"Become a 'God Owner' with Gangnam Apartment Prices"... Active Transactions in Small Building Deals [Practical Financial Techniques]

Despite adverse factors such as the prolonged COVID-19 pandemic and the resulting downturn in the self-employed business sector, the small building market continues to show an upward trend. Unlike the housing market, which is facing a transaction freeze, transactions of small to medium-sized buildings remain active.

According to real estate analysis platform Realty Korea on the 29th, the number of building transactions under 100 billion KRW in the third quarter of this year was recorded at 273. Although this is about a 23% decrease compared to 355 transactions in the same period last year, considering the transaction contraction caused by the interest rate hike warnings and strengthened loan regulations that began in earnest from the fourth quarter of 2020, this is regarded as a relatively good performance. Excluding the third quarter of last year, which was at an all-time high, the transaction volume in the third quarter of this year is higher than 265 cases in 2018 and 241 cases in 2019.

By price range, buildings under 5 billion KRW had the most active transactions with 114 cases, accounting for 41.8% of total transactions. The area with concentrated investment in buildings under 5 billion KRW was Mapo-gu with 28 transactions. Yongsan-gu followed with 10 cases, and Seongdong-gu with 8 cases. An industry insider said, "As the price of large apartments in Gangnam exceeds 5 billion KRW and housing prices soar, the perception has spread that one can also become a small building owner at a similar price, which led to this result."

The highest yield was recorded for buildings priced between 5 billion and 10 billion KRW at 2.31%. Buildings under 5 billion KRW had a yield of 2.19%, followed by those over 20 billion KRW at 1.67%. Properties priced between 10 billion and 20 billion KRW had the lowest yield at 0.81%.

The value of small to medium-sized buildings is also rising in the auction market. While the winning bid rate has been soaring every year, recently, a large number of bidders crowded into one auction case, pushing the winning bid ratio close to 200% of the appraised value.

According to Gigi Auction, a court auction specialist company, the average winning bid rate for small buildings (under 6 billion KRW) auctioned in Seoul from January to November this year was 120%. This is the highest figure since related statistics began in 2015. The average winning bid rate for small buildings was 97.1% in 2019 and 99.2% last year, both below the appraised value, but it has sharply increased this year.

Recently, a large number of bidders gathered for a small building, attracting attention. The auction for a building with a floor area of 536㎡ located in Cheongdam-dong, Gangnam-gu, attracted 120 bidders. This building was sold for 10.251 billion KRW, nearly double the appraised value of 5.219 billion KRW. The winning bid rate reached 196.4%.

The industry expects demand for small to medium-sized buildings to continue for the time being. A Realty Korea official said, "The total transaction amount of small to medium-sized buildings has also been increasing since 2018," adding, "The commercial real estate sector continues to benefit from the spillover effects of housing market regulations."

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