being reported one after another.
According to KB Real Estate's monthly officetel statistics on the 25th, the average sale price of Seoul officetels in November was 305.98 million won. This surpassed the previous peak average sale price of officetels, 305.53 million won, recorded in Oct. 2022. After that, the average sale price of Seoul officetels fell into the 200 million won range last year, but it has recently been on the rise again.
The November sale price index for Seoul officetels also climbed to 125.0, approaching the record high of Oct. 2022 (125.85).
The rise in officetel prices is being led by large officetels that can be used as residences. The average sale price of large officetels in November was 1.30573 billion won, surpassing 1.2641 billion won in Nov. 2022, when home prices were rising.
In particular, for large officetels, record-high transaction deals are being concluded one after another, centered on Gangnam and Mok-dong. According to real estate information provider Asil, a 187-square-meter exclusive unit at Tower Palace 3 in Gangnam-gu, Seoul, set a record high when it changed hands for 5.45 billion won on the 2nd of this month. That is more than 1.2 billion won higher than the previous transaction in Sept. last year (4.2 billion won).
A 137-square-meter exclusive unit at Hyundai Hyperion in Mok-dong, Yangcheon-gu, transacted for 2.97 billion won on the 30th. It is the highest price for the same floor-plan category. In June, the transaction amount for officetels of this size ranged between 2.55 billion and 2.75 billion won. In just four months, the sale price rose by 200 million to 400 million won.
Rental yield, which can be used to gauge price outlooks in the officetel market, is also on the rise. The rental yield for Seoul officetels in November was 4.82%, the highest since March 2018.
The continued price gains for officetels following apartments are because they can avoid the triple layer of restrictions applied across Seoul—regulated areas (adjustment areas and speculative overheating districts) and land transaction permit zones.
Under the Oct. 15 measures, when buying an apartment in Seoul, owner-occupancy requirements are imposed, making gap investment (sales with jeonse) impossible, and the loan-to-value (LTV) ratio is reduced to 40%, making it difficult to purchase dwellings if funds are insufficient. However, officetels are exempt from these regulations. Officetels allow loans up to 70% LTV and also permit gap investment. Analysts say demand for Seoul officetels is increasing, centered on end users who find it hard to enter the Seoul apartment market and investors seeking rental revenue.
In particular, officetels, like apartments, are seeing prices rise as supply drops sharply. The supply of officetels reached 125,000 units in 2020, but the number of move-ins this year fell to 48,635 units.
The trend of expanding officetel demand is expected to continue for the time being, centered on Seoul. Ham Young-jin, head of the Real Estate Research Lab at Woori Bank, said, "As of the 23rd, the transaction volume of Seoul officetels has risen to match last year's annual transaction volume," and noted, "Officetels are less burdensome in price than apartments, and even within land transaction permit zones, unlike apartments, transactions can proceed without obtaining permits, which is creating demand." Ham added, "Officetels, like apartments, have seen a significant reduction in supply, which has had an impact on (price increases)."
However, it is expected to be difficult for the expansion of officetel demand to become a long-term trend. Ham analyzed, "Demand for officetels arises depending on operating revenue, so demand emerges mainly in areas with many one- or two-person households, business districts, and areas near stations, but it will be difficult to see activation in the provinces," and added, "(Even in Seoul) it will be hard to expect officetel demand to grow in the long term or for total transaction volume to surpass that of apartments."