The 'Balloon Effect' Spreading to Officetels in Incheon and Daejeon

원본보기 아이콘

[Asia Economy Reporter Donghyun Choi] The balloon effect on housing prices in Incheon and Daejeon, caused by Seoul's housing transaction regulations, is spreading to the officetel market. Due to the abundant liquidity in the market and the influence of low interest rates, demand is expected to increase mainly in well-located areas for the time being.

According to the officetel price trend survey by the Korea Real Estate Board on the 3rd, the Incheon officetel sales price index rose by 0.01% compared to the previous month. During the same period, Daejeon also increased by 0.04%. This is the first time in 15 months since December 2018 that the officetel sales price indices in Incheon and Daejeon have risen.

By size, in Incheon, small officetels with an exclusive area of 40㎡ or less rose by 0.03% compared to the previous month, driving up the overall price. On the other hand, in Daejeon, medium-sized officetels over 40㎡ led the price increase with a 0.18% rise. Officetels are typically popular among single-person households, so small to medium sizes are favored, but recently, medium-sized officetels have gained popularity as substitutes for apartments whose prices have soared.

The rise in Incheon officetel prices is partly interpreted as influenced by the recent significant increase in apartment prices in the area. The monthly increase rate of Incheon apartment prices surged from 0.53% in February to 2.44% in March. Recently, asking prices have risen sharply mainly in Yeonsu-gu, Seo-gu, and Michuhol-gu, and subscription competition rates are also soaring. In particular, the number of unsold units in Incheon in February was 487, less than half of the previous month’s 1,035 units. This is due to the rapid depletion of unsold units in areas such as Geomdan New Town. As housing prices rise, officetel asking prices have also surged by tens of millions of won within a month. For example, a 137㎡ officetel in Daedeok Richiano, Samsan-dong, Bupyeong-gu, Incheon, was sold for 415 million won last month, about 30 million won higher than a month ago. In addition, officetel sales in Gyeyang-gu and Seo-gu were conducted at prices 10 to 30 million won higher than the previous market price.

Daejeon’s real estate market is also heating up as apartment prices rise. Apartment prices in Daejeon increased by 1.38% in February and 1.66% in March. Expectations for redevelopment projects and the attraction of innovation cities have drawn investment demand from Seoul and other regions, fueling the rise in housing prices. A representative from real estate agency A in Bongmyeong-dong, Yuseong-gu, said, "Recently, there have been many inquiries about investment for rental income from Seoul and Sejong," adding, "Officetels in this area are steadily popular because they are free from loan regulations and resale restrictions."

Another reason why officetels in Incheon and Daejeon are attracting attention is their yield. Among the six metropolitan cities, including Seoul, Gyeonggi, and Sejong, Daejeon has the second-highest officetel yield after Gwangju. Last month, the annual yield of officetels in Daejeon was 7.05%. Incheon also recorded 6.52%, surpassing Seoul (4.83%) and Gyeonggi (5.35%).

However, the rise in officetel prices and solid yields are only appearing in some areas such as Seoul, Incheon, and Daejeon, while Gyeonggi and other provinces have not yet escaped a long-term downward phase, so caution is advised when investing. Hyuntaek Cho, a researcher at the Commercial Information Research Institute, said, "Last year, with the strengthening of high-priced housing loan regulations, a balloon effect has appeared, such as an increase in transactions of high-priced officetels that are relatively free from loan restrictions," adding, "Officetels, which were previously investment products for rental income, are now frequently traded for actual residence purposes, diversifying the demand base, but polarization according to location will continue."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.