Auction Market Also Faces 'Transaction Cliff'... Only 1.8 Out of 10 Seoul Apartments Sold

Apartment view around Seoul / Photo by Jang Jin-hyeong aymsdream@

[Asia Economy Reporter Ryu Tae-min] The court auction market, considered a 'leading indicator of housing prices,' is also experiencing a severe transaction freeze. Even Seoul apartments, which used to attract many bidders for every property listed, are losing popularity, resulting in continuous auction failures. As investment demand remains cautious, only 1.8 out of 10 cases found new owners, causing the winning bid rate to drop to an all-time low.

According to Gigi Auction, a court auction specialist company, the average winning bid rate for Seoul apartment auctions last month was 17.8%. This is the lowest figure since statistics began being compiled in May 2001, falling 4.6 percentage points from the previous month’s record low of 22.4%. The winning bid rate refers to the ratio of properties with confirmed winning bidders among those put up for auction. For example, it means that only about 1.8 out of 10 auctioned properties found new owners.

The winning bid rate for Seoul apartments soared to a record high of 80% in February last year, meaning that 8 out of 10 auctioned properties found new owners. However, it has since declined to less than a quarter of that level. In particular, last month saw a total of 107 auctions, the highest number since June 2019, but only 19 properties were sold.

The average number of bidders also dropped to a record low of 2.58. This contrasts sharply with February last year, when the market was vibrant and 11.67 bidders competed per property. Gigi Auction analyzed that the decrease in bidders led to an increase in auction failures, and unlike last year, the frozen sales market this year reduced the number of withdrawn auction items, resulting in a significant rise in the number of auctions conducted.

About half of the sold properties were located in the Gangnam area. Of the 19 Seoul apartments sold last month, 8 (42.1%) were in the Gangnam 4 districts (Gangnam, Seocho, Songpa, Gangdong). Notably, 4 of the 10 properties with the highest winning bid rates were in Gangnam-gu, and the property with the most bidders (7) was in the Gangil River Park complex in Gangil-dong, Gangdong-gu. This is interpreted as a sign that demand for a ‘smart single property’ remains relatively strong despite the ongoing downturn.

The winning bid rate, which indicates the ratio of the winning bid price to the appraised value, also dropped significantly. Last month, the average winning bid rate for Seoul apartment auctions was 88.6%, down 1.1 percentage points from the previous month. This is the lowest since March 2019, excluding March 2020 when many court recess days occurred due to COVID-19, marking the first time in three and a half years that the rate fell into the 80% range. For example, a winning bid rate of 88.6% means an apartment appraised at 100 million KRW was sold for 88.6 million KRW.

The winning bid rate for Seoul apartments exceeded 110% for seven consecutive months from the first half of last year, setting a record high five times, but has been declining since November last year when the sales market began to freeze.

Gyeonggi and Incheon Apartment Auction Markets Also 'Stumble'

The metropolitan areas outside Seoul are also experiencing a downturn. Last month, the winning bid rate for apartments in Incheon was 31.1%, meaning only 3 out of 10 properties were sold. The winning bid rate last month also fell 1.3 percentage points from the previous month to 78.7%, showing a significant decline compared to the second half of last year when rates reached as high as 120%.

In Gyeonggi Province, the winning bid rate last month was 31.9%, with about one-third of properties failing to sell. This is the lowest level in 48 months since August 2019. The winning bid rate remained low at 81.0%, following 79.7% the previous month.

The decline in the metropolitan area apartment court auction market is attributed to consecutive base interest rate hikes and comprehensive tightening of loan regulations. Additionally, growing negative outlooks on the future apartment sales market have led investment demand, which had been turning to auctions, to adopt a wait-and-see stance.

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