['Hot Place' Auction] ① Niche Market Revitalized... Winning Bid Rate Also Increased

100 Bidders Compete for Low-Priced Items in Seoul Metropolitan Area
Seoul Apartment Auction Rate Recovers to 44%
Experts Say "Many Properties from Yeongkkeul Buyers Expected in Second Half"

[Asia Economy Reporter Onyu Lim] Amid the real estate market downturn, the niche auction market is gaining momentum. In some cases, 100 people crowd into the auction court for a single mid-sized apartment in the metropolitan area, creating a bustling scene. However, despite the influx of bidders, the final bid prices do not rise significantly. This is because most participants are smart buyers aiming only for properties that have been auctioned multiple times and dropped to half price. The market expects that properties owned by 'Youngkkeun' (borrowing to the max) and 'Bitt' (debt-financed investment) groups, unable to withstand high interest rates, will flood the auction market in the second half of this year.

Revived Auction Market... Fierce Competition Over Low-Priced Properties

On the 14th, a total of 81 bidders participated in the auction of a 60㎡ (exclusive area) apartment in Okbit Village, Hwajeong-dong, Deogyang-gu, Goyang, held at the Uijeongbu District Court Goyang Branch. The property first went to auction in 2017, with an appraised value of 267 million KRW, which was significantly lower than the market price (starting bid 420 million KRW). After one failed auction, the minimum bid dropped to 186.9 million KRW, leading to intense competition among participants. As a result, Mr. Kim won the auction with the highest bid of 371.72 million KRW.

Also, on the 3rd of last month, 97 people crowded into the auction for an 85㎡ apartment in Dongsuwon Xi, Mangpo-dong, Yeongtong-gu, Suwon. This number far exceeded last year's highest number of bidders in the metropolitan area, which was 80. This property had also failed auction twice, with the minimum bid dropping to 313 million KRW, less than half of the appraised value (640 million KRW). The property was eventually sold for 471 million KRW.

The auction market, previously overlooked due to the real estate market slump, has begun to revive. In fact, the nationwide apartment auction success rate rose from 27.5% in December last year to 36.5% in January this year, an increase of 9.0 percentage points, while Seoul's apartment auction success rate surged from 17.9% to 44.0% during the same period.

This is interpreted as a result of the appearance of half-priced apartments after multiple failed auctions and the government's large-scale deregulation efforts. The government previously eased tax and loan regulations for multi-homeowners and removed all areas except Gangnam, Seocho, Songpa, and Yongsan districts in Seoul from the regulated zones.

Smart Auction Participants Avoid Expensive Properties... Youngkkeun Group Properties Expected to Flood Market in Second Half

However, the bustling auction market atmosphere does not necessarily indicate a recovery in the real estate market. Although the auction success rate has risen sharply, the auction price ratio, which is the ratio of the final bid price to the appraised value, has not increased much. Nationwide apartment auction price ratio slightly recovered from 75.0% in December last year to 75.8% in January this year, and Seoul's auction price ratio rose only 2.2 percentage points from 76.5% to 78.7%.

Interest in auctions is increasing and more participants are joining, but since the real estate market remains sluggish, no matter how fierce the competition, buyers do not pay high prices. This is a different atmosphere from the period of rising housing prices when buyers paid much higher than appraised values for redevelopment and reconstruction properties, hoping for future capital gains. Jihyun Lee, a senior researcher at Gigi Auction, explained, "Although apartment auction indicators have rebounded due to the government's large-scale deregulation, the rise in auction price ratios remains limited due to interest burdens from high interest rates."

Experts predict a surge in auction properties in the second half of the year due to the impact of interest rate hikes. In fact, the number of collective buildings entering auction procedures due to inability to repay debts is rapidly increasing. Last month, the number of voluntary auction commencement registration applications for collective buildings (apartments, villas, officetels, etc.) nationwide was 2,365, a 48% increase compared to a year ago. In Seoul, the number surged 85% from 143 to 264 cases.

On the 15th, a man in his 30s met at the Seoul Central District Court auction courtroom said, "Recently, not only auction participants but also study groups and academy attendees preparing in advance are gathering," adding, "As it becomes harder to make profits from stocks or coins, the interest of people in their 20s and 30s is shifting to auctions."