'Hotel + Apartment' Residences Emerge as New Investment Destinations

No Various Regulations Like Loan Resale
Gaining Spotlight as Income-Generating Investment Product
Expected to Benefit from Low Interest Rates and Regulatory Reflex Effects

[Asia Economy Reporter Choi Dong-hyun] Demand for residential lodging facilities is increasing due to the government's strengthened housing market regulations and prolonged low interest rates. Residential lodging facilities, known as 'residences,' combine the advantages of apartments and hotels and are free from regulations on loans and resale, making them attractive investment products among income-generating real estate recently.

According to the industry on the 16th, the recently launched residential lodging facility 'Hillstate Songdo Stay Edition' in Songdo-dong, Yeonsu-gu, Incheon, attracted 65,498 applications for 608 units, recording an average competition rate of 107 to 1. In particular, the extra-large units ranging from 167 to 191㎡ (exclusive area) received 8,276 applications for 6 units, showing the highest competition rate of 1,379 to 1.

Residential lodging facilities also gained high popularity in previously launched complexes. In last month's subscription for 'Pyeongchon Prugio Central Park' in Gwanyang-dong, Dongan-gu, Anyang-si, Gyeonggi-do, 66,704 applications were submitted for 552 units, recording an average competition rate of 121 to 1 and a highest competition rate of 267 to 1. In July, Shinsegae Construction's 'Belive Paragraph Haeundae' supplied in Haeundae-gu, Busan, attracted 9,873 applicants for 254 units, recording an average competition rate of 38.8 to 1 and a highest competition rate of 266.9 to 1.

The high interest in residential lodging facilities is because they can be used like a home with individual registration allowing cooking and laundry, while also enjoying various services like a hotel. They combine the advantages of apartments and hotels and are mainly located near tourist attractions or business facilities, attracting high interest recently from retired elderly people and real users who frequently travel for business. Especially, with the recent increased interest in non-face-to-face (untact) services, large construction companies are introducing complexes equipped with office spaces and business rooms, expanding the demand base.

Residential lodging facilities are free from various regulations applied to housing, making them attractive not only for actual residence but also for investment. They do not require subscription savings accounts, are not subject to loan regulations, and have no resale restrictions. Also, like apartments, individual registration is possible, allowing owners to sell when prices rise and enjoy capital gains. Unlike officetels, lodging business is permitted, making profitability relatively high. They are not subject to the two-homeowner rule, so capital gains tax surcharges do not apply, and comprehensive real estate tax is exempted. For example, 'Giselle Signity Seocho' in Seocho-dong, Seocho-gu, launched last October, has already seen premiums rise from 30 million KRW to as much as 100 million KRW due to its location in the Gangnam area.

The industry expects demand for residential lodging facilities to increase further in the near future due to prolonged low interest rates and regulatory spillover effects. According to statistics from the Korea Real Estate Board, nationwide commercial real estate (excluding officetels) transaction volume steadily declined from January to April but rebounded from May and has been steadily rising. In particular, the transaction volume in July reached 18,167 cases, the highest in two years and four months since March 2018 (18,751 cases). An industry official said, "Many multi-homeowners burdened by holding taxes are disposing of houses and investing in residential lodging facilities or knowledge industry centers," adding, "While locations with good conditions can yield huge profits, many places remain undersubscribed, so it is important to carefully consider the surrounding conditions."