The villa court auction market, considered a 'leading indicator of housing prices,' has hit an all-time low. This appears to be due to continued cautious bidding amid growing concerns over 'empty lease' situations, where housing prices fall below the rental deposit. In particular, in Seoul, less than one out of ten auctioned properties were sold.
According to Gigi Auction, a court auction specialist company, the average winning bid rate for villa auctions in Seoul last month was 9.6%. This is the lowest figure since statistics began being compiled in May 2001, dropping 0.4 percentage points from the previous record low of 10.0% in November last year. The winning bid rate refers to the ratio of properties with confirmed winning bidders among those put up for auction. For example, a winning bid rate of 9.6% means that only about 0.9 out of 10 auctioned properties found new owners through the auction.
The winning bid rate for Seoul villas has remained in the 10% range for seven consecutive months since falling below 20% to 18.0% in August last year. Last month, 841 properties?the highest number since August 2006?were put up for auction, but due to lack of bids, the winning bid rate fell below 10%.
This decline seems to be influenced by concerns over 'empty lease' situations. Joo Hyun Lee, a senior researcher at Gigi Auction, explained, “As villa market prices fall, many properties have rental deposits that must be returned to senior tenants at appraisal value, so even if the winning bid is low, the bidder often incurs losses. The 'empty lease' problem in the villa market has become a serious social issue, significantly reducing bidders' interest in auctions.”
The winning bid price ratio also appears to be stagnating. Last month, the average winning bid price ratio for villa apartment auctions was 79.4%. Although this is 3.5 percentage points higher than the previous month, the winning bid price ratio has remained in the 70% range for four consecutive months. In Seoul, the winning bid price ratio for villa apartment auctions was 97.2% as recently as May last year, close to the appraisal price, but it has been on a downward trend for nine months. The winning bid price ratio indicates the ratio of the winning bid price to the appraisal price; for example, a ratio of 79.4% means a villa appraised at 100 million KRW was sold for 79.4 million KRW.
Meanwhile, the surrounding metropolitan areas outside Seoul are also experiencing a decline. Last month, the winning bid rate for villas in Gyeonggi Province was 13.6%, marking a record low as well. This is a 9.0 percentage point drop from the previous month’s 22.6%. The winning bid rate for villas in Incheon also fell by 1.2 percentage points from the previous month, recording 22.2%.
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