Mortgage Amount of 5.47 Billion Won Set by Loan Companies
Top-Grade Properties Auctioned One After Another Due to High Interest Rates
Apgujeong Hyundai Apartments, considered one of the top-tier residential areas in South Korea, have been put up for auction. This is due to the homeowner's inability to manage debts exceeding 6.9 billion KRW.
According to Gigi Auction, a specialized company for auction and public sale data, a 42-pyeong unit in Apgujeong Hyundai 4th Complex, Apgujeong-dong, Gangnam-gu, Seoul, was listed in the auction market last October. The homeowner's total debt amounted to 6.978 billion KRW, with the mortgage set by a lending company alone reaching 5.475 billion KRW. To prevent the ownership from transferring through the auction, the homeowner applied for rehabilitation procedures at the court, temporarily halting the auction process.
The appraised value of Apgujeong Hyundai is 4.75 billion KRW, and it was scheduled to be auctioned on the 19th of last month. This property attracted significant attention, ranking third among popular listings. In July last year, a unit in the same apartment complex was auctioned off to 10 bidders at 5.528 billion KRW, showing a winning bid rate of 124.8% compared to the appraised value of 4.43 billion KRW. Considering the high winning bid rates for apartments in the Gangnam area this year, it was expected that this property would also be sold at over 100% of its appraised value.
However, since the debtor filed for rehabilitation or bankruptcy with the court, the auction process is currently suspended. If the court rejects the rehabilitation or bankruptcy application, the auction process is expected to resume.
There are many advantages to acquiring this property through auction. The Apgujeong reconstruction complex is currently designated as a land transaction permission zone, where a residence obligation applies when buying a house. However, if acquired through auction, there is no residence obligation, allowing the owner to immediately find a tenant for a lease. There is also no requirement to submit a funding plan. Additionally, if the homeowner is a union member, the union membership status can be transferred. In principle, in speculative overheated zones, the transfer of union membership is not allowed after the establishment of the union, but transfers are possible in cases of auction or public sale due to default on debts to public and financial institutions.
Debt Investment and Leveraged Buying Lead to Auctions in Gangnam’s Three Districts
Recently, as the shadow of high interest rates lengthens, the number of homes being auctioned due to inability to repay debts to financial institutions is increasing. Even representative reconstruction apartments in the Gangnam area, which were rarely seen in the auction market, are now appearing one after another. According to Dooin Auction, an auction information company, among the properties scheduled for auction, residential facilities such as apartments in the three Gangnam districts (Gangnam, Seocho, Songpa) number 36 in Gangnam-gu, 77 in Songpa-gu, and 30 in Seocho-gu, totaling well over 100. Ultra-high-end complexes like Apgujeong Hyundai, Apgujeong Miseong, and Daechi-dong Eunma Apartments, which seemed unrelated to terms like 'Yeongkkeul' (excessive borrowing) and 'Bittou' (debt-financed investment), have also appeared in the auction market.
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