Is the Seoul Apartment Auction Market Cooling Off? Winning Bid Rate Drops Below 100% for First Time in 6 Months [Real Estate AtoZ]

Increase in Listings from Multiple-Homeowners and Impact of Lending Restrictions
Auction Market Sees 'Price Leveling' for Apartments Priced at 1.5 Billion Won or Less

The court auction winning bid rate for Seoul apartments has fallen below 100% again after six months. The auction market is experiencing a slowdown due to a weakened buying trend, particularly for ultra-high-priced apartments, coupled with an increase in listings from multiple-home owners and concerns about the burden of property taxes.

According to JiJi Auction, a company specializing in auction data, the winning bid rate for Seoul apartment auctions last month was recorded at 99.3%. The winning bid rate is an indicator that compares the actual auction price to the appraised value. If the rate is higher than 100%, it means the property was sold above the appraised value; if it is below 100%, it was sold for less than the appraised value.

The winning bid rate for Seoul apartments was 99.5% in September last year, but it rose to 102.3% in October and remained above 100% for five consecutive months until February of this year. However, after peaking at 107.8% in January this year, the rate declined to 101.7% in February and further dropped to 99.3% in March, finally falling below the 100% mark.

The interior view of the Seoul Central District Court auction courtroom where the auction bidding is in progress. Photo by The Asia Business Daily Database

Market observers believe that the increase in urgent listings, particularly in prime areas of Seoul, has also impacted the auction market. After President Lee Jaemyung announced via social media on January 23 that there were no plans to consider a temporary suspension of the capital gains tax surcharge for multiple-home owners, it is interpreted that these owners began rushing to put their properties on the market.

The government's announcement on February 12 that the temporary suspension of the capital gains tax surcharge for multiple-home owners would end as scheduled on May 9 is also seen as a contributing factor. However, the government also introduced a supplementary measure allowing those who complete contracts by May 9 to delay the payment of the balance and the registration process.

Additionally, the official posted prices for multi-unit dwellings in Seoul this year have seen the largest increase in five years, raising concerns that the property tax burden could grow heavier. With expectations of higher comprehensive real estate tax and property tax, owners of high-priced apartments in Seoul have continued to list their properties for sale.

Last month, Seoul's apartment auction market showed overall weakness not only in the winning bid rate but also in other indicators. The auction success rate fell to 43.5%, down from 45.4% in February. The average number of bidders also decreased from 8.1 to 7.6. This indicates that fewer people are stepping in to buy properties at auction.

This trend mirrors the general sentiment in the regular sales market. Lending regulations, an increase in listings from multiple-home owners, and concerns about the property tax burden have all combined to trigger a correction, especially in the high-priced apartment market, and this atmosphere has spread to the auction market as well.

Meanwhile, end-users are flocking to mid- to low-priced apartments, where the price burden is relatively lighter. In particular, demand has been concentrating on apartments priced at 1.5 billion won or less, for which mortgage loans are available, resulting in several cases where the winning bid price has come close to the 1.5 billion won threshold.

A notice about property tax posted at a real estate agency in Jamsil, Songpa-gu, Seoul on the 17th of last month. Photo by Yonhap News

For example, last month, a 51.77-square-meter (12th floor) apartment in Wirye 24 Complex, Jangji-dong, Songpa-gu, Seoul, was auctioned off at 1,499,999,999 won—about 420 million won higher than its appraised value of 1.08 billion won. The winning bid rate was 138.9%, and there were as many as 19 bidders.

Similarly, a 71.85-square-meter (1st floor) unit at Heights Apartment in Sageun-dong, Seongdong-gu, Seoul, attracted 34 bidders. This property was sold for 783 million won, 107 million won above its initial appraised value of 676 million won, with a winning bid rate of 115.8%.

Ji Juhyun, a senior analyst at JiJi Auction, said, "Auctions have served as a niche market for gap investments even under the land transaction permit system, as there is no requirement for actual residence. However, lately, the Seoul apartment auction market has also seen speculative demand retreat, particularly for ultra-high-priced apartments, due to price corrections and increased property tax pressure, just like the general sales market."

He added, "Going forward, it is highly likely that the so-called 'leveling out' trend will continue in the auction market, with demand clustering around apartments priced at 1.5 billion won or less and prices rising to similar levels."

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