[Practical Finance] Auction Market Cold Spell... But If You Put in the Effort, a Smart Home Can Be Yours

Cold Wind Blows Through Auction Market Amid Real Estate Cooling

Reduced Number of Competing Bidders Increases Winning Probability

Select Target Areas in Advance and Start with Familiar Places

[Asia Economy Reporter Kim Min-young] As the real estate market continues to cool, many people hesitate to buy their own homes. High interest rates have increased the burden of loan interest, and with forecasts that housing prices may fall further, more buyers are adopting a wait-and-see approach rather than rushing to purchase.

The auction market is no different from the sales market in atmosphere. When the real estate market was booming, court auction rooms in various regions were crowded, but recently, even seats in the gallery have been seen empty. However, this is precisely the time to turn the situation into an opportunity to select properties that suit you and secure your home. A decrease in the number of competing bidders means your chances of winning the bid have increased. A lower winning bid rate also means you can buy below market price.

◇ Buy a 1 Billion KRW Apartment in Seoul for 880 Million KRW = According to auction information company Gigi Auction, the average winning bid rate for apartment auctions in October was 88.60% in Seoul and 81.0% in Gyeonggi Province. This means that an apartment with a market price of 1 billion KRW can be purchased for about 880 million KRW in Seoul and 810 million KRW in Gyeonggi. Winning a bid at auction also reduces acquisition tax. Since the purchase price is lower than in general transactions, taxes can be saved. Also, even in designated land transaction permission zones, acquiring property through auction does not require land transaction permission. There is no mandatory holding period after acquisition, so ownership transfer is possible immediately.

Let's look at some auction properties recommended by Gigi Auction. According to Gigi Auction, Apartment Complex 7, Building 722, 10th floor, Unit 1004, Mok-dong New Town, 925 Mok-dong, Yangcheon-gu, Seoul, is on the auction market. This property is part of a 34-building, 2,250-unit apartment complex completed in November 1986, located on the 10th floor of a 15-floor building. The exclusive area is 101㎡ with 4 rooms, 2 bathrooms, and a staircase layout. It is close to Mok-dong Station and Omokgyo Station on Subway Line 5, making public transportation convenient. Commercial and convenience facilities in the Mok-dong Station area are accessible. Nearby educational institutions include Mok-dong Elementary School, Mokun Middle School, and Jinmyeong Girls' High School. The initial appraised value was 2.62 billion KRW, and after two failed auctions, bidding is proceeding at 1.6768 billion KRW. The auction will be held on December 6 at the Southern District Court Auction Division 4. Case number 2021-111684.

Another property worth noting is Unit 1405, 14th floor, Building 103, Sillim Hyundai, 1694 Sillim-dong, Gwanak-gu, Seoul. This property is part of a 12-building, 1,634-unit apartment complex completed in June 1994, located on the 14th floor of a 15-floor building. The exclusive area is 120㎡ with 4 rooms, 2 bathrooms, and a staircase layout. It is within walking distance to Seowon Station on the Sillim Line and Seoul National University Venture Town Station, making public transportation convenient. To the south of this property, the Sillim 1 District has been designated as a rapid redevelopment integrated plan zone, expected to improve foot traffic and living convenience facilities in the future. Nearby educational institutions include Sillim Elementary School and Singwan Middle School. The initial appraised value was 1.262 billion KRW, and after two failed auctions, bidding is proceeding at 876.8 million KRW. The auction will be held on the 30th of this month at the Central District Court Auction Division 4. Case number 2021-109425.

Unit 801, 8th floor, Building 102, Shangreville, 949 Cheongnyangni-dong, Seongbuk-gu, Seoul, is also up for auction. This property is part of a 4-building, 352-unit apartment complex completed in August 2004, located on the 8th floor of a 22-floor building. The exclusive area is 79㎡ with 3 rooms, 2 bathrooms, and a staircase layout. Wolgok Station on Line 6 is within accessible distance. The initial appraised value was 803 million KRW, and after two failed auctions, bidding is proceeding at 513.92 million KRW. The auction will be held on December 13 at the Northern District Court Auction Division 9. Case number 2021-108896.

◇ Select Target Areas in Advance... Carefully Calculate Bid Prices = Although the real estate auction market allows you to purchase properties below market price, it also carries many risks, so you should not jump in without any preparation.

Senior Researcher Lee Joo-hyun of Gigi Auction advises selecting target areas in advance or starting with areas you know well. By selecting two or three target areas and continuously researching the market prices and trends of real estate, you can approach ahead of others and make more accurate value judgments. The investment purpose should also be clear.

Researcher Lee said, "For example, if the goal is capital gains, it is good to study approaches and solutions for redevelopment, reconstruction, or so-called ‘special properties’ that others do not often seek, and build your skills." He added, "If focusing on rental income, do not neglect broad understanding and regional analysis of commercial areas, vacancy rates, and profitability of commercial properties, officetels, and knowledge industry centers." Setting a specific purpose allows you to plan investment amounts and appropriate winning bid prices that suit you.

You should also discard the perception that the auction appraised price equals market price. When a real estate auction is requested, the court conducts an appraisal of the property simultaneously with the auction commencement registration. After going through several procedures, the sale date for investors to bid is set at least six months, sometimes up to a year later. Due to the time gap between the appraisal and the sale date, the appraised price may not reflect the current market price. For example, in a rising market, the appraised price will inevitably be lower than the market price, and conversely, in a declining market, the appraised price will be higher than the market price.

Researcher Lee said, "Since the auction appraised price cannot be an absolute standard for calculating bid prices, you should thoroughly investigate surrounding actual transaction prices and asking prices, think flexibly according to the situation, and calculate your bid price accordingly."

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