Sale Price 2.26 Billion KRW... Lower Than Appraised Value
Previously, Sale Price Rate Exceeded 100%, Showing Popularity
Declining Sale Prices Make Auction Participants More Cautious
Also, Failed Auction Complexes Exist in Jamsil, Dogok, and Others
The exterior view of 'Tower Palace' located in Dogok-dong, Gangnam-gu, Seoul / Photo by Gigi Auction
[Asia Economy Reporter Hwang Seoyul] Last month, the ‘Tower Palace’ in Dogok-dong, Gangnam-gu, which failed to find a successful bidder at auction, finally found an owner after lowering the minimum bid price by 20% from the appraised value. This is due to the auction market freezing as apartment sale prices decline, causing participants to be extremely cautious in bidding.
According to auction information company Gigi Auction on the 6th, the ‘Tower Palace (exclusive area 81.6㎡)’ in Dogok-dong, Gangnam-gu, Seoul, which was put up for auction at the Seoul Central District Court, was sold for 2,259,999,999 KRW after one failed auction. This price is 97.84% of the initial appraised value of 2,310,000,000 KRW. The complex was once auctioned unsuccessfully on the 2nd of last month, resulting in the minimum bid price being set 20% lower than the appraised value at 1,848,000,000 KRW.
Tower Palace, once synonymous with ultra-high-priced apartments, was previously bid at prices higher than the appraised value. In December last year, an exclusive area of 137.24㎡ was sold at 3,150,000,000 KRW, which is 112% of the appraised value (2,800,000,000 KRW), and in October 2020, an exclusive area of 141.65㎡ was sold at a sale price rate of 127.01% (2,806,880,000 KRW) at auction.
However, as the recent decline in apartment sale prices continues, auction participants seemed reluctant to bid hastily in the initial auction despite the complex’s reputation. Considering the high possibility that the final sale price during the auction process would exceed the minimum bid price, the initial appraised value was unlikely to be a significant advantage for bidders compared to recent actual transaction prices. According to the Ministry of Land, Infrastructure and Transport’s real transaction price disclosure system, the actual transaction prices for three cases of exclusive area 81.6㎡ in May ranged from a minimum of 2,700,000,000 KRW to a maximum of 2,750,000,000 KRW.
The lack of merit for Gangnam’s three districts and famous complexes in the auction market is not limited to this complex. Besides Tower Palace, high-priced apartments in Gangnam and Songpa-gu are also reattempting auctions this month with minimum prices lower than the appraised values.
For example, ‘Rescentz (124.22㎡)’ in Jamsil-dong, Songpa-gu, is going up for auction again on the 19th after three failed auctions this year. Each time it failed, the minimum price was reduced by 20%, dropping from the initial appraised value of 2,995,000,000 KRW to a minimum price of 1,533,440,000 KRW. Similarly, ‘Hyundai Apartment (84.96㎡)’ in Dogok-dong, Gangnam-gu, will be auctioned on the 28th after failing last month, with the minimum price (1,424,000,000 KRW) set 20% lower than the appraised value of 1,780,000,000 KRW.
Due to these trends, auction indicators for apartments in Gangnam-gu and Songpa-gu have also decreased compared to last year. From January to August this year, the apartment sale rate in Gangnam-gu (45.18%) dropped by 17.32 percentage points compared to the same period last year, and the sale price rate (64.98%) fell by 28.65 percentage points. Songpa-gu also saw decreases in the same period, with the sale rate dropping from 69.38% to 53.75% and the sale price rate from 96.15% to 81.34% compared to the previous year.
Senior researcher Lee Juhyun of Gigi Auction analyzed, "While there is a loan risk due to restrictions on mortgage loans for houses priced over 1.5 billion KRW, it seems that the recent decline in real estate sale prices has a greater impact on buyers."
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