Seoul Apartment Auction 'Price Gaps' Widen... ₩470 Million Lower in Gangnam and ₩250 Million Lower in Mokdong

[Financial News]  Seoul apartment prices have risen for 85 consecutive weeks. Yet once the Chuseok holiday ends, Seoul apartments with price tags hundreds of millions of won below market value will appear in court auctions one after another, seeking new owners. The properties range from Gangnam and Mokdong to Nowon and Guro. The key point in the auction market is not how far a property has fallen below its appraised value, but how much cheaper it actually is than its current market price.
According to court-auction industry sources on the 25th, the 76.77-square-meter unit at The H Xi Gaepo in Irwon-dong, Gangnam-gu, will be put up for auction at the Seoul Central District Court on Oct. 1. The appraisal value and minimum bid are ₩3.03 billion. That is ₩470 million below the KB standard market estimate of ₩3.5 billion. Although this is a new auction listing that has not failed to attract a bid even once, the auction is effectively starting at a price about 13% below the current market value.
On Oct. 7, immediately after the Chuseok holiday, a 59.39-square-meter unit at Mokdong New Town Complex 7 in Yangcheon District will go under the hammer. The minimum bid is ₩1.75 billion, which is ₩250 million below the KB standard market estimate of ₩2 billion and ₩210 million below the actual transaction price of ₩1.96 billion recorded in July.
That same day, the 84.96-square-meter Doosan Apartment in Gaebong-dong, Guro District, will begin its first auction at ₩645 million. The price is ₩120 million below the KB standard market estimate of ₩765 million and about 19% lower than the ₩800 million actual transaction price recorded in August.
The discount is even greater for properties that have failed to sell at auction. The 134.74-square-meter unit at Dongjin-Shinan Apartments in Junggye-dong, Nowon District, failed to attract a bid once against an appraisal value of ₩1.35 billion, bringing its minimum bid down to ₩1.08 billion. That is ₩420 million below the KB standard market estimate of ₩1.5 billion.
Conversely, there are places where the idea that 'auctions are cheap' does not hold.
The 59.97-square-meter unit at Mapo The Classic in Ahyeon-dong, Mapo District, will hold its first auction on Oct. 6 at an appraised value of ₩2.23 billion. That is similar to the KB standard market estimate of ₩2.225 billion and actually ₩80 million higher than the ₩2.15 billion actual transaction price recorded in July.
The 84.97-square-meter unit at Seocho Gyodae e-Pyeonhansesang in Seocho-dong, Seocho District, will also begin bidding that day at ₩3.461 billion. This is higher than the KB standard market estimate of ₩3 billion.
The gap in market sentiment between the general home-sales market and the auction market is also widening, analysts say. According to the Korea Real Estate Board (KREB), Seoul apartment sales prices rose 0.13% week-on-week in the third week of September, marking 85 consecutive weeks of gains. By contrast, the winning-bid-to-appraisal ratio for Seoul apartment auctions stood at 89.3% that week, down 5.5 percentage points from the previous week.
A real estate industry official said, "Ultimately, the number to watch in the auction market after Chuseok is not 'how many times the property has failed to sell.' Even if the appraisal value has been reduced by 20%, a property is not a bargain if its current market price is lower. Conversely, even a new auction listing that has not failed to attract a bid can start at a price below the current market value if home prices have risen since the appraisal."
If The H Xi Gaepo and Mokdong New Town Complex 7 fall into the latter category, Mapo The Classic and Seocho Gyodae e-Pyeonhansesang offer little clear price advantage based solely on their initial auction prices.
An auction industry official pointed out, "Because an appraisal value reflects the price at the time of assessment, it can differ from the current market price. Rather than the number of failed auctions, buyers should first compare recent actual transaction prices and current market prices for the same complex and similar-sized units." The official continued, "They must also examine senior tenants and their enforceable rights, rights that must be assumed by the buyer, delinquent maintenance fees, and eviction costs. What buyers should look for at auction houses after Chuseok is not a home that has failed to sell many times, but one that is genuinely cheaper than its current market price. Related matters must also be examined carefully." 


[email protected] Kim Kyung-a Reporter