President Lee Jae-myung ordered officials to prepare for a sharp drop in home prices, citing increases in mortgage loan arrears and auction listings. In fact, from January to August this year, the number of apartment auctions nationwide rose by nearly 10% from the same period last year.
However, the increase was concentrated outside Seoul. Apartment auctions in Seoul fell by nearly 35%, while in the provinces, the number of auctions rose 16.5% but the bid success rate fell to 34%. Even in the auction market, the polarization between the Seoul and provincial housing markets is becoming more pronounced.
On the 30th, on X (formerly Twitter), the president said, "We should note that mortgage loan arrears and auction listings are increasing significantly," adding, "I hope you will also pay attention to the bid success rate."
He added, "I have instructed preparations for a system to purchase in bulk dwellings below certain standards for public housing holdings in case home prices plunge due to early large-scale supply, curbs on speculative demand, and a surge in loan arrears and auctions under high interest rates."
◇ Provincial apartment auctions up 16.5%…bid success rate at 34%
On the 31st, according to data obtained by ChosunBiz from GGAuction, a company specializing in foreclosure and public auction data, the number of apartment auctions nationwide from January to August this year was 25,174, up 9.8% from the same period last year. The figure combines voluntary and compulsory auctions.
The uptick was led by the provinces. During the same period, the number of provincial apartment auctions was 15,892, up 16.5%. By contrast, Seoul logged 1,079 cases, down 34.7%. The greater metropolitan area as a whole recorded 9,282 cases, down 0.01%, roughly flat from last year.
While auction listings increased nationwide, the share that actually found new owners fell. From January to August this year, the number of apartment auction sales nationwide was 9,236, down 5.5% from 9,772 in the same period last year. The bid success rate—the share of auctioned properties that actually sold—fell 5.9 percentage points, from 42.6% to 36.7%.
In the provinces, apartment sales fell from 5,522 to 5,409, down 2.0%. The bid success rate dropped 6.5 percentage points, from 40.5% to 34.0%. This means that while more apartments came to auction, demand to buy them weakened.
Seoul's apartment bid success rate also fell, from 50.3% to 46.3%. However, price indicators moved differently from the provinces. From January to August this year, the average successful bid-to-appraisal ratio for Seoul apartments was 101.2%, up 5.2 percentage points from 96.0% in the same period last year. A ratio above 100% means units sold above the appraised value.
Whereas the provinces saw more auction listings and a lower bid success rate, in Seoul, demand at auction appears to have persisted for apartments with strong locations and project feasibility.
◇ More sales of unit buildings at auction also outside Seoul
Gaps between Seoul and other regions also appeared in unit buildings, including villas, officetels, and retail spaces, not just apartments.
According to the Court Registration Information Plaza, applications for transfer of ownership registrations for unit buildings due to voluntary auction sales totaled 16,090 nationwide from January to July this year, up 15.7% from 13,909 in the same period last year. A voluntary auction is the process by which a creditor puts collateral real estate up for auction when the principal or interest on a secured loan is not repaid.
In the provinces, applications for transfer of ownership registrations rose 15.0% to 8,072. Gyeonggi and Incheon recorded 6,582, up 22.9%. By contrast, Seoul fell 6.3%, from 1,532 to 1,436.
Within Seoul, the differences by district were large. Guro District rose 176.6%, from 64 to 177, and Geumcheon District rose 282.1%, from 28 to 107. Gangseo District also increased 40.4%, from 104 to 146.
By contrast, the Gangnam area declined sharply. Seocho District fell 52.2%, from 138 to 66, and Gangnam District fell 46.9%, from 64 to 34.
Nam Hyuk-woo of the Woori Bank Real Estate Research Institute said, "Even if auction listings appear in Seoul, there is demand to absorb them, but in the provinces, the rise in auctions is relatively more likely to lead to default risk," adding, "In Seoul, loan accessibility matters more than the level of interest rates itself, so banks' total loan volume controls could become a bigger variable."
Experts say that if interest rates rise further and loan regulations tighten, the provinces, where housing demand is weaker, could be hit harder than Seoul. Nor is it easy to be reassured about Seoul based only on fewer auctions and a high bid success ratio. Observers noted that it is necessary to watch how rising rates and total loan volume limits affect buying sentiment.