[비즈한국] Once considered a popular investment destination during the real estate boom of 2020–2021, officetels (studio apartments/office-living hybrids) were initially spotlighted as substitutes for apartments. However, the market began to cool down from 2022 due to interest rate hikes, "jeonse" fraud issues, and regulations regarding the counting of properties toward housing ownership quotas.
Recently, however, officetels—previously criticized for having lower investment value compared to apartments—are back in the spotlight. Sales prices in key areas of Seoul have begun to rise, and rental yields are also showing an upward trend. Let’s take a detailed look at why investing in officetels is advantageous and why now is the right time.
The revival of officetel investment: Let’s summarize the four reasons why its investment appeal has recently increased.
First, the issue of surging apartment prices and supply shortages.
As apartment prices in Seoul and the metropolitan area have soared, demand for alternative housing is shifting toward officetels. Especially with the severe shortage of apartment supply in these regions, officetels are emerging as viable substitutes. The projected volume of new officetels for move-in in Seoul for 2024 is 4,057 units, which is only 28% of the 14,479 units seen in 2023, and this figure is expected to drop further next year. With this supply shortage, the scarcity value of officetels is increasing, putting upward pressure on both sales prices and rental yields.
Second, the issue of tax exemption benefits and deregulation.
The government's August 8th measures include a provision to exclude newly built officetels with a dedicated area of 60㎡ or less, completed by 2027, from the total housing count. This has increased investment interest in small-sized officetels by offering benefits in acquisition tax, comprehensive real estate tax, and capital gains tax. In particular, utilizing these "non-housing count" benefits provides investors with greater flexibility for additional housing purchases or investments.
Third, the issue of falling interest rates and rising rental yields.
With the U.S. Federal Reserve recently cutting benchmark interest rates, the possibility of domestic interest rate cuts is also growing. While bank deposit interest rates remain in the 2-3% range, officetel rental yields average 4-5%. The average yield for Seoul officetels is 4.87%, the highest level in five years. Additionally, due to the growing aversion toward jeonse, monthly rent demand is increasing, making it highly likely that rental yields for officetels will continue to rise.
Fourth, the issue of increasing demand for proximity to workplaces.
In major Seoul business districts such as Gangnam, Yeouido, and the city center, demand for housing near workplaces is concentrating on officetels. In areas where apartment prices and rents are high, employees are increasingly tending to choose relatively affordable officetels. As a result, demand for officetels in central areas is expected to rise further.
The analysis of why officetel investment has increased recently is as follows:
First, the turnaround in sales prices and rental yields.
Sales prices for Seoul officetels have turned upward for the first time since 2022. The combination of apartment supply shortages and increased demand has led to a rebound in officetel market prices. Furthermore, rental yields are showing stable growth due to falling interest rates and a decrease in jeonse demand. Investing in an officetel at this time is an advantageous situation where you can expect both an increase in capital gains and rental yields.
Second, the increase in scarcity value due to supply shortages.
With officetel supply significantly decreasing this year and next, scarcity value is expected to be highlighted. This supply shortage is not a short-term factor; it is highly likely to persist long-term due to complex factors such as rising land prices, burdens of Project Financing (PF) loans, and regulations involving housing counts. Especially as supply dwindles in central Seoul, buying an officetel now could lead to greater appreciation in the future.
Third, the fact that they have established themselves as an alternative to safe assets for income-generating real estate.
As interest rates fall, the yields on safe assets like bank deposits and bonds may decrease. Officetels offer stable returns among income-generating real estate, and demand is expected to remain consistent in Seoul's major business districts. In an era of low interest rates, an officetel, which allows you to expect both stable rental income and asset value appreciation, can be viewed as an alternative to safe assets.
Let’s review promising regions for officetel investment.
The southeastern part of Seoul has high demand for proximity to workplaces and quality transportation networks; as apartment demand is high, the demand for medium-to-large officetels is also strong. Small officetels in the Gangnam area are seeing strong growth in both sales prices and rents due to high demand from high-income workers.
The southwestern part of Seoul is a densely populated area for office workers. Officetels in Yeongdeungpo-gu, near Yeouido, and Dongjak-gu, with its excellent transportation, are gaining popularity. Recently, as safe rental demand shifts to officetels due to the influence of jeonse fraud, medium-sized officetels with a dedicated area of 40-80㎡ are offering good returns.
The northwestern region, including Mapo, Seodaemun, and Eunpyeong-gu, has high demand from single-person households and newlyweds due to its proximity to the city center and relatively affordable rents. Also, because of their excellent accessibility to major central Seoul districts, officetels near subway stations with convenient transportation can expect stable rental income.
However, officetel investment is not unconditionally safe. Unlike apartments, officetels are commercial properties, so it is important to carefully investigate the surrounding commercial districts and transportation networks when investing. In addition, since medium-to-large officetels may have high maintenance costs, which can lower tenant preference, it is better to choose small officetels if your focus is on rental income.
At this point, considering factors such as rising sales prices, rental yields, interest rate cuts, and supply shortages, investing in an officetel can be a favorable choice. It is time to pay attention to officetel investments that can offer stable returns after carefully selecting high-value areas and closely examining market conditions.
Kim Hak-ryeol, head of the Smart Tube Real Estate Research Institute, known by his pen name "Pashong," served as the team leader of the Real Estate Research Division at Gallup Korea. He operates and hosts the Naver blog "Pashong’s World Exploration" and the YouTube channel "Tube TV." His books include "Absolute Principles of Seoul Real Estate (2023)," "The Future of Incheon Real Estate (2022)," "Kim Hak-ryeol’s Absolute Principles of Real Estate Investment (2022)," "Korea’s Real Estate Future Map (2021)," "From Now On, Only Things That Will Rise, Rise (2020)," and "Korea’s Real Estate User Manual (2020)."