While apartment transactions have decreased due to loan regulations and price surges, the number of people looking for a jeonse for opstar officetels has increased. In some areas, such as Gongdeok, where demand for office workers and university districts is concentrated, it is not uncommon to see cases where the price of jeonse is higher than the sale price.
From the end of the year to the beginning of the year, when office workers’ personnel transfer season and preparations for the new semester overlap, it is the peak season for opstar officetel rental transactions. In a situation where the price of jeonse has soared due to a shortage of jeonse, there is also growing concern about the ‘tin can opstar officetel’, whose jeonse price is higher than the sale price. If you purchase an opstar officetel through a gap investment with loans and jeonse without your own capital, it is highly likely that you will fall into a ‘can-jeonse’ in which the sum of the loan and deposit becomes higher than the house price when the real estate market declines.
Small opstar officetel, where demand is concentrated, Jeonse price overtakes sales price
At the opstar officetel ‘Co-op Residence Omokgyo’ located in Yeongdeungpo-gu, Seoul, 10 sales contracts were signed in the past two months from October to November. Most of the properties for sale are small studios with an exclusive area of 16.98 square meters, and the sale price ranges from 67 million won to 73 million won. On October 26, the same flat was traded for 80 million won, but the sale price was formed at a price of about 10 million won lower than the Jeonse price.
According to the real transaction price disclosure system of the Ministry of Land, Infrastructure and Transport, ‘Riverview’ opstar officetel in Dangsan-dong, Yeongdeungpo-gu sold for 187 million won in October with an exclusive area of 20.22㎡. Five days later, an opstar officetel of the same area was signed with a deposit of 200 million won. The Jeonse price is 13 million won higher than the sale price.
In Gongdeok-dong, where the demand for jeonse is concentrated near Gwanghwamun/Seoul Station, Sinchon University District, and Sookmyung Women’s University, a reverse phenomenon is also occurring in which the jeonse price exceeds the sale price. ‘Gongdeok Office Star’, located in an opstar officetel cluster, was sold for 108 million won for a 16.88 m² exclusive area on November 1, while the same flat was signed for 120 million won on the same day. On the 27th and 29th of the same month, a lease contract was signed for 130 million won and 120 million won, respectively.
An official from a nearby real estate agency said, “Gongdeok-dong is a place where there is a lot of demand for charters in their 20s and 30s, including college students and office workers. Jeonse loans are good, and I prefer Jeonse to monthly rent. On the other hand, most of the opstar officetels are small opstar officetels, except for newly built ones, and they are usually purchased for investment purposes. Because the interests of the owner and the tenant are different, the amount of jeonse is insufficient. Jeonse prices inevitably go up, and recently, Jeonse transactions are rare.”
When the amount of Jeonse is insufficient, Jeonse rises and the phenomenon of overtaking the sale price is intensified. According to KB Kookmin Bank’s monthly KB housing market trend on November 23, the Jeonse rate for opstar officetels in Seoul in October was 82.2%. It increased steadily from 61.8% in July 2010, when related statistics began to be compiled, and reached an all-time high.
20s and 30s investment demand and jeonse demand are rushing… Vulnerable when house prices fall
The small opstar officetel has recently been attracting attention as an investment destination for young people. This is because there is an expectation that investment returns can be made with a small amount of capital through gap investment. However, there are concerns that a gap investment in a small opstar officetel may leave a greater aftereffect for investors and tenants. This is because they are more sensitive to market changes.
According to the Korea Real Estate Agency’s 3Q opstar officetel price trend survey, it can be seen that the sales demand patterns are different for small opstar officetels and mid-large-sized opstar officetels. Sales of less than 40 square meters rose 0.29% from the previous quarter, and there was no significant change, but △ 60 square meters or less increased by 1.54% △ 60 square meters or less increased by 2.91% △ 85 square meters or less increased by 4.33%. Unlike mid-to-large opstar officetels, which are located as replacements for residential apartments, small opstar officetels do not fluctuate much in sales prices. If the Jeonse price is lowered after signing a contract when the Jeonse price is high, the tenant may not be able to get the deposit back.
In fact, the number of non-refundable Jeonse deposits reported to the Housing and Urban Guarantee Corporation (HUG) increased from 33 in 2017 to 2,408 in 2020. In the first half of this year alone, 1290 cases were reported. The Seoul Youth Housing Counseling Center said that the number of inquiries related to kanjeonse deposits more than doubled in the second half of this year compared to the first half of this year.
Experts urge caution when entering the opstar officetel market, where investment demand for opstar officetel and demand for jeonse are entangled. It is difficult to accurately grasp the market price of opstar officetels due to the lack of transaction volume, but it is necessary to be aware of the trick of inflating the current sales price based on the price of neighboring apartments or newly built opstar officetels, thereby raising the pre-set price. During a period of contraction in the real estate market, non-apartment transactions are particularly difficult, which can cause problems in getting the deposit back. When looking for a house, it is necessary to review whether it is possible to purchase Jeonse Guarantee Insurance.
The same is true for investing in small opstar officetels. Kim In-man, director of the Real Estate Economic Research Institute, said, “The background of the opstar officetel becoming a residential real estate was greatly influenced by the real estate market situation and government policies. If the overheating of the opstar officetel becomes more severe, the government will shift its stance to regulation. In the case of end-users who purchase for the purpose of residence, it is necessary to establish a conservative financial plan in consideration of future interest rate hikes.”