Auction Market Heats Up... Office-tel Winning Bids Also Soar

[Asia Economy Reporter Ryu Tae-min] As apartment prices soar to unprecedented heights, officetels, considered a 'substitute' in the court auction market, are gaining popularity. Last month, the winning bid rates for officetels in both Seoul and Incheon reached record highs. Analysts suggest that buyers, unable to afford the skyrocketing house prices, are flocking to officetels as alternatives, causing overheating even in auctions.

According to Gigi Auction, a court auction specialist company, the winning bid rate for Seoul officetels last month was 102.4%, up 2.4 percentage points from the previous month (100%). This is the second-highest figure since statistics began in 2001.

This year marks the first time since July 2002 (103.84%) that the monthly winning bid rate for Seoul officetels has exceeded 100%. In the first half of this year, the winning bid rates for Seoul officetels rose significantly compared to previous years. ▲January recorded 88.42%, ▲February 82.87%, ▲March 80.95%, ▲April 81.55%, ▲May 92.40%, and ▲June 100.0%. Last year's average winning bid rate was 79.37%, failing to surpass 80%.

Some officetel listings were auctioned at prices close to 1.5 times their appraised value. An officetel auction property in Hannam-dong, Yongsan-gu, Seoul, with a 51㎡ (exclusive area), was sold for 789,999,000 KRW on the 6th of last month. This price was more than 250 million KRW higher than the appraised value of 534 million KRW, resulting in a winning bid rate of 148%. Thirteen bidders competed for this property.

The Incheon officetel auction market shows a similar trend. Last month, the winning bid rate for Incheon officetels rose by 22.5 percentage points from the previous month to 90.5%, marking a record high.

This appears to be due to the continued rise in apartment and housing prices, driving demand toward the substitute officetel market. In particular, as the prices for apartment rentals and monthly rents in Seoul and the metropolitan area have also surged recently, concerns about housing instability have increased, leading to more tenants seeking officetels.

The fervor for officetels is also evident in the sales market. According to the 'KB Officetel Market Trend Report' released by KB Financial Group on the 25th of last month, the average sales price of officetels in the metropolitan area in June this year was 260 million KRW, up 30 million KRW from 230 million KRW a year ago.

Senior researcher Lee Joo-hyun of Gigi Auction explained, "Along with investment demand aiming for rental income, it seems that actual users for residential purposes are also flocking to officetels," adding, "With recent sharp increases in sales prices, the auction market, which is considered relatively affordable, is gaining popularity."