The city of Seoul is expanding the application of the land transaction permission zone (land permission system) to the entire apartment complex in Gangnam (Gangnam, Seocho, Songpa) and Yongsan, which is increasing interest in these areas in the auction market. This is because apartments that go to auction are not subject to the land permission system and do not have a residential obligation, thus occupying a sort of regulatory blind spot. Recently, there have been cases where auction apartments in areas subject to the land permission system have been sold at prices higher than the appraised value. The balloon effect of the land permission system is spreading to the auction market.
According to data from auction and public sale specialist Gigi Auction on the 2nd, from the 19th of last month, when the land permission system was expanded to the three districts of Gangnam and Yongsan, there have been a total of six auctioned apartments sold in this area until the 1st. By autonomous district, Songpa had three sales, Seocho had two, and Yongsan had one. Among the legal districts, Jamsil had the highest number with two sales, and auction apartments were also sold in Banpo, Bangbae, and Macheon-dong.
Except for the auction that took place in Macheon-dong, all of the six auctions were sold at prices higher than the appraised value. This is a rare occurrence in the auction market, where deals usually occur at prices below the appraised value.
Looking at individual auction items, a property in Seocho's Banpo-dong, 'Acro River Park', with a dedicated area of 84㎡ was sold for 51,299,900 won, which is higher than the appraised value of 5.1 billion won. This is about 1 billion won higher than the minimum bid price of 4.08 billion won. The 'WOOSUNG 1, 2, 3 Apartment' in Songpa's Jamsil-dong (dedicated area of 131m²) was sold for a record high of 3.1764 billion won, and 'Bangbae Grand Xi' in Seocho's Bangbae-dong was also sold for 2.83111 billion won, finding new owners at prices exceeding the appraised values.
Lee Joo-hyun, a senior researcher at Gigi Auction, noted, “In the past, it was common for properties to be sold lower than the appraised value, but due to the impact of the land permission system designation, the advantage of not being subject to regulation has led to an increase in demand wanting to purchase at higher prices, even above the appraised value.” Ko Jun-seok, a professor at Yonsei University's Sangnam Business School, remarked, “Auction properties do not have the residential obligation, which is the core regulation of the land permission system, and the appraised value is assessed six months before the auction, which does not reflect the recent price increases in the real estate market, making them advantageous in terms of price,” adding, “Interest in auction apartments is likely to remain high in the future.”