[Ryu Taemin's Real Estate A to Z] More Expensive Than Sale Price... Auction Market Avoiding Regulations 'Blazing'

Designation of Land Transaction Permission Causes 'Balloon Effect'... Winning Bids Exceed Actual Transaction Prices
No Permission Needed for Auction Acquisition... Exemption from Submission of Fundraising Plan

[Asia Economy Reporter Ryu Taemin] The real estate auction market is bustling. As housing prices continue to rise, the average winning bid rate in Seoul's apartment auction market has recorded an all-time high for three consecutive months. Recently, cases where auction winning prices exceed the highest actual transaction prices have been emerging, especially in land transaction permission zones.

According to the Seoul Central District Court on the 25th, a 128㎡ (exclusive area) unit in Hanbo Mido Mansion, Daechi-dong, Gangnam-gu, Seoul, which was recently put up for auction, was sold on the 15th for 3.661227 billion KRW, about 29% higher than the appraised value of 2.93 billion KRW. This property, which attracted 10 bidders, was sold for more than 200 million KRW higher than the previous actual transaction price of 3.445 billion KRW for the same apartment and area.

Earlier, a 171㎡ unit in Cheongdam Dongyang Paragon, Cheongdam-dong, Gangnam-gu, Seoul, was auctioned off for 3.8882 billion KRW, significantly exceeding the appraised value of 3.44 billion KRW. A larger 197㎡ unit was actually sold for 3.73 billion KRW at the end of last year. As demand floods the auction market, high winning bids that far exceed market prices are becoming common.

Although auction prices are generally considered cheaper than market prices, these properties have repeatedly sold above market prices because the auction market is relatively free from regulations. Currently, when buying apartments in land transaction permission zones such as Apgujeong, Cheongdam, Daechi, Samsung, and Jamsil, permission from the district office is required. However, unlike general sales, acquiring real estate through auctions is exempt from obtaining separate local government transaction permission under the exceptions of the Civil Execution Act. Also, bidders are attracted because submitting a funding plan is exempted when acquiring apartments through auctions.

The auction fever is also rising in land transactions within land transaction permission zones. In April, a 10,353㎡ forest land in Yongjeong-ri, Jingeon-eup, Namyangju-si, Gyeonggi Province, attracted 129 bidders when it was put up for auction. This is an unusual level of competition for forest land, which is relatively difficult to develop compared to other land types such as residential land. Located near the Wangsuk district in Namyangju, one of the 3rd phase new towns in the metropolitan area, this land became popular due to the auction's characteristic of not requiring transaction permission despite being designated as a land transaction permission zone along with the new town designation. Ultimately, this land, appraised at 476.37 million KRW, was sold for over eight times that amount at 4.02 billion KRW.

On the 20th of last month in Ulsan, a 771㎡ land parcel in Ipam-ri, Beomseo-eup, Ulju-gun, attracted 67 bidders and was sold for 191.49 million KRW, 38% higher than the appraised value of 138.78 million KRW. This property is included in the 'Ulsan Seonbawi District' public housing zone, designated as a land transaction permission zone following the government's 2·4 housing supply plan follow-up measures.

Senior researcher Lee Joo-hyun of Gigi Auction said, "There are not many properties coming up for auction, and the fact that acquiring real estate through auctions allows one to avoid regulations in land transaction permission zones has increased popularity even more."