Seoul Apartment Auctions Also Decline... 8 Out of 10 Cases Fail to Find Buyers and Are 'Passed'

Seoul Apartment Auction Rate Hits Record Low at 22.4%
8 Out of 10 Properties Remain Unsold
Auction Price Ratio Also Drops Sharply to the 80% Range

Apartment view around Seoul./Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Ryu Tae-min] Even the court auction market, considered a leading indicator of the real estate market, is unable to escape the slump. Even Seoul apartments, which used to find new owners as soon as they were listed, continue to fail to sell, resulting in the lowest auction success rate ever recorded. As properties are being ignored by bidders, the auction price ratio has also fallen to the 80% range.

According to Gigi Auction, a court auction specialist company, the average auction success rate for Seoul apartments last month was 22.4%, down 14.1 percentage points from the previous month. This is the lowest figure since statistics began to be compiled in May 2001, even lower than the previous record low of 22.5% in December 2008. The auction success rate refers to the ratio of properties with successful bidders among those put up for bidding. For example, it means that only about 2 out of 10 properties were sold.

The auction success rate for Seoul apartments soared to 80% in February last year, marking an all-time high. In other words, 8 out of 10 properties listed for auction found new owners. However, the downward trend continued, dropping to less than one-third (a decrease of 57.6 percentage points).

The auction price ratio, which indicates the ratio of the winning bid price to the appraised value, also fell significantly. Last month, the average auction price ratio for Seoul apartments was 89.7%, down 4 percentage points from the previous month. This is the lowest since March 2019, and except for March 2020 when there were many court recess days due to COVID-19, it fell to the 80% range for the first time in three and a half years. For example, an auction price ratio of 89.7% means that an apartment appraised at 100 million KRW was sold for 89.7 million KRW.

The auction price ratio for Seoul apartments exceeded 110% for seven months from the first half of last year, breaking the all-time high five times, but has been declining since November last year when the sales market began to freeze.

Gyeonggi and Incheon Auction Markets Also Stumble... Difficulty in Financing Due to Interest Rate Hikes and Strengthened Loan Regulations

The metropolitan areas outside Seoul are also experiencing a decline. Last month, the auction success rate for apartments in Incheon was 26.5%, down 4 percentage points from the previous month, marking the lowest figure since statistics began in May 2001. This is a decrease of 58.1 percentage points compared to the record high of 84.62% in June last year. The auction price ratio also recorded 80% this month, significantly down from the 120% range in the second half of last year.

In Gyeonggi Province, the auction success rate last month was 33.8%, meaning about one-third of properties failed to sell. This is the lowest in 47 months since August 2019. The auction price ratio dropped to 79.7%, falling from the 90% range in July to the 70% range in just two months.

The contraction of the metropolitan apartment court auction market is attributed to consecutive base interest rate hikes and the government's comprehensive strengthening of loan regulations. Additionally, as the outlook for the apartment sales market darkens, investment demand that had been flocking to the auction market is also turning cautious.