Fewer Bidders and Slowing Winning Bid Rates... Is the Seoul Apartment Auction Market Reaching a 'Turning Point'?

Seoul Apartment Auction November Winning Bid Rate 107.9%, Down 12%p from Previous Month
Average Number of Bidders 2.82, 'Record Low' Level... Slight Decrease in Winning Rate
Impact of Loan Regulations and Interest Rate Hikes... Cautious Sentiment Ahead of Presidential Election

Seoul Central District Court auction courtroom scene. The seats are empty due to the absence of bidders. (Photo by Ryu Taemin)

[Asia Economy Reporter Ryu Tae-min] As housing transactions sharply contract, changes are also being detected in the court auction market. With tightened loan regulations, the average number of bidders has dropped to an all-time low, and the winning bid rate has slightly decreased compared to the previous month. With the presidential election next year, as the wait-and-see sentiment deepens, there is a forecast that a 'turning point' may come to the auction market.

According to Gigi Auction, a court auction specialist company, the average winning bid rate for apartment auctions in Seoul this month was recorded at 107.9%. This is 12 percentage points lower than the previous month, which had recorded an all-time high. The trend of surpassing 110% for seven months this year and setting a record high five times has slowed down. The winning bid rate refers to the ratio of the winning bid price to the appraised value. A winning bid rate of 107.9% means that a villa appraised at 100 million KRW was sold for 107.9 million KRW.

The average number of bidders per item is also rapidly decreasing. The average number of bidders for apartment auctions in Seoul this month was 2.82, the second-lowest figure since Gigi Auction began compiling statistics in 2001. The average number of bidders had risen to 8.33 in August, when the real estate market was booming, but fell to 5.05 last month as the sales market slowed down.

As the number of bidders decreased, the winning rate, which is the ratio of winning bids to the number of auctioned items, also declined. The winning rate for Seoul apartments, which had risen to 77.8% in August, sharply dropped to 62.2% this month. Gigi Auction explained that the winning rate fell because the number of participants in auctions decreased, resulting in more unsold items.

This difference becomes more pronounced when comparing the highest winning bid rate and the item with the most bidders. The item with the highest winning bid rate this month was a 33.48㎡ (exclusive area) Hanshin Villa in Guro-dong, Guro-gu, Seoul, recording a winning bid rate of 145.4%. This is lower than the highest winning bid rates of 167.1% and 159.3% in September and October, respectively. Regarding the highest number of bidders, September recorded 35, last month 28, but this month only 8.

The contraction of the Seoul apartment court auction market is interpreted as a result of the government's comprehensive tightening of loan regulations. Lee Joo-hyun, a senior researcher at Gigi Auction, said, “Because loan regulations apply equally to auction items, buyers seem to feel burdened by financing,” adding, “Especially with interest rate hike forecasts and the upcoming presidential election next year, the wait-and-see sentiment is growing.”