Despite the Seoul Auction Slump... Gangnam Area's Winning Bid Rate Soars

Preference for Smart Single Properties
Nodogang, Concentrated with Mid-to-Low Priced Apartments, Falls Below the Average

Despite the cold spell in transactions in the court auction market targeting Seoul apartments, the winning bid rates for prime properties in the Gangnam 3 districts continue to soar. This is the result of a deepening preference for a single smart property in key areas even in the auction market. The polarization of apartment prices in Seoul is leading to polarization in winning bid rates in the auction market.

Auctions Also Favor Smart Single Properties

According to auction information company Gigi Auction on the 10th, last month, the selling price rates of apartment auction items in the Gangnam area among Seoul's autonomous districts showed a marked upward trend. Among these areas, Gangdong-gu showed the largest increase in selling price rate, rising 19.3 percentage points from 90.4% in December last year to 109.7% in January this year. Seocho-gu followed with an increase of 11.56 percentage points from 81.6% to 93.2%, and Gangnam-gu rose 7.2 percentage points from 95.8% to 103%. Areas with many mid-to-low priced apartments such as Nodogang (Nowon-gu, Dobong-gu, Gangbuk-gu) fell below the Seoul average selling price rate of 94.3% last month, intensifying the polarization. Nowon-gu recorded 87.7%, Dobong-gu 78.8%, and Gangbuk-gu 87.5%.

The selling price rate is the ratio of the winning bid price to the appraised value. It is used as a leading indicator of housing prices. When a rise in housing prices is expected, multiple bidders compete, driving up the winning bid price and the selling price rate.

The highest winning bid last month also came from Gangnam-gu. For example, a 243㎡ unit in Yonsei Riverbill 3rd complex in Cheongdam-dong, Gangnam-gu, was sold at 106% of the appraised value of 5.55 billion KRW, fetching 5.8777 billion KRW. A 94㎡ unit in Raemian Daechi Palace in Daechi-dong, Gangnam-gu, found a new owner at 102% of the appraised value of 4.02 billion KRW, amounting to 4.119 billion KRW. A 50㎡ unit in Gangdong Riverst 4th complex in Gangil-dong, Gangdong-gu, was sold at 6.58 billion KRW, 110% higher than the appraised value.

Although the selling price rate last month was not higher than the previous month overall, high selling price rate sales were also seen in Songpa-gu and Seongdong-gu, which are part of the Gangnam area. A 60㎡ unit in Trizium, Jamsil-dong, Songpa-gu, was sold at 108% of the appraised value of 1.928 billion KRW, fetching 2.079 billion KRW. In Seongsu-dong, Seongdong-gu, the Gangbyeon Geonyeong 85㎡ unit attracted 32 bidders, showing high interest. This property was sold at 105% of the appraised value of 1.73 billion KRW, fetching 1.82 billion KRW.

Polarization of Winning Bid Rates During Economic Downturn

While bidding enthusiasm has heated up in major areas such as the Gangnam 3 districts, the overall Seoul market is experiencing a transaction freeze. The winning bid rate was 94.3% in January this year and 91.9% in December last year. As the real estate market slows, bidders are hesitant and are waiting for opportunities.

However, Seoul's winning bid rate jumped from 40.8% in December last year to 48.8% last month, which appears to be a visual effect caused by a decrease in total auction items due to the long Lunar New Year holiday. Experts expect the winning bid rate to drop again this month, similar to the September holiday last year. During last Chuseok, transaction volume halved from 296 cases the previous month, and the following month saw a surge in auction items, causing the winning bid rate to fall from 45.6% to 41.3%, a decrease of 4.3 percentage points.

Comprehensive loan regulations are also evaluated to have fueled the polarization of winning bid rates between Seoul overall and Gangnam. After the implementation of the strengthened Level 2 Debt Service Ratio (DSR) in September last year, the winning bid rates in the non-Gangnam auction market, which attracted real demand buyers, declined. The number of bidders also decreased. On the other hand, cash-rich buyers trying to purchase Gangnam apartments at even slightly lower prices flocked to the auction market, and their bidding competition raised the winning bid rates.

Joo Hyun Lee, Senior Researcher at Gigi Auction, explained, "Gangnam apartments still record selling price rates of 90% to 100%, but apartments in the outskirts often wait until they are auctioned twice before being sold, which lowers the winning bid rates. There is a polarization phenomenon where demand concentrates on newly built apartments or those in good locations."