Despite 34% Drop in Last Year's Officetel Transactions... Micro Units Show Resilience in Volume and Prices

Last Year, Transactions and Prices for Units Under 20㎡ Increased
"Preference for Ultra-Small Units with High Income Yield Will Continue for a While"

[Asia Economy Reporter Kwak Min-jae] Despite the contraction of the officetel market last year, transactions of ultra-small units remained steady. This is analyzed to be because smaller areas generally have lower purchase price burdens and higher yields, making investment easier.

[Image source=Yonhap News]

On the 2nd, Real Estate R114 analyzed the Ministry of Land, Infrastructure and Transport's actual transaction price data and found that the number of officetel sales transactions nationwide in 2022 was 41,176, a 34% decrease compared to 62,284 transactions in 2021. By exclusive area segment, the number of transactions (change rate compared to 2021) was 543 units over 85㎡ (78% decrease), 4,541 units over 60㎡ up to 85㎡ (54% decrease), 5,832 units over 40㎡ up to 60㎡ (45% decrease), 25,472 units over 20㎡ up to 40㎡ (27% decrease), and 4,788 units under 20㎡ (12% increase). While transactions of larger officetels significantly declined, ultra-small units saw an increase in transactions.

The volume of officetel sales transactions also influenced price fluctuations. The nationwide officetel sales price change rate in 2022 was 0.38%, a slowdown of 4.79 percentage points compared to 5.17% in 2021. In particular, prices for units over 60㎡ up to 85㎡ fell by 0.41%, marking the first decline since 2013 (-0.26%). The magnitude of price change adjustments was greater in larger exclusive area segments, whereas the segment under 20㎡, which saw increased transactions, experienced a slight price rise.

It is analyzed that ultra-small officetels, which are relatively less affected by market conditions, maintained steady transactions and succeeded in price defense. In contrast, transactions of officetels over 60㎡, which were popular in 2021 due to high scarcity value and as alternatives to apartments, were halved last year due to the weak apartment market, high interest rates, and DSR (Debt Service Ratio) regulations, highlighting a stark contrast.

Yeokyunghee, Senior Researcher at Real Estate R114, stated, “Given the diminished possibility of real estate capital gains, the preference for ultra-small units with relatively high income yield (the ratio of annual rental income to net investment amount after deducting lease deposits from purchase price) is expected to continue for some time.”

However, she added, “Since the price per unit area of ultra-small officetels is relatively high compared to other sizes, the possibility of capital gains after market recovery is expected to be low. When investing, it is better to focus on rental yields without vacancies and consider purchasing officetels near subway stations or close to workplaces where tenant demand is high.”