As Expected, 'Hipjiro'... 28 Bidders for Small Building Auctions Despite COVID-19

4th Floor Small Building, Winning Bid Rate 137%
Still Popular Despite COVID-19
Price Increase Expected After This Period
Corporate Bids Also Increasing

(Photo by Getty Images Bank)

[Asia Economy Reporter Moon Jiwon] On the 28th of last month, 28 bidders crowded around a four-story small building in Jeodong 2-ga, Jung-gu, Seoul, which was up for court auction. Considering the recent economic downturn caused by the novel coronavirus (COVID-19) that has frozen Seoul's commercial districts, this is unusual. The property was sold at 1.21111 billion KRW, more than 300 million KRW above the minimum sale price of 881.14 million KRW. An auction industry insider said, "There is a growing interest in auction properties in traditionally strong commercial areas such as Euljiro and Myeongdong."

According to the industry on the 6th, the alley commercial district around Seoul's Euljiro, known as the so-called 'Hipjiro,' is revitalizing, leading to increased interest in real estate in the area. Unique pubs, cafes, and restaurants have opened in places where printing factories or stores in Euljiro have closed, significantly increasing the floating population of people in their 20s and 30s. 'Hipjiro' is a combination of the English word 'hip,' meaning fresh and unique, and Euljiro.

The auction of the small building in Jeodong 2-ga is also explained by local brokers as reflecting interest in the commercial district. A nearby store official said, "Before the auction, more than 50 individuals and corporate representatives came to inquire about the property," adding, "It seems that the recent influx of young people to Euljiro has led to the opening of restaurants and an increase in foot traffic."

In fact, open-type shopping centers like Jung-gu's Millore and Good Morning City Shopping Mall are struggling in the auction market due to the spread of non-face-to-face consumption, but the situation is different for small buildings or stores. A two-story store in Euljiro 3-ga, listed on the 1st of last month, attracted five bidders and was sold at 948.89 million KRW (winning bid rate 118.99%), about 150 million KRW higher than the minimum sale price of approximately 797.46 million KRW.

Although the popularity of income-generating real estate has significantly declined due to COVID-19 and other factors, properties with high potential for commercial district recovery and good locations still attract great interest. Oh Myungwon, a researcher at Gigi Auction, said, "Jung-gu is a tourist special district, but last year, due to deteriorating Korea-Japan relations and recently COVID-19, the floating population has decreased significantly. Nevertheless, there is an expectation that real estate prices could rise once this period passes, which seems to be driving interest in auction properties."

Recently, the influx of corporate bidders into the auction market also appears to be influencing the trend. Unlike individuals, whose financing ability has weakened due to strong government regulations, corporations have relatively freer access to loans and more tax-saving methods, making it advantageous for them to enter the auction market. In fact, the small building in Jung-gu auctioned on the 28th of last month was won by a corporation, and corporate participation is reportedly increasing in the apartment auction market as well.

Researcher Oh explained, "Since July last year, the number of corporate winning bidders has steadily increased," adding, "The postponement of auctions scheduled for March due to COVID-19 also seems to be a reason why the average winning bid price and bidding competition rate have increased this month."