Surge in 'Minus P' Listings Below Sale Price...Direct Hit from 'Residence' Deregulation

Magok Le West Property 1.39 Billion KRW... 120 Million KRW Lower Than Sale Price
Office-Tel Average Sale Price in Seoul Metropolitan Area 275.61 Million KRW
Lowest Level Since November 2021

Alternative apartment products such as residential lodging facilities and officetels are experiencing deepening stagnation due to decreased demand following the easing of apartment regulations. Amid a frozen real estate market caused by interest rate hikes, the remaining demand appears to be shifting to the apartment market, intensifying the contraction in buying activity.

According to the Korea Real Estate Board on the 18th, the nationwide officetel transaction volume in January was 4,086 cases, marking the lowest since related statistics began in 2017. Prices are also on a downward trend. According to KB Real Estate's monthly officetel statistics, the average sale price of officetels in the metropolitan area in February this year was 275.61 million KRW. This is the lowest since November 2021 (275.05 million KRW). The average sale price of officetels in Seoul was recorded at 303.09 million KRW, while Incheon and Gyeonggi were 164.32 million KRW and 271.23 million KRW, respectively. This is interpreted as a result of investment demand for officetels, which had been spotlighted as alternative apartment products, shifting to apartments as officetel prices fell during the housing market downturn.

Residential lodging facilities are also witnessing 'minus premium' listings being sold at prices lower than the pre-sale price in various locations. A low-floor unit with a net area of 88㎡ in the residential lodging facility 'Lotte Castle Le West,' scheduled to be built in Magok-dong, Gangseo-gu, Seoul, was listed at a asking price of 1.398 billion KRW. This is a 'minus premium' property priced 120 million KRW lower than the pre-sale price.

Lotte Castle Le West recorded an average competition rate of 657 to 1 with 575,960 applicants in its subscription in August 2021. The pre-sale price for the 88㎡ unit was set between 1.44 billion and 1.654 billion KRW, while the adjacent Magok M Valley 7 Complex 84㎡ was priced between 1.6 billion and 1.7 billion KRW at the time. If the market price had been maintained, a capital gain of several hundred million KRW would have been guaranteed.

However, as the real estate market cooled, the recent price of the 84㎡ unit at 'Magok 13 Complex Hillstate Master,' just one subway stop away, dropped to 1.09 billion KRW. Compared to the highest price of 1.68 billion KRW, this is a decrease of about 600 million KRW.

The government’s extensive relaxation of subscription-related regulations to induce a smooth real estate market may further reduce demand for these alternative apartment products. Starting next week, the criteria for mid-term payment loan limits based on pre-sale prices and the per-person mid-term payment loan guarantee limits will be abolished. The revised regulations will take effect from the 20th.

Previously, the government only allowed mid-term payment loans for pre-sale prices under 900 million KRW, but this was relaxed to 1.2 billion KRW last November, and now it will be completely removed. Accordingly, from next week, mid-term payment loans will be permitted even for complexes with pre-sale prices exceeding 1.2 billion KRW. Additionally, the current per-person mid-term payment loan guarantee limit set at 500 million KRW will also be abolished.