"Less than 3 out of 10 units sold"... Seoul Apartment Auction Rate Hits Lowest in 13 Years

Seoul Apartment Auction Rate at 27.4%, Lowest in 13 Years and 7 Months
Despite Accumulating Listings, Average Bidders This Month Only 3... Half of January's Level
Out of 17 Successful Auctions, 11 Experienced at Least One Failure... Winning Bid Rate Also Drops Sharply

Seoul apartment exterior / Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Ryu Tae-min] The auction success rate for apartments in Seoul has hit its lowest point in 13 years. The apartment auction market, considered a leading indicator of the real estate market, seems unable to escape its slump. This appears to be due to the frozen sales market recently, combined with increased financing burdens caused by the total debt service ratio (DSR) regulations implemented this year, which have led to a halt in investment demand.

According to Gigi Auction, a court auction specialist company, the average auction success rate for apartments in Seoul last month was recorded at 27.4%. The success rate refers to the ratio of properties with confirmed buyers among those put up for bidding, meaning fewer than 3 out of 10 auctioned apartments found new owners. This is the lowest figure in 13 years and 7 months since December 2008, dropping by 52.6 percentage points from the record high of 80% in February last year, falling to about one-third of that level.

This month, the auction price ratio in the Seoul apartment auction market was recorded at 96.3%, the lowest since September 2020. The auction price ratio is the ratio of the auction price to the appraised value; for example, an apartment appraised at 100 million KRW was auctioned at 96.3 million KRW. From the first half of last year, the Seoul apartment auction price ratio exceeded 110% for seven consecutive months, setting record highs five times, but it has been declining since November last year when the sales market began to freeze.

More Properties but Finding New Owners Is ‘Like Catching Stars in the Sky’... Unsold Properties Are Highly Popular

The number of Seoul apartments coming up for court auction has been increasing recently. In the previous year, when market demand was strong, auctions averaged 35 cases per month due to many withdrawals, but this year, more properties have come to auction, with 62 cases conducted this month alone. This is analyzed as an increase in homeowners trying to resolve debts through auctions instead of sales due to the frozen housing transaction market.

On the other hand, the number of bidders has sharply decreased. The average number of bidders for Seoul apartment auctions this month was 3.0, the third-lowest since Gigi Auction began compiling statistics in 2001, dropping to less than half compared to 6.35 bidders in January this year. The average number of bidders surged to 11.6 in February last year during the real estate market boom but has been declining since the second half of last year when the sales market slowed. Gigi Auction explained that as the number of participants in auctions decreased, the number of unsold properties increased, causing the auction success rate to fall.

In particular, bidders are flocking to unsold properties. Of the 17 apartments auctioned successfully in Seoul this month, more than two-thirds, 11 cases (64.7%), were properties that had been unsold at least once before. This is interpreted as a growing perception that the appraised values are set higher than buyers’ expectations amid the recent downward trend in housing prices. Especially, appraisals for auctioned apartments are usually conducted 6 months to 1 year before the auction starts, and the appraisal period coincided with last year when concerns arose that housing prices had peaked. In Seoul’s legal auctions, if a property fails to find a buyer and is unsold, the minimum auction price is lowered by 20% of the appraised value each time.

Gyeonggi and Incheon Auction Markets Also Slowing... Financing Difficulties Due to Interest Rate Hikes and Stricter Loan Regulations

The metropolitan areas outside Seoul are also experiencing a downward trend. This month, the apartment auction success rate in Incheon dropped 19.8 percentage points from the previous month to 31.0%, marking the lowest since statistics began in May 2001. This is a 53.62 percentage point decrease compared to the record high of 84.62% in June last year. The auction price ratio also recorded 91.5% this month, significantly down from the 120% range in the second half of last year.

In Gyeonggi Province, the auction success rate this month was 46.0%, with more than half of the properties unsold. This is the lowest in 47 months since August 2019. The auction price ratio remained in the 90% range for three consecutive months since May, recording 92.7% this month.

The contraction of the metropolitan apartment court auction market is attributed to consecutive base interest rate hikes and the government’s comprehensive tightening of loan regulations. Additionally, as the outlook for the apartment sales market darkens, investment demand that had been flocking to the auction market is turning cautious. Joo Joo-hyun, a senior researcher at Gigi Auction, said, "Because loan regulations apply equally to auction properties, buyers seem to feel burdened by financing," adding, "With the total debt service ratio (DSR) regulations applied since the beginning of this year, the auction market is expected to slow down further."

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