House in Huam-dong with 32 Residents... Sold for Over 5 Times Appraised Value at Court Auction

32 Bidders for Huam-dong Detached House... Sold at 5.4 Times the Appraised Value
Preliminary Investigation Required When Acquiring Building Only... Demolition Possible in Worst Case Scenario

A detached house in Huam-dong, Yongsan-gu, Seoul, sold last month on the 12th for more than five times its appraised value. (Source=Zigiz Auction)

[Asia Economy Reporter Tae-min Ryu] Although risk signals such as transaction contraction are being detected one after another in the housing market, the enthusiasm for court auctions seems to be spreading even more. While dozens of bidders flock to each property, there are even cases where properties are sold at prices more than five times the appraised value.

According to Gigi Auction, a court auction specialist company, at the court auction held on the 12th of last month at the Seoul Western District Court, a detached house with a total floor area of 291.7㎡ located in Huam-dong, Yongsan-gu, which was appraised at 94.65 million KRW, was sold for 512.88 million KRW. This is 5.4 times higher than the appraised value. A total of 32 bidders competed for this property. Gigi Auction explained that the appraised value was set low because only the building share was auctioned without land ownership.

The fact that this property was sold at a price more than five times the appraised value is interpreted as reflecting redevelopment expectations. In fact, the Huam-dong area where the property is located has been designated as a residential environment improvement district. Unlike reconstruction, redevelopment grants membership in the association and secures the right to move in if one owns either land or a house.

Another reason for the high price is that this area is adjacent to the Namsan walking trail and has emerged as a "hot place" frequently visited by young people. It is also known that investors interested in purchasing old detached houses to change their use to commercial facilities and then renovate them into cafes or stores to generate rental income have shown interest.

However, experts explain that prior investigation is essential when winning a bid for properties that sell only the building, like this one. In this case, since the landowner is Yongsan District Office, the risk of demolition or land rent burden is relatively low, but depending on who owns the land, there could be various obstacles after purchase.

Senior Researcher Joo-hyun Lee of Gigi Auction advised, “Buildings without established statutory superficies rights face the risk of demolition by the landowner in the worst case,” adding, “Even if the building use is maintained, it is advantageous to negotiate in advance because a certain portion of land rent must be paid to the landowner.”