[Naejip Road] What If You Could Buy an Apartment in Eunpyeong New Town Worth Over 1.3 Billion Won for Around 800 Million Won?

On November 1, the apartment auctioned after two failed bids had a "lowest price of 864 million won"
Buyers need to prepare an additional 30 to 40 million won beyond the winning bid amount

Editor's NoteAsia Economy's Construction and Real Estate Department reporters are launching the on-site, boots-on-the-ground article series 'Naejip Road' (My Home Road). We gather valuable information flowing directly from the field and deliver it to our readers. We cover all areas including pre-sale, auction, and sales without discrimination. We aim for 'pinpoint analysis' that focuses on a single property or complex rather than vague assessments. We hope to assist in 'home ownership' and 'successful investment' so that the housing hardships of our nation's people are alleviated.

Eunpyeong New Town Gupabal 9 Complex Raemian Main Gate./
Photo by Chawan Yong

Property Information: Auction property of 135㎡ housing type on the 3rd floor of Building 924, Eunpyeong New Town Gupabal, 25 Jingwan-dong, Eunpyeong-gu, Seoul (Seobu 1st Branch 2021-57499, 2nd auction failure, minimum bid 864 million KRW)

[Asia Economy Reporter Cha Wanyong] The first introduction in 'Naejip Road' is an auction property. It is an apartment of 135㎡ housing type located in Complex 9, Eunpyeong New Town District 3, Jingwan-dong, Eunpyeong-gu, Seoul, notable for its price attractiveness. The original appraised price was 1.35 billion KRW, but after two auction failures, the minimum bid dropped to 864 million KRW.

The third auction is scheduled for November 1. Different competition is expected compared to the first and second auction failures. Only bids higher than the minimum bid are likely to win. However, one should not bid recklessly just because the price is attractive. Especially in the current sluggish real estate market, careful analysis and strategy are necessary. Therefore, 'Naejip Road' conducted a proxy site visit to this apartment to closely examine any points of caution and its market value.

Mortgage rights canceled, but unpaid management fees and land rights should be considered

First, to analyze the most important rights in court auctions, we reviewed the court auction website, auction information publications, and the internet. This apartment is a voluntary auction property with Irum Asset Management Loan as the creditor. The registry shows a total of 14 registrations including mortgage, pledge, and seizure, with mortgages set by Kookmin Bank and Irum Asset Management Loan. All mortgages will be canceled upon completion of the auction. This means there is no separate payment to creditors after winning the bid.

No tenants were confirmed either. This means there is no concern about eviction (tenant vacating) which is the biggest issue when acquiring through auction. The debtor also appears not to reside there. It was confirmed that the apartment currently has about 20 months of unpaid management fees (including electricity, water, heating, etc.). This amount must be paid by the winning bidder upon acquisition, estimated at around 8 million KRW.

A notable issue is the unregistered land rights. Land rights refer to the rights acquired by the building's sectional owner to the land on which the building is located in order to own the exclusive part. Although unregistered, this is not a major problem. Currently, apartments located in Eunpyeong New Town Districts 2 and 3 all have unregistered land rights because the project has not yet been completed and the land rights have not been subdivided. The appraised price already includes the valuation of the land rights. However, if the land rights are acquired later, an expense of about 3 million KRW is expected.

Considering these factors comprehensively, even if this apartment is won at the minimum bid, the total cost including transaction taxes (acquisition tax, etc.) and unpaid management fees is expected to exceed 900 million KRW.

Located at the edge of District 3, indoor interior should be considered

On the 7th, an on-site inspection was also conducted. The apartment is Building 924, about a 10-15 minute walk from Exit 1 of Gupabal Station. It is located at the very edge within District 3. Exiting through the back gate of the apartment complex leads directly to Changneung Stream, beyond which lies Jichuk-dong, Deogyang-gu, Goyang City.

Although somewhat distant, the complex is in a location suitable for a walk or stroll. Especially, the apartment complex with a floor area ratio of 150% offers a pleasant and stable feeling, unlike the towering apartments in downtown Seoul. It even gives the impression of being one of the neighborhoods where autumn is particularly beautiful in Seoul. Walking around, the sight of leaves fluttering in the wind and the sound of birds chirping delight the eyes and ears.

Eunpyeong New Town Complex 8 and Complex 9. /

The commercial area is well established. Like other New Towns, the first floors of the apartment buildings surrounding the complex house street shops, providing ample convenience facilities. Right in front of the complex are a children's playground and a fountain, and on the first floor of the apartment, there is a library and a senior citizens' center nearby.

According to the collective building ledger, the apartment was completed in 2010, making it 12 years old this year. Unlike first-generation new towns like Ilsan, there is no concern about rust-colored water from aging sewage pipes. The exterior is also neat. However, although the interior was not inspected, it is unlikely to have the luxurious interior finishes typical of newly built apartments these days. For this reason, most new residents carry out new interior renovations.

The apartment consists of 10 floors in total, and the property is located on the 3rd floor. While not a premium floor, it is reasonable. However, the line (Unit 3) is located near the parking lot entrance, which may cause concerns about lights and warning sounds when vehicles enter and exit. Sensitive individuals should keep this in mind. The apartment has 4 rooms, 2 bathrooms, and the living room faces due south.

Shinbundang Line station development is a positive factor, but funds are necessary

An apartment in Eunpyeong New Town Complex 9./
Photo by Cha Wanyong

This apartment also holds a direct positive factor: the extension of the Shinbundang Line. According to local real estate agents, a station is likely to be built between Complex 9 and Complex 8 or across Changneung Stream. Of course, government policies may introduce variables.

Above all, the biggest attraction of this apartment is the minimum bid price. Quick sales of similar-sized apartments nearby are priced between 1.35 billion and 1.4 billion KRW, a difference of as much as 500 million KRW. However, due to interest rate hikes, transaction freezes, and real estate market stagnation, transactions have been sluggish. According to the Ministry of Land, Infrastructure and Transport's actual transaction price inquiry, the last transaction of this size in Eunpyeong New Town was on July 3 at 1.42 billion KRW.

Funds are also required to acquire this property. Especially if the winning bid exceeds 900 million KRW, mortgage loans (LTV) are limited to 20% under speculative overheated district regulations. Even if the bid is below 900 million KRW, the limit is only 40%. Moreover, it is not easy to rent out on a jeonse (long-term deposit lease) basis. According to local real estate agents, the jeonse price for this apartment is between 700 million and 800 million KRW, but finding tenants is difficult.