"Sold for 200 Million Won Above Market Price"... Gangnam Apartment Auctions Also 'Unbeatable'

As housing demand is reviving mainly in the Gangnam area, 'Gangnam apartments' are also gaining popularity in the auction market. There have been cases where apartments were sold at auction for about 200 million KRW more than the market price. Since it is possible to avoid the residency obligation by acquiring properties through auctions even in land transaction permission zones, and with the recent emergence of the 'housing price bottom theory' centered around Seoul, it is analyzed that the housing market heat is extending to the auction market.

According to Gigi Auction, a specialized court auction company, the winning bid rate for apartments in the three Gangnam districts (Gangnam, Seocho, Songpa) auctioned in court last month was 34.3%. This is 7.7 percentage points higher than the 26.6% winning bid rate in the other 22 districts of Seoul. The winning bid price ratio was also strong, with the Gangnam 3 districts at 85.2%, 6.8 percentage points higher than the 78.4% in other areas.

In fact, apartments in the Gangnam area are increasingly being sold at auction for prices higher than the market price. On the 12th, a 118㎡ unit in Apgujeong Hyundai 4th complex in Gangnam-gu attracted 10 bidders and was finally sold for 5.52799 billion KRW. This is about 25% higher than the appraised value of 4.43 billion KRW. Considering that the lowest asking price for the same complex and unit size on online platforms is currently around 5.3 billion KRW, it was sold at about 200 million KRW above the market price.

Competition for Gangnam area apartments was fierce beyond Apgujeong-dong as well. On the 10th, a 84㎡ unit in Resentz, Jamsil-dong, Songpa-gu, Seoul, was sold for 2.26199 billion KRW. This is about 90 million KRW higher than the actual transaction price. According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system, the 84㎡ unit in this complex was traded for 2.17 billion KRW on the 21st. In May, an 84㎡ unit in Eunma Apartment, Daechi-dong, Gangnam-gu, was sold for 2.65288 billion KRW after attracting 45 bidders. Similarly, it was sold at a price exceeding the recent transaction price of the same unit size (2.48 billion KRW).

The reason Gangnam apartments are popular is due to the characteristics of the land transaction permission zones. Although there is a two-year residency obligation in these zones, acquiring property through auction allows one to avoid this obligation, making gap investment possible by purchasing with a lease. If the property is won at auction and a lease tenant is found, the actual investment amount can be reduced. Also, acquiring an apartment through auction exempts the obligation to submit a funding plan.

Moreover, the recent signs of rising housing prices in Seoul seem to have influenced the enthusiasm in the auction market. With consecutive base rate freezes and the spread of the housing price bottom theory, some uncertainties have been resolved, leading to renewed housing demand flowing into the auction market. According to the weekly apartment price trend survey for the fourth week of July (as of July 24) released by the Korea Real Estate Board, Seoul apartment prices have been rising for 10 consecutive weeks since the fourth week of May this year (0.03%).

Lee Joo-hyun, a senior researcher at Gigi Auction, said, “The reason Gangnam apartments are sold at auction for prices higher than the market price is because the residency obligation is exempted in the land transaction permission zones and there is an expectation of value increase due to future reconstruction.” He added, “However, since the national average winning bid rate still remains in the low 30% range and there is a possibility of further interest rate hikes, it remains to be seen whether this will lead to a general upward trend in the auction market.”