Why 36 People Rushed to the Auction of an Unclaimed Apartment in Paju

11·19 Gimpo, Busan, and parts of Daegu designated as regulated areas
Balloon effect occurs in nearby non-regulated areas... Winning bid rate and number of bidders increase significantly

The government designated parts of Gimpo, Gyeonggi Province, and Busan as regulated areas, leading to increased popularity of auction properties in nearby non-regulated areas.
[Image source=Yonhap News]

[Asia Economy Reporter Onyu Lim] #On the 25th of last month, 36 bidders gathered for an auction of an apartment in Paju held at the Uijeongbu District Court Goyang Branch. The property was an 85㎡ (exclusive area) apartment in Saekkotmaeul Tteuranchae, Geumchon-dong, Paju, which failed to attract any bidders during its first auction in October. The minimum bid price had dropped to 152.6 million KRW, but the property eventually found a new owner at 271.5 million KRW, 24% higher than the appraised value.

The dramatic change in the atmosphere of this apartment auction within a month is explained by local real estate agencies as a 'balloon effect' caused by regulatory zones sweeping through the Paju area. On the 19th of last month, Gimpo across the river was designated as a regulated area, causing apartment investment demand to shift to Paju.

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

Last month, the average apartment auction winning bid rate in Paju, Gyeonggi 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 its appraised value. The number of apartment auction bidders also reached 301, the highest since January 2015 (361 bidders). The auction fever in the Paju area intensified after Gimpo across the river was designated as a regulated area on the 19th of last month. Researcher Myungwon Oh of Gigi Auction said, “In Gimpo’s case, being recently designated as a regulated area and the shortage of auction properties suggest that the popularity of Paju apartments will continue for the time being.”

The balloon effect toward the auction market is also evident in provincial areas. The Hyundai apartment in Yangjeong-dong, Busanjin-gu, Busan, 115㎡, which failed to sell in its first auction in October, found a new owner last month on the 26th at 511.11 million KRW. 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 rates and number of bidders are at their highest levels this year,” adding, “The hottest places in the auction market are apartments in non-regulated areas.”

As auction bidding overheats, the value of old small apartments with potential for future reconstruction is also soaring. For example, the Jugong 1 Complex 42㎡ in Daldong, Nam-gu, Ulsan was auctioned at 165 million KRW, 38% higher than the appraised value of 120 million KRW, after competition among 51 bidders. Even more strikingly, the Gaegum Jugong 3 Complex 61㎡ in Dangam-dong, Busanjin-gu, Busan was auctioned on the 19th of last month at 343.5 million KRW, nearly double its appraised value of 190 million KRW. Considering that both complexes are currently undergoing reconstruction, it is analyzed that many investors aiming to gain capital gains with small-scale funds have flocked to these properties.

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