Busan Jugong Worth 100 Million Sold for 150 Million... 'Balloon Effect' Also Seen in Auctions

Paju Apartment Winning Bid Rate 108%, Exceeds 100% for First Time in 13 Years
Number of Bidders Highest Since 2015
Clear Balloon Effect in Local Areas Like Busan and Ulsan
Popular Aged Jugong Apartments Under Reconstruction
No Listings as Outsiders Sweep Them Up

[Asia Economy Reporter Onyu Lim] #At the beginning of this month, 25 bidders gathered for the auction of a 30-year-old aging Jugong apartment held at the Busan District Court Seobu Branch. It was a 45㎡ (exclusive area) unit in Jugong Complex 1, Deokcheon-dong, Buk-gu, which failed to attract bidders during its first auction last month. This property, whose minimum bid price had dropped to 83.2 million KRW, eventually found a new owner at 153.99 million KRW, 48% higher than the appraised value of 104 million KRW.

The dramatic change in the atmosphere of this apartment auction within a month is explained by nearby real estate agencies as the 'balloon effect' caused by the designation of regulatory zones sweeping across Busan. A representative from real estate agency A in Deokcheon-dong said, "Until October, this apartment was traded in the 90 million KRW range, but the current asking price is 160 million KRW," adding, "Even outsiders from places like Daejeon have come to buy, and now the listings are almost depleted."

As the government expands regulatory zones, a balloon effect is appearing in neighboring housing markets, sparking a frenzy of 'blind investment' in many places. The overheating of the sales market is spilling over into court auctions, attracting dozens of bidders to specific properties.

According to the auction trend report by auction information provider Gigi Auction on the 8th, abnormal overheating phenomena have recently appeared one after another in auction markets in places such as Paju in Gyeonggi Province, Busan, and Ulsan. Most of these are around five districts designated as adjusted areas last month, including Gimpo in Gyeonggi, Haeundae in Busan, and peripheral areas of Suseong-gu in Daegu.

Last month, the average winning bid rate for apartment auctions in Paju, Gyeonggi Province, was recorded at 108.1%. This is the first time in 13 years since May 2007 (103.1%) that Paju's apartment winning bid rate exceeded 100%. The winning bid rate is the ratio of the winning bid price to the appraised value, and a figure above 100 means the property sold for more than the appraised value. The number of bidders for apartment auctions also reached 301, the highest since January 2015 (361 bidders). The auction fever in the Paju area intensified from the 19th of last month when Gimpo across the river was designated as an adjusted area. On the 25th of last month, 36 bidders competed for an 85㎡ unit in Saekkotmaeul Turranche, Geumchon-dong, Paju, which was sold at 271.5 million KRW, 25% higher than the appraised value. Researcher Myungwon Oh from Gigi Auction said, "In Gimpo's case, since it was recently designated as an adjusted area and auction properties are scarce, the popularity of Paju apartments is expected to continue for the time being."

The balloon effect toward the auction market is also evident in provincial areas. The Hyundai 115㎡ apartment in Yangjeong-dong, Busanjin-gu, Busan, which failed to sell in its first auction in October, found a new owner at 511.11 million KRW on the 26th of last month. Compared to the appraised value of 385 million KRW, this is a 33% increase. This apartment also attracted 51 bidders, driving the winning bid price up. Researcher Oh said, "In Ulsan and Busan, more than half of the apartments auctioned since November have been sold, and both the winning bid rate and the number of bidders are at their highest levels this year," adding, "The hottest places in the auction market are apartments in non-regulated areas."

Notably, as auction bidding overheats, the value of aging small apartments is also soaring. In Ulsan Nam-gu Daldong Jugong Complex 1, a 42㎡ unit was sold at 165 million KRW, 38% higher than the appraised value of 120 million KRW, after competition among 51 bidders. Even more strikingly, a 61㎡ unit in Gaegum Jugong Complex 3, Dangam-dong, Busanjin-gu, Busan, was sold on the 19th of last month for 343.5 million KRW, nearly double the appraised value of 190 million KRW. Considering that both complexes are currently undergoing reconstruction plans, it is analyzed that many investors are flocking to gain capital gains using small-scale funds.

The balloon effect from the designation of regulatory zones in the Busan area seems to be spreading throughout the Yeongnam region. A 42㎡ Jugong unit in Seok-dong, Jinhae-gu, Changwon, Gyeongnam, was sold at 137.2 million KRW, 160% of the appraised value of 86 million KRW. This property had been auctioned once without success, and the minimum bid price had dropped to 68.8 million KRW. A representative from real estate agency B in Seok-dong said, "The rising trend in Changwon's housing prices centered on Seongsan and Uichang-gu is extending to Jinhae," adding, "Most Jugong units in Seok-dong have official prices in the 70 million KRW range, resulting in low acquisition tax rates, and many multi-homeowners are entering to hold them as long-term investments."

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