The Auction Market Cools Down... Number of Bidders Hits Lowest Since January Last Year

[Asia Economy Reporter Onyu Lim] Real estate regulations have poured cold water on the auction market, which had been heating up. The average number of bidders in July hit the lowest point in 18 months, and the average winning bid rate and winning bid price ratio for residential facilities in the Seoul metropolitan area, including Seoul and Incheon, all declined simultaneously.

According to the July auction trend report published by Gigi Auction on the 6th, the number of nationwide auction cases last month was 12,812, of which 4,391 were successful bids. The number of successful bids decreased by 696 compared to the previous month. The average number of bidders also decreased by 0.9 to 3.4. This is the lowest number in 18 months since January last year, when it was 3.5. The winning bid rate was 34.3%, and the winning bid price ratio was 73.3%.

In the Seoul metropolitan area, the winning bid rate (37.2%) and winning bid price ratio (80.6%) decreased by 3.3 percentage points and 2.2 percentage points, respectively, compared to the previous month. In Incheon, which had been on the rise due to the balloon effect in the metropolitan area, the winning bid rate (31.8%) and winning bid price ratio (74%) sharply dropped by 10.2 percentage points and 6.9 percentage points, respectively, compared to the previous month.

In particular, all indicators in the residential facilities sector of the metropolitan area declined compared to the previous month. In Seoul, the winning bid rate (37.4%) and winning bid price ratio (95.9%) decreased by 3.8 percentage points and 1.4 percentage points, respectively, compared to the previous month. Gyeonggi, the stronghold of the metropolitan balloon effect, also saw the winning bid rate (40.9%) fall by 4.9 percentage points compared to the previous month, and the average number of bidders, recorded at 4.7, dropped to the 4-point range for the first time in seven years since July 2013 (4.6).

In the office and commercial facilities sector, Seoul and Incheon showed a decrease of around 5 percentage points. Although Gyeonggi showed a slight increase in the winning bid rate (36.5%) and winning bid price ratio (73.6%) compared to the previous month, it is difficult to interpret this as a shift of bidding demand from residential facilities to office and commercial facilities in the Gyeonggi area.

Researcher Myungwon Oh of Gigi Auction analyzed, "As the government announced the June 17 and July 10 measures and the related legislative procedures in the National Assembly proceeded swiftly, strengthening real estate regulations became visible, and it seems that the footsteps of bidders visiting auction courts have sharply decreased."