In Seoul's apartment auction market, some units are being sold for more than their appraised values. A small apartment completed 40 years ago was awarded at more than 1 billion won per pyeong (3.3㎡). The winning bid was over 70% higher than the appraisal and more than 200 million won above recent general sale prices.
Analysts say the trend is showing up in the auction market as government lending curbs and the expansion of the land transaction permit system make it harder to buy apartments through general transactions and asking prices rise in the sales market. It also appears that auction prices are higher because auctions face fewer regulations than general transactions. Apartments purchased at auction are not subject to occupancy requirements under the land transaction permit system. In addition, if a financial institution under the Housing Act, such as a commercial bank, savings bank, or insurer, files for auction as a creditor, buyers can assume association membership even for redevelopment apartments in speculative-overheating districts.
According to GGAuction, an auction information provider, on Feb. 4, the Seoul apartment with the highest winning-bid ratio (winning bid as a percentage of appraisal) last month was Seongsan-Siyeong Apt. in Mapo District. On Jan. 13 at the Western District Court, a first-floor apartment with an exclusive area of 50.5㎡ (15.3 pyeong) sold for 1.6 billion won. The appraised value was 933 million won, but it was awarded for 667 million won more. The winning-bid ratio was 171%. It effectively sold for more than 104.55 million won per 3.3㎡.
For Seongsan-Siyeong Apt., on May 28, 2024, an eighth-floor unit of the same size was awarded for 880.1 million won, 88% of its then-appraised value (1 billion won). In one year and eight months, the winning price rose by more than 700 million won. The latest winning bid is also higher than general sale prices for the same layout. On Nov. 25 last year, an apartment of the same size changed hands in a general transaction for 1.37 billion won (13th floor).
Completed in 1986, Seongsan-Siyeong Apt. is the largest redevelopment complex in Mapo District, currently consisting of 14 stories across 33 buildings with 3,710 households. On Dec. 22 last year, it received approval to establish an association from Mapo District and is pursuing redevelopment. The plan calls for up to 40 stories across 30 buildings with 4,823 households. If rebuilt as planned, it would surpass Mapo Raemian Prugio (Maraepu) (3,885 households), the landmark mega-complex in Mapo District. Seongsan-Siyeong has good access to Gangbyeonbuk-ro and the Inner Ring Road, and is near a cluster of Han River bridges—Gayang Bridge to the north and Seongsan, Yanghwa, Seogang, and Mapo bridges to the south. With the recent opening of World Cup Bridge, access to Gangnam and Yeouido has also improved. World Cup Stadium lies to the west of the complex, and Haneul Park to the southwest.
Sadang Useong Complex 3 in Sadang-dong, Dongjak District, which is pursuing remodeling, was also sold last month at a winning bid close to 170% of its appraisal. A 59.9㎡ (18.1 pyeong) unit (appraised at 900 million won) sold for 1.51388 billion won. The winning-bid ratio was 168%, the second highest after Seongsan-Siyeong. The same size unit was sold in a general transaction for 1.4585 billion won on Nov. 13 last year.
Useong Complex 3, together with nearby Useong Complex 2, Geukdong, and Sindonga Complex 4, is known as "Ugeuksin." The total scale is 4,397 households (Useong 2: 1,080; Useong 3: 855; Geukdong: 1,550; Sindonga 4: 912). Useong and Geukdong formed associations and selected POSCO E&C as the remodeling contractor in May last year. Sindonga set up a separate remodeling promotion committee. On Oct. 29, 2024, a 59.9㎡ unit in Sindonga Complex 4 was awarded for 947 million won, 95% of its appraised value (1 billion won). In one year and three months, the winning price rose by more than 560 million won.
Other high winning-bid ratios included Gaepo Useong Complex 1 in Daechi-dong, Gangnam District (138.4%), Seonsa Hyundai in Amsa-dong, Gangdong District (137.6%), Seocho Sampung in Seocho-dong, Seocho District (132.1%), Raemian High River in Geumho-dong, Seongdong District (131.7%), Sambu in Yeouido-dong, Yeongdeungpo District (129.8%), Mok-dong New Town in Sinjeong-dong, Yangcheon District (129.3%), Raemian Park Suite in Guui-dong, Gwangjin District (129%), and Jamsil Els in Jamsil-dong, Songpa District (127.4%), all of which found new owners.
Lee Joo-hyun, a senior expert at GGAuction, said, "Record-high prices are appearing more often at auction than in the sales market," and noted, "Because of lending curbs and the land transaction permit system, it is hard for general sales to become actual transactions even as asking prices rise, and that is being reflected in higher auction winning bids."
Ham Young-jin, head of Woori Bank's Real Estate Research Lab, said, "It is unusual to see record highs exceeding general transaction prices in the auction market, where buyers usually seek discounts from market levels," adding, "This mainly appears when the market is overheated." Ham added, "Auctions have advantages such as relatively looser lending regulations and the ability to assume association membership in redevelopment complexes within speculative-overheating districts, and those factors likely contributed to higher winning bids."