[Real Investment] Gangnam Apartments See Series of Low-Priced Auction Sales... Is It Time to Trade Up Through Auctions?

High-End Gangnam Complexes Falling Short of 100% of Appraisal Value
Tax Reforms and Lending Regulations Suppress Bidding Demand
Multiple Auction Failures Lead to Up to 1 Billion KRW Below Asking Price

Recently, low winning bids with bid-to-appraisal ratios below 100% have become common, particularly for high-priced homes in the Hangang Belt and Gangnam area. The number of bidders has plunged as the 8.3 tax reform has sharply increased property tax burdens and coincided with stringent lending restrictions. However, some expect this trend could present an opportunity for buyers seeking to move up to a more desirable neighborhood. In fact, bidders have recently flocked to high-priced apartments in the Gangnam area, where minimum auction prices have fallen by as much as KRW 1 billion below asking prices.

Trimage Appraised at KRW 7.4 Billion Goes for KRW 5.8 Billion

According to GG Auction on October 7, the winning bid-to-appraisal ratio for apartments in Seoul stood at 94.7% last month, its lowest level in 19 months since February 2025, when it was 91.8%. A ratio below 100% means that the winning bid was lower than the property's initial appraised value.

Low winning bids for high-priced homes and medium-to-large apartments in Seoul's Hangang Belt drove down the overall ratio. An analysis by The Asia Business Daily of last month's auction bids compiled by GG Auction, a company specializing in auction and court-sale data, found that only five of the 10 properties with initial appraisals of at least KRW 3 billion were sold. Four of those five, excluding the 50-pyeong unit (132.4 square meters of exclusive area) at Banpo Xi in Seocho-gu, sold for less than their appraised values.

By property, a 38-pyeong unit (115 square meters of exclusive area) at Daelim in Ichon-dong, Yongsan-gu, sold for KRW 2.81888 billion, or 93% of its initial appraised value of KRW 3.03 billion. A 50-pyeong unit (147 square meters of exclusive area) at Sambu Apartments in Yeouido, Yeongdeungpo-gu, found a buyer at its third auction, after failing to sell twice, for KRW 4.02199 billion, or 79% of its initial appraised value of KRW 5.083 billion.

A 35-pyeong unit (95 square meters of exclusive area) in Mokdong New Town Complex 3 in Yangcheon-gu, where the redevelopment association has yet to be established and membership rights can therefore be transferred, sold for KRW 2.50911 billion, about KRW 500 million below its initial appraised value of KRW 3 billion. Its winning bid-to-appraisal ratio was 84%.

Trimage in Seongsu-dong, the property with the highest appraisal among those put up for auction last month, was a 61-pyeong unit (152 square meters of exclusive area) that sold for KRW 5.874 billion. That was about 80% of its initial appraised value of KRW 7.39 billion. The property found a buyer only at its third auction, after failing to sell twice. Among auctions held last month, only the 50-pyeong unit (132 square meters of exclusive area) at Banpo Xi found a buyer at its first auction for its initial appraised value of KRW 4.96 billion.

By contrast, mid- and lower-priced complexes on Seoul's outskirts saw a string of bids above appraisal, keeping the market fiercely competitive. Of the 53 properties priced below KRW 1.5 billion that sold at auction last month, 28 had winning bid-to-appraisal ratios above 100%. A 30-pyeong unit (85 square meters of exclusive area) at Dangsan Hyundai Complex 3 in Yeongdeungpo-gu, for example, sold for KRW 1.62999 billion, about KRW 500 million above its initial appraised value of KRW 1.11 billion, giving it a ratio of 147%. No fewer than 21 bidders competed for that property.

Property Tax Burden and Lending Restrictions Choke Off Funds, Cutting Auction Demand

The tax reform is cited as a reason for the recent decline in auction demand for high-priced homes. Under the 8.3 tax reform, the comprehensive real estate tax rates were revised to focus on property value rather than the number of homes owned, sharply increasing the tax burden on owners of high-priced homes. In addition, the special deduction for long-term home ownership was shifted from an ownership-based to a residence-based calculation, reducing investor demand for high-priced homes at auction.

Lee Juhyun, a senior research fellow at GG Auction, said, "Demand from end users looking to buy a home has been concentrated on auction properties in mid- and lower-priced complexes on Seoul's outskirts, particularly those priced below KRW 1.5 billion." He added, "The tax burden has reduced demand from buyers seeking high-priced homes for investment, and the auction market has been reshaped around end users."

Stringent lending restrictions are also cited as a reason for the drop in demand for high-priced auction properties. Under the June 27 lending restrictions announced last year and the October 15 measures, the limit on auction balance loans for homes priced above KRW 2.5 billion in the Seoul metropolitan area and other regulated regions was cut to KRW 200 million. In addition, a loan-to-value (LTV) ratio of 40% applies to all buyers except first-time homebuyers, meaning that bidders must effectively prepare most of the winning bid in cash. Investors seeking short-term capital gains had previously secured funds for winning bids through a workaround: loans to property trading businesses. But lending for those businesses has also been restricted to an LTV of 0%, except for purchases such as newly built homes other than apartments, cutting off that source of funds as well.

Winning Bids Nearly KRW 1 Billion Below Asking Prices

However, experts see the current market as an opportunity for buyers with sufficient cash who are looking to move up to a better home. In the Hangang Belt, more and more high-priced properties have failed to sell at auction multiple times, resulting in winning bids nearly KRW 1 billion below asking prices. Auctions also have an advantage over buying a bargain property on the regular market: buyers are not subject to the owner-occupancy requirement under the land transaction permit system, and face a lighter burden when documenting the source of their funds.

Kang Eunhyun, head of the auction research center at Myeongdo Law Firm, said, "Since the start of this year, the winning bid-to-appraisal ratio for high-priced properties in the Hangang Belt has continued to trend lower than last year." He added, "For end users who own one home and have been looking to move to the Gangnam area to secure one high-quality property, auction listings whose minimum bids have fallen after multiple failed auctions may be worth considering."

A 50-pyeong unit at Sambu Apartments in Yeouido that sold at auction this month found a buyer for KRW 4.02199 billion, nearly KRW 400 million below the market's lowest asking price of KRW 4.4 billion. It was also about KRW 500 million below the April transaction price of KRW 4.5 billion. Seven bidders competed for the property at its third auction, well above the Seoul average of 5.41.

The 38-pyeong unit (115 square meters of exclusive area) at Daelim in Ichon-dong, which sold for KRW 2.81888 billion, also fetched about KRW 400 million less than the lowest asking price of KRW 3.2 billion for a high-floor unit with the same specifications. The 61-pyeong unit at Trimage in Seongsu-dong likewise sold for KRW 5.874 billion, nearly KRW 1 billion below its lowest asking price of KRW 6.89 billion. Seven and eight bidders, respectively, competed for those properties.

However, setting an appropriate bid is likely to be key to increasing the chances of winning. As repeated failed auctions widen the gap between the minimum auction price and asking prices on the sales market, the bid amount is likely to determine whether a bidder succeeds.

Kang said, "In the auction market, bids are often set at around 10% below asking prices in the Gangnam area and around 5% below in other areas." He added, "For properties where repeated failed auctions have widened the gap between the minimum auction price and asking prices, bidders can improve their chances of success by taking market asking prices into account and setting an appropriate bid."

This content was produced with the assistance of AI translation services.