Rising Apartment Thresholds... Surging Demand Heats Up Office-Tel Auction Market in the Seoul Metropolitan Area

Demand Surges Due to Regulatory Balloon Effect... Seoul's Average Winning Bid Rate at 101.2%
Number of Bidders Also Increased from Previous Month... Apartment Bidders Sharply Decrease

[Asia Economy Reporter Ryu Taemin] #On the 17th of last month, at the Goyang District Court in Gyeonggi Province, the hottest item at the court real estate auction was a 131㎡ (exclusive area) A officetel unit on the 2nd floor in Baekseok-dong, Ilsandong-gu. This residential-type officetel attracted 33 bidders and was sold at 526.18 million KRW, 40% higher than the appraised value of 374 million KRW. The 2nd and 3rd highest bids for this property were also close to 500 million KRW, indicating fierce competition.

As government regulations on real estate loans and taxes and fatigue from rapid housing price increases have raised the threshold for apartments, officetels, considered substitutes in real estate auctions, are gaining popularity. Competition is intensifying with dozens of bidders flocking not only to Seoul but also to relatively affordable officetel auctions in Gyeonggi Province.

According to Gigi Auction, a court auction specialist company, the average winning bid rate for Seoul officetels last month was 101.2%. This is 2.7 percentage points higher than the previous month and the third time this year that the rate exceeded 100%. The winning bid rate refers to the ratio of the winning bid price to the appraised value. A winning bid rate of 101.2% means that an officetel appraised at 100 million KRW was sold for 101.2 million KRW.

The average number of bidders per item is also increasing rapidly. This month, the average number of bidders in Seoul officetel auctions was 6.93, the second highest this year. The average number of bidders rose to 8.27 in January but then declined, remaining between 2 and 5 per month until last month.

Looking at actual winning cases, an officetel auction in Nonhyeon-dong, Gangnam-gu, Seoul, with an area of 58㎡, was sold for 617.59 million KRW on the 23rd of last month. This amount is 210.9 million KRW higher than the appraised value of 416.5 million KRW. Officetels in Yeoksam-dong, Gangnam-gu (25㎡), and Bongcheon-dong, Gwanak-gu (22㎡) also attracted 17 and 11 bidders respectively, selling above their appraised values.

This contrasts with the recent sharp decline in the number of bidders in the Seoul apartment auction market. Last month, the average number of bidders for Seoul apartment auctions was 2.82, the second lowest since Gigi Auction began compiling statistics in 2001. This is attributed to increased financial burdens due to strengthened government loan regulations.

The trend is similar in the Gyeonggi area. The average number of bidders for officetels in Gyeonggi last month was 7.67, the second highest this year. The average winning bid rate was 82.3%, down 13.3 percentage points from the previous month’s 95.6%, but still above the January-September average of 80.1% this year.

Especially in Gyeonggi, many auction properties attracted a large number of bidders. On the 16th of last month, an officetel auction in Yeongtong-gu, Suwon-si, Gyeonggi, with an area of 91㎡, attracted 22 bidders and was sold for 391.7 million KRW, 130.7 million KRW higher than the appraised value of 261 million KRW. A 30㎡ property in Sampyeong-dong, Bundang-gu, Seongnam-si, also attracted 33 bidders on the 29th of last month and sold above its appraised value.

This upward trend is due to a balloon effect from apartment regulations, driving demand into the officetel market. Joo Hyun Lee, senior researcher at Gigi Auction, explained, “Due to recent loan regulations and rapid price increases, the entry barrier for apartments has risen, making relatively affordable officetels popular as an alternative. Officetels are attracting both residents and investors as they are valued not only for living but also as income-generating real estate.”

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