On the 27th in Seoul Central District Court Auction Division 8. At an auction for a second-floor villa in "Daewang Housing" in Sangdo-dong, Dongjak District, Seoul, 20 bidders competed. Appraised at 269 million won, the property was sold for 401.5 million won. That is 132.5 million won above the appraisal. The bid-to-appraisal ratio (winning bid compared with appraisal) was 149.3%, the second highest among Seoul villa auction items in May.
Bidders were willing to pay premiums in the hundreds of millions of won because the villa is in an area eligible for a redevelopment occupancy right (nicknamed "ticket"). Unlike apartments in a land transaction permit zone, there is no requirement to live there, and buyers can aim for an occupancy right in a newly built apartment with relatively less capital, drawing in demand.
According to the maintenance industry and GGAuction, a data company specializing in auctions and public sales, on the 3rd, Daewang Housing is located within the Sangdo District 16 redevelopment site being pursued under Seoul City's expedited integrated planning. Sangdo District 16 covers about 85,787 square meters around 214 Sangdo-dong, Dongjak District, and the project will build a complex of 1,832 apartment units in two underground to 40 aboveground floors and supporting welfare facilities. Seoul City selected the area as a candidate site for expedited integrated planning redevelopment last year. A Dongjak District official said, "We are currently at the stage of establishing guidelines with Seoul City for the expedited integrated planning."
The phenomenon of auction demand flocking on redevelopment expectations is appearing in other areas as well. On the 28th, a day before the Daewang Housing auction, a fourth-floor villa in "The Terrace" in Sinjeong-dong, Yangcheon District, sold for 436 million won, more than 100 million won above the 332 million won appraisal. The bid-to-appraisal ratio was 131.4%. The property is within the Sinjeong Station District 1 redevelopment site. The project aims to develop 84,505 square meters around Sinjeong 4-dong under expedited integrated planning and create a large complex of more than 3,000 households. Kim Ho-u, head of the Sinjeong Station District 1 expedited planning promotion committee, said, "We plan to begin the process of designating the maintenance zone this month after resident review and other steps."
A similar case emerged in Jangwi-dong, Seongbuk District. On the 19th, the third floor of "Cheongun Twins Ville" in Jangwi-dong sold for 580 million won, 160 million won above the 420 million won appraisal. The bid-to-appraisal ratio was 138.1%. This property belongs to Jangwi District 14, a redevelopment promotion zone within Jangwi New Town. In March, a notice was issued changing the redevelopment promotion plan applying a 270% floor area ratio, and the project faces an integrated review by Seoul City's Architecture Committee in the second half of this year. The industry sees a possibility of business plan approval next year.
Experts say rising Seoul apartment prices and regulations in land transaction permit zones are drawing demand to redevelopment villa auctions.
Ko Jong-wan, head of the Korea Asset Management Research Institute, said, "As apartment prices and jeonse rents in Seoul rise together, end users are turning their eyes to the villa auction market, where entry burdens are relatively lower," adding, "In particular, redevelopment areas near subway stations draw strong interest on expectations of obtaining occupancy rights in newly built apartments."
Lee Ju-hyun, a specialist at GGAuction, said, "Unlike apartments, villas in land transaction permit zones are not subject to mandatory self-occupancy and can be approached with relatively less capital," adding, "As interest in villas in redevelopment areas grows, bidding competition in the auction market is heating up."
However, when winning a villa at auction in a redevelopment area, bidders should carefully check the type of auction.
In particular, they must check whether it is a compulsory auction. A compulsory auction is a process in which a creditor, after securing an enforcement title such as a court judgment, forcibly sells a debtor's real estate to recover the claim. It differs in nature from a voluntary auction, which a financial institution conducts based on collateral rights.
Meanwhile, when winning a villa at auction in a redevelopment area, one should check that the auction is not a compulsory auction. A compulsory auction is a legal process in which a creditor receives an "enforcement title," such as a judgment from a court, and forcibly sells the property of a debtor who does not repay the debt, recovering the lent money from the proceeds. It mainly follows nonperformance of debt between private parties and is distinct from voluntary auctions or public sales conducted by banks and other financial institutions or government agencies to recover creditor loans.
Kim Je-kyung, head of ToMe Real Estate Consulting, said, "In voluntary auctions or public sales, there are cases where you can still obtain occupancy rights through succession of a member's status even after the management and disposal plan approval, but in compulsory auctions, member status transfers are often not recognized," adding, "Even if redevelopment is completed, you could become subject to cash settlement instead of an occupancy right, so caution is needed."