Building Appraised at 31.8 Billion Won Falls to 20.3 Billion Won at Auction
Expert: "Poor Economy Also Reduces Auction Demand"
A commercial building in Myeongdong valued at around 30 billion KRW was withdrawn from auction after failing twice, with the bidding price dropping by more than 10 billion KRW. The building was put up for auction due to unpaid bank debt exceeding 600 million KRW.
On the 9th, Gigi Auction, a specialized company for auction and public sale data, announced that the auction for a four-story neighborhood commercial building located in Chungmuro 1-ga, Jung-gu, Seoul, scheduled for the third sale on the 13th, was withdrawn on the 5th.
Approved for use in May 1967, the building sits on a land area of 31.7 pyeong (approximately 105 square meters) with a total floor area of 289.02㎡. The first and second floors house accessory shops, the third floor a plastic surgery clinic, and the fourth floor real estate agencies and a tailor shop, making it a prime commercial property. The first and second floors have a lease deposit of 1 billion KRW and a monthly rent of 70 million KRW. Despite being a 57-year-old aging building, the appraised price was over 1 billion KRW per pyeong, with the initial appraisal price reaching 31.8 billion KRW.
The building owner had consistently borrowed money from banks using this commercial building as collateral since 2004, and due to overdue loan interest of about 600 million KRW, the building was put up for auction. The creditor's claim amount was 602.28 million KRW.
However, no bidders appeared, and the auction failed twice. The minimum bid for the third auction, scheduled for the 10th, dropped to 20.35981 billion KRW, more than 10 billion KRW below the appraised value, but it was canceled. Since auctions are rarely withdrawn solely based on repayment plans, it appears the owner repaid the debt of about 600 million KRW and escaped the auction crisis.
Experts believe the number of commercial and villa properties failing at auction will likely increase. Although the number of properties entering auction is rising due to the economic downturn, high interest rates have reduced profitability, and the rental market conditions are poor, resulting in low demand for winning bids. It is not uncommon for properties to be sold at prices significantly lower than the appraised value after repeated failures.
Senior researcher Joo Hyun Lee forecasted, “Unless we return to ultra-low interest rates like in 2021, the number of commercial property auctions will continue to increase due to poor rental market conditions, and the winning bid rate is expected to decline.”
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