First Ever Entry into 0% Base Interest Rate... Attention Turns to Income-Generating Real Estate

On the 16th, the Bank of Korea made a surprise cut to the base interest rate from 1.25%p to 0.75%p, leading investment funds with no clear destination to flock toward income-generating real estate. Furthermore, as the government continues to tighten regulations on the housing market, this trend is expected to intensify.

This rate cut is twice the size of the previous adjustment in October, when the rate was lowered from 1.50% to 1.25%. Experts predict, “Investors will seek stable returns from income-generating real estate rather than low-interest bank deposits,” adding, “Unlike apartments, income-generating real estate is less affected by real estate regulations, attracting significant investment demand.” Generally, when the base interest rate falls, market interest rates also decline, allowing investors to earn returns equivalent to the reduced interest burden.

Buoyed by market sentiment, the enthusiasm for income-generating real estate, centered on officetels, is expected to heat up again. According to the Korea Real Estate Board, the officetel sales price index in the metropolitan area rose by 0.03% in November last year compared to the previous month. This marked the first increase after a continuous decline. In December, it rose another 0.02%, continuing the upward trend. The December yield was recorded at 5.20%, higher than the near-zero market deposit and savings interest rates.

Additionally, according to the “Officetel Price Trend Survey,” officetel yields rose by 0.01%p month-on-month to 5.21% in February. This was the first upward shift since monthly officetel yields have been tracked starting in 2018. Riding the wave of the metropolitan market’s enthusiasm, nationwide officetel yields also began to rise last month for the first time.

However, having many investment advantages does not guarantee success. When investing in real estate that promises returns, it is essential to carefully analyze various factors to distinguish the gems from the flood of listings. Since yield polarization can be severe depending on location and property type, reducing investment risk requires selecting locations and properties with clear investment value.

Amid this, Shinsegae Construction has announced plans to supply Villiv Centro, a residential officetel, at Yongho-dong 958 within Metro City, Nam-gu, Busan, drawing attention.

The complex will consist of 4 buildings ranging from 3 basement floors to 25 above-ground floors, with a total of 392 units including ▲57㎡ 48 units and ▲84㎡ 344 units, located in the prime area of Metro City, one of Busan’s traditional affluent neighborhoods.

Within 300 meters of the complex are elementary, middle, and high schools, including Daeyeon High School and Yemoon Girls’ High School, known for their high university admission rates. Additionally, Pukyong National University, Kyungsung University, and Dongmyung University are nearby, and there are no entertainment facilities within 2 km of the complex, boasting a clean educational environment.

Villiv Centro offers a one-stop lifestyle through large-scale commercial facilities within the complex, designed with a New York-inspired exterior. Nearby, lifestyle and cultural infrastructure such as W Square, Mega Mart, and St. Mary’s Hospital provide convenience. Also, the UN Memorial Park and the 1.93 million㎡ Igidae Waterfront Park are close by, enabling a pleasant life surrounded by clean nature.

Excellent transportation networks also stand out. The complex is located along the Coastal Circular Expressway, facilitating easy access to Busan’s eastern and western areas and neighboring regions. Furthermore, the completion of the Mandeok-Centum deep urban expressway is scheduled for 2024, which will make travel across Busan even more convenient. Additionally, if the planned tram extension (Kyungsung University Station to Igidae Station), currently awaiting preliminary feasibility review, is confirmed, public transportation access will improve significantly.

Meanwhile, the Villiv Centro model house is located at 1406-1 U-dong, Haeundae-gu, Busan, and is scheduled to open in March. To prevent the spread of COVID-19, visits to the model house will be by prior reservation only, and a virtual model house will be offered for customers who are unable to visit in person.