"At 75% of Appraised Value"... Seoul Auction Winning Bid Rate Falls Again

A red light is on at a traffic signal near an apartment in downtown Seoul. (Photo by Asia Economy DB)

[Asia Economy Reporter Ryu Tae-min] The decline in the court auction market, known as a "leading indicator of housing prices," is steep. While the market was hot until last year, the auction market has rapidly frozen as the housing market has stalled. In particular, with the increased burden of financing due to the rise in the base interest rate and strengthened loan regulations, and growing negative outlooks on the housing market, buyers are showing caution in bidding.

According to Gigi Auction, a court auction specialist company, the average winning bid rate for Seoul apartments in December last year was recorded at 76.5%. This is a 7.1 percentage point drop compared to the previous month (83.6%). The winning bid rate is the ratio of the winning bid price to the appraised value; for example, a winning bid rate of 76.5% means an apartment appraised at 100 million KRW was sold for 76.5 million KRW.

The winning bid rate for Seoul apartments exceeded 110% for seven consecutive months starting from the first half of 2021, breaking the all-time high five times, but it has been declining since the end of the same year when the sales market began to freeze. The average winning bid rate in 2021 was 111.2%, the highest ever, but it sharply dropped by 16.5 percentage points to 94.7% last year.

The winning bid ratio is also on the decline. In December last year, the average winning bid ratio for Seoul apartment auctions was 17.9%. This is the third-lowest figure since statistics began in May 2001, just 3.7 percentage points higher than the previous month’s record low of 14.2%. The winning bid ratio for Seoul apartments has been in the 10% range for three consecutive months. The winning bid ratio is the proportion of auctioned items for which a winning bidder has been determined; for example, only about 1 to 2 out of 10 auctioned properties found new owners.

The metropolitan area shows a similar trend. In December last year, the average winning bid rate for apartments in Incheon was 68.0%, meaning apartments were sold for less than 70% of their appraised value. Considering that the highest winning bid rate for Incheon apartments was 123.9% in August 2021, this represents about a 50% decrease. The winning bid ratio also recorded 23.1% in December last year, meaning about 2.3 out of 10 units were sold.

In Gyeonggi Province, the average winning bid rate in December last year was 73.7%, down 5.2 percentage points from the previous month. The winning bid ratio was 25.0%, a significant drop of 15.8 percentage points from the previous month’s 40.8%.

View of a villa neighborhood from a building in Yangcheon-gu, Seoul. / Photo by Moon Honam munonam@

The villa market is no different. In December last year, the average winning bid rate for Seoul villas was 79.8%, falling below the 80% mark. The winning bid ratio was 11.1%, meaning only about 1 out of 10 auctioned villas was sold. In Incheon, the villa winning bid rate was 70.7%, approaching the 60% range. The winning bid ratio was 25.0%. In Gyeonggi Province, the winning bid rate was 75.5% and the winning bid ratio was 22.9%, also showing poor performance.

The decline in winning bid prices and the increase in failed auctions suggest that appraised values are perceived to be higher than buyers’ expectations. Typically, appraisals for auctioned apartments are conducted 6 months to 1 year before the auction starts. Most of the properties currently being auctioned were appraised during 2021 and 2022, when concerns about housing prices peaking were raised. However, as housing prices continue to fall recently, appraised prices are considered high.

Additionally, consecutive base interest rate hikes and comprehensive loan regulation tightening have had an impact. Lee Joo-hyun, a senior researcher at Gigi Auction, explained, “As the burden of financing increases, buyers are becoming more cautious in bidding,” adding, “With growing negative outlooks on the housing market, investment demand that had flooded the auction market is also maintaining a wait-and-see stance.”