Incheon Housing Prices Overheat, Spreading to Auctions as Well

Balloon Effect Amid Regulatory Tightening Pushes Appraised Values and Market Prices Higher
As of April, Winning Bid Rate Hits 105%, Nearly 130% in Cheongna International City

[Asia Economy Reporter Onyu Lim] The rise in housing prices and overheated subscription demand in the Incheon area have ignited the real estate auction market as well. Despite the overall auction market shrinking due to the prolonged COVID-19 pandemic, apartments in Incheon are showing signs of overheating, with auction winning bids exceeding not only the appraised value but also market prices. In particular, the winning bid rates in high-growth potential areas with transportation benefits, such as Cheongna International City, have soared to nearly 130%.

According to the auction industry on the 9th, a 59㎡ (exclusive area) unit at Hoban Verdiom & Youngmo Yedam in Cheongna-dong, Seo-gu, Incheon, was sold at auction for 396 million KRW the day before. This amount is 25% higher than the appraised value of 317 million KRW and exceeds the upper market price limit of 395 million KRW based on KB Real Estate data. Twenty-five people participated in the bidding for this property. Fierce competition took place despite the economic downturn caused by COVID-19 and the uncertain real estate outlook.

The auction winning bid rate for apartments (including residential-commercial complexes) in Incheon has been sharply rising since the end of last year. The winning bid rate, which was 91.9% in January, rose to 96.79% in February and further increased to 100.39% last month. The winning bid rate is the ratio of the winning bid price to the appraised value. Researcher Myungwon Oh from Gigi Auction explained, "This is the first time in the past three years that the winning bid rate for Incheon apartments has exceeded 100%."

This trend seems to be continuing this month as well. As of the 8th, the winning bid rate for Incheon apartments stands at 105.3%. The property with the highest number of bidders this month was a 75㎡ unit at Guwol Hillstate in Guwol-dong, Namdong-gu, Incheon, auctioned on the 2nd. After 40 bidders competed, it was sold for 454.99 million KRW, about 130% of the appraised value of 350 million KRW.

The boom in Incheon apartment auctions is interpreted as a balloon effect resulting from the government's strengthened regulations to curb housing prices in key metropolitan areas such as Seoul and the Suwon-Yongin-Seongnam (Suyongseong) area through the December 16 and February 20 measures last year. With the expansion of regulated areas and tightened loan restrictions, investment funds with nowhere else to go have flooded into Incheon.

In particular, the rapid rise in Incheon housing prices appears to have fueled the increase in auction winning bid rates. Most properties auctioned since last month were appraised last year before the sharp rise in Incheon housing prices.

According to the Korea Appraisal Board, apartment sale prices in Incheon rose by 2.44% last month, the highest increase in 12 years since July 2008, when it recorded 2.84%.

Researcher Oh analyzed, "The rise in Incheon apartment winning bid rates can only be interpreted as a balloon effect spreading to non-regulated areas in the Gyeonggi region. Especially in Incheon, the balloon effect is clear in areas like Cheongna International City, where infrastructure such as transportation is expected to be expanded or where there are reconstruction prospects."

However, experts advise caution against investments driven by the current atmosphere, as the real estate market is sluggish due to the prolonged COVID-19 situation. Ham Youngjin, head of the Zigbang Big Data Lab, said, "Along with government policies, the transaction market continues to shrink due to COVID-19. The uncertain end of the pandemic increases uncertainty in the sales market, which is expected to lead to continued demand contraction."

This content was produced with the assistance of AI translation services.