The previously quiet apartment auction market in the Seoul metropolitan area is gaining popularity again. As a flood of properties have been repeatedly passed over, a large number of buyers are rushing in to win bids at affordable prices. In particular, properties that have been passed over more than twice are attracting dozens of bidders, intensifying the competition.
According to Gigi Auction, a court auction specialist company, the average number of bidders for apartments auctioned in the metropolitan area last month was 10.7. This is an increase of 2.41 from the previous month (8.29). Compared to September last year (4.5), when participation in the auction market sharply declined, this is more than double.
By region, Seoul saw an increase to 7.95 bidders last month, more than three times the 2.58 bidders recorded in October last year, which was the weakest month. The property with the most bidders was an 85㎡ (exclusive area) apartment in Doosan Apartment, Seokgwan-dong, Seongbuk-gu, Seoul, auctioned on the 1st of last month, attracting 73 bidders in fierce competition. This property, which had been passed over three times, was sold at 705.23 million KRW, 71% of the appraised value.
On the 16th of last month, more than 200 people gathered at the Seoul Seocho District Central District Court Auction Court. [Photo by Ryu Taemin]
In Gyeonggi Province, the average number of bidders was 13.71, the highest within the metropolitan area. On the 14th of last month, 81 bidders competed for a 59㎡ unit in Okbit Village Complex 16, Hwajeong-dong, Deogyang-gu, Goyang-si, Gyeonggi Province, showing the hottest enthusiasm. Incheon also recorded 10.4 bidders, recovering to double digits for the first time in 1 year and 5 months since September 2021. When an 85㎡ unit in Songlim Humansea Complex 1, Songlim-dong, Dong-gu, Incheon went up for auction, 42 bidders gathered.
‘Half Price’ After 2-3 Passes... Bidding Crowds Boost Winning Rates
The auction market’s popularity is due to the minimum bid price dropping with repeated passes. As the apartment auction market cold spell that began in the second half of last year caused properties to be repeatedly passed over, many buyers seeking affordable homes have flocked in. In real estate auctions, the minimum bid price decreases by 20-30% each time a property is passed over. For example, in the Seoul court where the pass reduction rate is 20%, if a property appraised at 1 billion KRW fails to sell at the initial auction, the minimum bid price for the next auction will be 800 million KRW.
In fact, among 44 apartments sold by auction in Seoul last month, 41 (93.1%) had been passed over at least once. Especially, 33 properties (75% of the total) had been passed over more than twice, with minimum bid prices dropping to 64% or less of the appraised value, showing high popularity for passed-over properties.
As bidders flock in, the winning rate is also on the rise. The average winning rate for Seoul apartment auctions last month was 36.1%. Although this is 7.9 percentage points lower than the previous month (44%), it is more than double the rate in November last year (14.2%), when the winning rate hit bottom. The winning rate refers to the ratio of properties with successful bidders among those auctioned. For example, a winning rate of 36.1% means that out of 10 properties auctioned, 3.6 found new owners.
As Bidding Concentrates on Affordable Properties... Winning Price Ratio ‘Alone’ Declines
The number of successful auctions has also surged. In January, the number of apartments sold in Seoul auctions totaled 50, more than double the 24 recorded in December last year. This is the highest number in two and a half years since July 2020. Last month also recorded 44 successful auctions, indicating the auction market is reviving.
On the other hand, the winning price ratio, which indicates the ratio of the winning bid price to the appraised price, is declining. The average winning price ratio for Seoul apartments has remained in the 70% range for three consecutive months since recording 76.5% in December last year. In Incheon, it dropped to 66.4% last month, the third lowest since statistics began in May 2001, while Gyeonggi Province recorded 71.9%, approaching the 60% range.
Senior researcher Lee Joo-hyun of Gigi Auction explained, “Real buyers entering the auction market are mainly concentrating on properties with lowered minimum bid prices due to repeated passes. Especially, bidders are flocking to properties passed over more than twice, causing the winning price ratio to trend downward.”
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