Seoul Apartment Winning Bid Rate Drops 16.4%P in December
Winning Bid Ratio Also Falls to 46.9%, Over Half of Units Unsold
Impact of Loan Regulations and Interest Rate Hikes... Cautious Market Ahead of Presidential Election
[Asia Economy Reporter Ryu Taemin] As housing transactions sharply contract, the heat in the court auction market?considered a leading indicator of the real estate market?is also cooling off. More than half of the apartments up for auction in Seoul fail to sell, and the winning bid rate has fallen for two consecutive months. Since the total debt service ratio (DSR) regulation has also been applied this year, there are forecasts that the wait-and-see sentiment may grow even stronger.
According to Gigi Auction, a court auction specialist company, the average winning bid rate for Seoul apartment auctions in December last year was 103.5%. This figure is 16.4 percentage points lower than the 119.9% recorded in October last year, which was the highest ever. The trend of surpassing 110% for seven months since the first half of last year and breaking the record 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 103.5% means that an apartment appraised at 100 million KRW was sold for 103.5 million KRW.
The average number of bidders per item is also rapidly decreasing. In December last year, the average number of bidders for Seoul apartment auctions was only 3.4. This is the third-lowest figure since Gigi Auction began compiling statistics in 2001. The average number of bidders rose to 8.33 in August last year when the real estate market was booming but fell to 5.05 in November last year as transactions slowed.
As the number of bidders decreased, the winning bid rate also dropped below half. The winning bid rate for Seoul apartments rose to 77.8% in August last year but sharply fell to 46.9% in December last year. The winning bid rate is the ratio of the number of successful bids to the number of auctioned items. Gigi Auction explained that as the number of participants in auctions decreased, more items failed to sell, causing the winning bid rate to fall.
This trend is also seen in the Incheon apartment auction market. The average winning bid rate for Incheon apartment auctions in December last year was 105.7%, down 14.4 percentage points from 120.1% in October last year. The winning bid rate, which had risen to 84.62% in June last year, also dropped by 19.2 percentage points to 65.4% in December last year.
The contraction of the metropolitan area 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, “Since loan regulations are equally applied to auction items, buyers seem to feel burdened in financing,” adding, “With the application of the total debt service ratio (DSR) regulation this year, the auction market is expected to show signs of slowing down.”
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