Three High-Priced Auction Sales in Songpa District the Day After September 7 Measures... Auction Market Moves First [Real Estate AtoZ]

Three Songpa Apartments Fetch High Auction Prices
Lecents Achieves 135% Winning Bid Rate
No Impact Despite Dealer Loan Restrictions
Investment Floods In Amid Distrust of Supply Measures

Just one day after the government announced the September 7 supply measures and closed off loans for property trading businesses in the Seoul metropolitan area, high-priced auction bids were made in the court auction market. All three properties in Songpa District, considered a barometer for Seoul's housing prices, were auctioned off at prices higher than their initial appraised values. Not only were the winning bids high, but it was also unusual for all three to be sold at once. Last month, only four properties in Songpa District found new owners through auctions. Analysts say that negative outlooks on the government's first supply measures?believing they will not resolve supply-demand instability?have driven speculative demand into the auction market, with buyers betting on further price increases.

According to the court on September 9, the previous day a 84-square-meter unit in the LECENTS apartment complex in Jamsil-dong, Songpa District, was auctioned off at a final price 879.99 million won higher than its appraised value of 2.49 billion won, recording a winning bid ratio of 135%. There were 27 bidders, and the second-highest bid was 3.311 billion won. LECENTS is one of the so-called "El-Ri-Te" (Els, Lecents, Trizium), the three major apartment complexes in Jamsil. The winning price was only 70 million won less than last month's record-high transaction price of 3.44 billion won for a regular sale.

On the same day, a Hyundai Apartment unit in Jamsil-dong, also 84 square meters, was auctioned off at 1.65 billion won, which is 118% of its appraised value of 1.4 billion won. Thirteen bidders competed for the property. In addition, a 49-square-meter unit in Geoyeo 4th Complex, Geoyeo-dong, was sold for 847.88 million won (a winning bid ratio of 103%), exceeding its appraised value of 822 million won.

It is considered unusual for such results to emerge at the first auction held after the September 7 supply measures, which shut down loans for property trading businesses in the metropolitan area. In August, after the direct impact of the June 27 loan restrictions, the winning bid rate for Seoul apartments dropped to 40.3%, the lowest level this year. In the same month, the winning bid rate for apartments in the three Gangnam districts also fell to 18.80%, marking the lowest figure so far this year.

In particular, the market was expected to contract as the new measures closed the "property trading business loans," previously seen as a major loophole in the June 27 loan restrictions. These loans were a funding channel used by corporations or individual business owners to purchase homes through auctions. Previously, in regulated areas, loans up to 30% of the collateral value were allowed, and up to 60% in non-regulated areas, with no obligation for actual residence. There were also no limits on the loan amount. As a result, after the June 27 measures capped mortgage loans at 600 million won, these loans became a de facto alternative investment route in the auction market.

In this context, the strengthening of buyer sentiment in the auction market is analyzed as a result of heightened expectations for rising home prices amid distrust of the supply measures. The latest measures did not include the abolition or revision of the reconstruction excess profit recovery system?a key step to accelerating redevelopment projects?leading to growing expectations that housing supply instability will persist. In Seoul, over 80% of new homes are supplied through redevelopment and reconstruction projects. The planned supply for new housing in Seoul, such as the development of the Sungkyunkwan University baseball stadium site, amounts to only about 4,000 units over five years.

Songpa District serves as a "weathervane" for Seoul's real estate market, so this shift in buyer sentiment could influence the broader market. Of the top ten apartment complexes nationwide by market capitalization (based on KB Leading Apartments), six are located in Songpa District. Price movements in these complexes are seen as indicators for other regions and the overall market. In particular, the auction market is considered a leading indicator, as buyer sentiment is reflected more quickly than in regular sales.

Joo Hyun Lee, a senior researcher at GGI Auction, explained, "For individual complexes, bidding was intense for Geoyeo 4th Complex and Jamsil Hyundai Apartment due to expectations for remodeling, while Lecents, as a high-priced apartment, has low dependence on loans and has continued to trade regardless of the June 27 restrictions. Large complexes in Gangnam worth 1.5 billion won or more are relatively less affected by regulations, and as doubts grow about the feasibility of the supply measures, investment capital is concentrating on prime complexes in Gangnam."