"Resentz Auctioned for 3 Billion Won"...Why Not Just Buy It Outright? [Real Estate AtoZ]

Average Auction Winning Price Ratio in Gangnam 3 Districts and Yongsan Surpasses 100% After Regulations
Auctions in the Spotlight as a 'Niche Market' Exempt from Restrictions
Multiple Cases of Winning Price Ratios Exceeding 120% in Jamsil Resentz and Cheongdam Gunyoung
"Fewer Transactions, But Prices Remain Firm" Sentiment Spreads

Recently, the apartment auction market in Seoul's Gangnam area has been heating up. Following the designation of land transaction permit zones (LTPZ) in the three Gangnam districts and Yongsan District, investment demand has surged into the auction market. Unlike regular sales, auctions do not require transaction permits or mandatory occupancy, and gap investments are also possible. In major complexes, there have been multiple cases where the auction winning price ratio has exceeded 120%.

According to real estate auction specialist company GGI Auction on April 20, a total of 19 apartments were successfully auctioned in the LTPZ-designated districts of Gangnam, Seocho, Songpa, and Yongsan over the four-week period from March 24 to April 18. The auction winning price ratio, which is the ratio of the winning bid to the appraised value, exceeded 100% in all four districts. In Gangnam District, the average winning price ratio from three auctions reached 108.9%, while Songpa District (10 auctions) recorded 106.8%. Yongsan District (2 auctions) and Seocho District (4 auctions) also posted ratios of 104% and 100.8%, respectively.

Statistics clearly show the shift in market sentiment before and after the LTPZ designation. Among the four districts, not a single one recorded an auction winning price ratio above 100% between January 1 and March 23 of this year, prior to the LTPZ designation. During this period, Gangnam District's ratio was 95.7%, Seocho District's was 90.5%, Songpa District's was 94.3%, and Yongsan District's was 94.2%. After the regulations, the winning price ratios in all four districts rose by around 10 percentage points, indicating a clear upward trend.

Jamsil Resentz.

The most notable recent case is "Resentz" in Jamsil-dong, Songpa District. It is one of the so-called "El-Ri-Tri" (Els, Resentz, Trizium), considered the top complexes in Jamsil. On April 14, an 84-square-meter (12th floor) unit in this complex was auctioned for 2.97 billion won, which is 24% higher than its appraised value of 2.39 billion won. There were 22 bidders for this auction. The winning bid was nearly identical to the most recent actual transaction price for the same size unit (3 billion won). As of April 18, asking prices for 84-square-meter units in this complex range from 2.69 billion to 3.4 billion won. The auctioned unit was sold at a higher price than urgent or low-priced listings in the regular sales market.

The case with the highest auction winning price ratio since the regulations were implemented was Gunyoung Apartment in Cheongdam-dong. On April 2, a 101-square-meter (17th floor) unit was auctioned for 3.81132 billion won, nearly 780 million won above its appraised value of 3.03 billion won. The winning price ratio was 126%. There were 13 bidders for this auction. Among the "high-price winning bids" where the auction price exceeded the appraised value, there have been three cases-including Resentz and Gunyoung-where the winning price ratio surpassed 120%. On March 31, a 131-square-meter unit in Woosung Apartment, Jamsil-dong, Songpa District, was auctioned for 3.1764 billion won, recording a winning price ratio of 125%.

This is the result of a large influx of investors into the auction market seeking to avoid real estate regulations. Auctions are not subject to LTPZ regulations. When acquiring an apartment through auction, no separate permit is required, and there is no mandatory occupancy requirement. Gap investments involving rental tenants are possible. Lee Juhyun, a senior specialist at GGI Auction, explained, "With the number of properties available for regular sale decreasing, auctions have emerged as a niche market, leading to fierce competition," adding, "The current market sentiment-'transactions have decreased, but prices are not falling'-is being demonstrated through the auction market as a result of the regulations."