(Bloomberg) -- South Koreans piled into an auction for discounted luxury apartment units on Monday, crashing the government website for several hours and underscoring strong investor appetite for the greater Seoul area’s hot property market.
More than 2 million people were waiting to log in at 2:30 p.m. on Monday, an unprecedented queue. They were bidding on 114 units at a luxury apartment complex in Banpo, Seoul, and one unit in Dongtan, south of Seoul, before the website went down. The state-run Korea Real Estate Board extended the bidding deadline to 11 p.m. for the Banpo apartments and to Tuesday for the Dongtan flat, according to an e-mailed statement.
The units are being offered for prices below their market value under a government plan that requires most apartment developers to sell a part of new projects at discounts through a pre-sale program. When the gap between new home prices and secondary-market prices is big, the auctions attract speculators seeking to make quick profits.
The apartment units in Banpo, one of the most affluent areas in Seoul, could fetch valuations of as much as 2.3 billion won ($1.7 million) each. Given the market rate in the area, a winning bidder could make potential profit of 2 billion won. The unit in Dongtan near a chip complex of Samsung Electronics Co. could generate about 1 billion won of return.
Strong demand for the units is another sign of recovery in Seoul’s top-end property market, which the central bank is watching closely as it considers the timing of an interest rate cut after being on hold since early 2023. The Bank of Korea is concerned premature rate-cut signals may risk stoking the real estate market.
Seoul’s apartment market has been on a tear amid a buying spree in popular areas. Prices in the capital climbed 0.3% last week from the previous seven-day period in the biggest rise since September 2018. They’ve gained for 18 consecutive weeks, according to data from the Korea Real Estate Board.
Koreans call the apartments “lotto” since the trade has the potential to generate billions of won in profit.
--With assistance from Seyoon Kim and Sam Kim.
©2024 Bloomberg L.P.
