Despite Warnings of Peak Housing Prices, the Villa Auction Market Remains Hot... Investment and Residential Demand Surge

47㎥ Auction in Gangbuk Attracts 21 Bidders... Sold at 80% Above Minimum Price
Seoul Housing Prices Soar, Real Residence Demand Concentrates on Villas
‘Momtech’ Investment Targets Old Villas Amid Redevelopment and Transportation Boom Expectations

[Asia Economy Reporter Ryu Tae-min] #At the real estate auction held at the Seoul Northern District Court on the 13th of last month, the hottest item was a 47㎡ (exclusive area) A Villa first-floor unit located in Beondong, Gangbuk-gu, Seoul. This villa, built 33 years ago, attracted 21 bidders and was sold for 234 million KRW, 80% higher than the minimum price of 130 million KRW. The second-highest bid for this property also exceeded 200 million KRW, indicating fierce competition.

Despite repeated warnings that housing prices have peaked recently, the popularity of row houses and multi-family (villa) properties in court-conducted real estate auctions is soaring. Not only in Seoul but also in relatively affordable villa auctions in Incheon and Gyeonggi, dozens of bidders are flocking, showing signs of overheated competition.

According to Gigi Auction, a specialized court auction company, the average winning bid rate for villas in Seoul in October was 93.40%. Although this is 4.5 percentage points lower than the previous month, it is the second-highest record ever. The winning bid rate refers to the ratio of the winning bid price to the appraised value. A winning bid rate of 93.4% means that a villa appraised at 100 million KRW was sold for 93.4 million KRW.

Incheon and Gyeonggi also show similar trends. The average winning bid rate for villas in Incheon in October rose by 4 percentage points from the previous month to 87.90%, the highest figure since the company began compiling statistics in 2001. The average winning bid rate for villas in Gyeonggi was 83.50%, also the highest ever.

Experts explain that as apartment prices soar and jeonse (long-term deposit rental) prices rise significantly, the burden on actual homebuyers has increased, leading them to flock to the villa market, which is relatively affordable and offers decent living environments, especially newly built villas within 10 years of construction. On the 26th of last month, 13 bidders competed in the auction for an 85㎡ B Villa in Cheongna-dong, Seo-gu, Incheon. This property, built in 2016, was sold for 650.72 million KRW, 47.2% higher than the appraised value of 442 million KRW.

Additionally, for the time being, some investors are targeting cheap first-floor or semi-basement units in 20-30-year-old old villas, hoping for redevelopment projects or transportation improvements, a strategy known as ‘mom-tech’ investment. Especially in the auction market, prices are considered relatively cheaper than in the sales market, which could maximize future returns and capital gains. For example, a 36㎡ C Villa in Gyesan-dong, Gyeyang-gu, Incheon, built in 1991, was sold at auction on the 13th for 88.88 million KRW, 64.6% higher than the appraised value of 54 million KRW.

Lee Joo-hyun, a senior researcher at Gigi Auction, explained, “Because apartment prices are so high, actual residents are moving to the villa auction market, which is considered relatively affordable. Along with this, the recent growing expectations for redevelopment in the metropolitan area have created a coexistence of demand for investing in old villas aiming for capital gains.”

Meanwhile, in the case of Seoul apartments, even the auction market’s winning bid rate has soared to the highest level ever, increasing the price burden on buyers. Last month, the winning bid rate for Seoul apartments reached a record high of 119.0%.

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