Auction Market Draws Investors Avoiding Land Transaction Permit System... Seoul Apartment Successful Bid Rate Hits 3-Year, 4-Month High [Real Estate A to Z]

Seoul Auction Bid Rates Exceed 100%
Seongdong and Gwangjin Districts Lead the Uptrend
Nowon and Geumcheon See Intensified Selection Among Listings

Following the October 15 measures that designated the entire city of Seoul as a land transaction permit zone, investment demand has been pouring into the auction market. Analysts point out that wealthy cash buyers are turning their attention to the auction market because auctioned properties are not subject to mandatory occupancy requirements.

According to the October Auction Market Trend Report released by GGI Auction on November 6, the successful bid rate for Seoul apartments last month was 102.3%, up 2.8 percentage points from the previous month’s 99.5%. This is the highest figure in three years and four months. A successful bid rate exceeding 100% means that properties were auctioned off at prices higher than their initial appraised values.

View of an apartment complex from Namsan, Seoul. Photo by Yonhap News Agency

In particular, high successful bid rates were observed in key areas of Seoul. Gwangjin District recorded the highest rate at 135.4%, a 27.9 percentage point increase from the previous month. Seongdong District followed, rising by 17.7 percentage points to 122.1%, driving the overall upward trend. Yongsan District (117.6%), Songpa District (114.3%), Gangnam District (110.7%), and Seocho District (107.1%) followed.

Even in Nowon, Geumcheon, and Jungnang Districts, where lower-priced apartments are concentrated, the successful bid rate climbed to 102.3%, reaching the highest level in three years and four months.

After the October 15 measures designated all of Seoul as a land transaction permit zone starting on the 20th, demand appears to have shifted to the auction market, which does not impose mandatory occupancy requirements. Properties acquired through auction are not subject to the occupancy requirement under the land transaction permit system unless a mortgage loan is used.

On the other hand, the successful auction rate for Seoul apartments plunged to 39.6%, down 11.1 percentage points from the previous month’s 50.7%, marking the lowest level in one year and seven months. The increase in failed auctions in Nowon, Geumcheon, and Jungnang Districts led to the overall decline in the auction success rate. While some older properties with redevelopment potential drove up the successful bid rate, analysts note that there are limits to investment demand spreading to all listings.

Joo Hyun Lee, Senior Researcher at GGI Auction, stated, “In these areas, investment demand is still focused on properties with redevelopment potential,” adding, “Since asking prices in the sales market have not risen significantly, investors are entering the auction market after properties fail to sell at least once.”