Rising Demand for Officetels Instead of Apartments with Higher Entry Barriers... Surge in Court Auction Interest Drives Up Prices

Last December, Seoul Officetel Winning Bid Rate at 102.5%
Demand Surges for Apartment Alternatives Amid Loan Regulations and Price Fatigue

A view of an officetel in the Seoul metropolitan area (Photo by Asia Economy DB)

[Asia Economy Reporter Ryu Tae-min] As government loan regulations and fatigue from soaring housing prices accumulate, raising the threshold for apartments, officetels, considered an alternative, are gaining popularity in the auction market. Not only in Seoul but also in the relatively cheaper Gyeonggi officetel auctions, dozens of bidders are flocking, narrowing the gap in winning bid rates compared to apartments.

According to Gigi Auction, a court auction specialist company, the average winning bid rate for Seoul officetels in December last year was 102.5%. This figure was 1.3 percentage points higher than the previous month and was the highest among the monthly averages recorded last year. The winning bid rate refers to the ratio of the winning bid price to the appraised value. A winning bid rate of 102.5% means that an officetel appraised at 100 million KRW was sold for 102.5 million KRW, and typically, a winning bid rate exceeding 100% indicates expectations of price appreciation.

The average number of bidders per item is also increasing. The average number of bidders for Seoul officetel auctions rose from about 1 in September last year to 3.79 in October, 6.93 in November, and 4.33 in December, showing signs of revival.

This contrasts with the Seoul apartment court auctions, where the winning bid rate and number of bidders have sharply declined. The winning bid rate for Seoul apartment auctions dropped by 12 percentage points from the previous month to 107.9% in November last year. In December, it fell further to 103.5%, showing a narrow gap with officetel winning bid rates. The average number of bidders per item also hit a 21-month low, with 2.82 in November and 3.40 in December, allowing officetels to overtake apartments.

The Gyeonggi region shows a similar trend. The average winning bid rate for Gyeonggi officetels in December last year soared to a record high of 99.9%, approaching the 100% mark. For example, a 31st-floor A officetel unit of 114㎡ (exclusive area) in Jung-dong, Bucheon-si, Gyeonggi, attracted 20 bidders and was sold for 632.12 million KRW, 47% higher than the appraised value of 431 million KRW. The difference between the winning bid and the second-highest bid was only 1.12 million KRW, indicating fierce competition.

Experts analyze that due to loan regulations and price fatigue increasing the burden on apartments, demand is ballooning into the officetel market as a side effect. Lee Joo-hyun, senior researcher at Gigi Auction, said, “Recently, as government loan regulations and fatigue from previously soaring prices have raised the entry barrier for apartments, relatively cheaper officetels are gaining attention as an alternative. It seems that not only actual residence demand but also investment demand aiming for rental income is increasing, making them more popular.”