The Rocket Building in Yeoksam-dong was sold for 24.38 billion won, which was 47 million won over its estimated value. (Image : Yonhap)
SEOUL, Aug. 10 (Korea Bizwire) – Under the current market conditions, attention is concentrated on profitable real estate. Due to continued low interest rates, the auction price ratio of business and commercial properties at court auctions exceeded 70 percent for the first time in nine years. The number of bids also reached an all time high.
It has been interpreted that surplus funds from investors who could not find decent investments because of the low interest rates have been directed instead towards profitable real estate.
According to JiJi Auction, a company specializing in real estate auctions, the average auction price ratio of business and commercial properties during July was 70.2 percent, which was the highest since June 2006 (75.9 percent). It is the third time the auction price ratio exceeded 70 percent since JiJi Auction started investigating auction statistics in January 2001.
The bid rate also showed an all time high, passing 30 percent for the first time since JiJi Auction started keeping statistics. Among the 2,840 national auctions that occurred during the past month, 873 properties were auctioned off, recording a 30.7 percent bid rate.
A 12-story hotel in Jongno that was auctioned off for 34.1 billion won was the most expensive property sold at auction. The building failed to attract bids at three different auctions last year.
The Rocket Building in Yeoksam-dong ranked second. It was sold for 24.38 billion won, which was 47 million won over its estimated value.
Experts explain that investment on profitable real estate increases when expected profits are greater than the interest rate. “If interest rates are low, real estate prices are bound to go up. Investors hurried to profitable real estate after the low interest rate shock, as the return is two to three times higher than the bank rates.”
Lee Chang-dong, a researcher at JiJi Auction, expects that the demand for real estate will grow. “Eyes have been on real estate at the auctions since April. It started to heat up in May, and reached a high in July. We assume that the popularity of profitable real estate was neglected because of the rise of the housing market. When change occurs in the housing market due to regulations in loans, we expect an increase in the demand for profitable real estate.”
By M.H.Lee (mhlee@koreabizwire.com)
