High Barriers to Homeownership, 'Officetels' Gaining Attention for Lower Prices and Fewer Regulations

- Seoul Average Apartment Sale Price Reaches 900 Million KRW, High Average Subscription Scores Make Entry Difficult
- Buyers Shift to 'Officetel' with Lower Initial Costs and No Need for Subscription Savings Compared to Apartments

Due to high apartment prices and low subscription scores, officetels are gaining attention from buyers as an alternative for securing their own homes.

Most office workers have jobs in Seoul and typically hope to own a home there. However, Seoul apartment prices are set too high for average workers to afford, making homeownership difficult. According to KB Real Estate, as of April, the average apartment sale price in Seoul was 914.58 million KRW. For an office worker earning a monthly salary of 3 million KRW, saving every penny without spending would take over 25 years to afford such a home.

Turning to the subscription market, the entry barriers remain high. Checking subscription scores for four private apartment complexes in Seoul supplied between January and May 8 this year (based on winner announcement dates) through the Korea Real Estate Agency’s subscription website?‘Gaepo Presidents Xi’, ‘Le El Sinbanpo’, ‘Hobat Summit Mokdong’, and ‘e-Pyeonhansesang Hongje Garden Platz’?the lowest winning subscription score for the popular 59㎡ exclusive area averaged 64 points.

A subscription score of 64 points corresponds to over 15 years of no home ownership (maximum 32 points), over 15 years of subscription to the housing subscription savings account (maximum 17 points), and having two dependents such as a spouse and one child (15 points out of 35). This score is excessively high for most people in their 30s preparing to buy a home.

On the other hand, officetels do not require a subscription savings account and have relatively lower initial costs compared to apartments, making them ideal for buyers preparing to own a home. Moreover, recent officetels are supplied as ‘residential officetels’ with 2 or 3 rooms, similar to apartments, unlike the past when they were mostly studio or 1.5-room (room + living room) types, increasing their popularity.

Officetels in prime locations also command high premiums. For example, according to the Ministry of Land, Infrastructure and Transport, a residential officetel ‘Kintex Kkum-e Green’ in Daehwa-dong, Ilsan Seo-gu, Goyang-si, Gyeonggi Province, with an exclusive area of 84㎡ (14th floor), was sold for 564 million KRW in April. Considering the original sale price ranged from 324.7 million to 328 million KRW depending on the building and unit, this represents a premium of over 200 million KRW. This is attributed to convenient commuting conditions, with subway Line 3’s Daehwa Station and Juyop Station nearby, and business sites such as Insan Technovalley in the vicinity.

With such high premium expectations and lower entry barriers compared to apartments, officetels are gaining popularity. Several notable officetels are also emerging in the first half of this year.

Hyundai Construction is currently selling ‘Hillstate Cheongnyangni Station’ through the development of Miju Shopping Center B Building in Cheongnyangni-dong, Dongdaemun-gu, Seoul’s downtown area. The complex consists of 954 officetel units and neighborhood living facilities called ‘Hills Avenue Cheongnyangni Station’ and public office facilities (dong community center), spanning from 7 basement floors to 20 above-ground floors. This small officetel, which is gaining attention with the recent increase in 1- and 2-person households, is located directly opposite Cheongnyangni Station. Various living infrastructures such as Cheongnyangni Station, Lotte Department Store, Dongdaemun Tax Office, Dongdaemun Police Station, Seoul Sacred Heart Hospital, and University of Seoul are all within walking distance.

Dongbu Construction plans to supply ‘Centum Centreville Flavinew’ in Jaesong-dong 900-64, Haeundae-gu, Busan, in August. The complex consists of 3 buildings, 4 basement floors to 20 above-ground floors, with a total of 323 units sized 57㎡ and 75㎡. It is located in the ‘Centum living area’, sharing infrastructure with Centum City, one of the preferred residential areas in Busan, approximately 3 km from BEXCO, the center of Centum City. Adjacent to it is Wave City, a high-rise office and commercial facility equipped with entertainment, video, gaming, software companies, resident convenience facilities, cultural and assembly facilities, and retail facilities, offering a one-stop lifestyle.