hankyoreh

People look out over a hazy Seoul from Mount Nam in the capital. (Yonhap)

Amid the effects of a real estate market slump and high interest rates, the amount of South Korean real estate put up for auction due to failure to repay debt to financial institutions reached a nine-year high in 2023.

According to statistics published on the Supreme Court of Korea’s registration information site, there were a total of 105,614 registration requests for the initiation of voluntary auction proceedings last year for real estate, including land, structures, and condominium buildings. The number was up by 61% from its level in 2022.

The last time the number of requests surpassed 100,000 was nine years earlier, in 2014, when it was calculated at 124,253.

Voluntary auction is a procedure in which creditors put real estate up for auction to recover a loan when borrowers who used it for collateral are unable to repay their loan and interest in a timely manner. Typically, it occurs when the creditor is a bank or other financial institution.

Condominium buildings — a category that includes apartment buildings, “officetels” (multi-purpose residential and commercial buildings), and multi-family housing — accounted for 39,059 cases of real estate for which voluntary auction initiation registration was requested last year. That number was up by 62% from 24,101 the year before.

The situation appeared to reflect houses being auctioned as borrowers who purchased them with excessive loans taken out amid the low interest rates of 2020 and 2021 found themselves unable to cope with the higher rates. Analysts estimated that a large number of voluntary auction residences involved cases of deposit fraud.

By administrative locale, the largest number of voluntary auction registration requests for aggregate buildings last year was in Gyeonggi Province. A total of 11,106 cases were counted, representing an increase of 114.3% from 5,182 the year before.

The city of Suwon, which accounted for a particularly large number of deposit fraud cases in the province, had 990 requests, up by 181% from 352 in 2022.

In second place after Gyeonggi Province was Seoul with 4,773 requests, an increase of 74.1%. Busan came in next with 4,196 requests, up by 105.4%.

The rise in voluntary auctions, especially for residences, appears poised to continue this year.

“Interest rates are still at a high level, and the crunch in the real estate market means there aren’t really a lot of transactions,” said Lee Ju-hyeon, a senior researcher with the real estate auction and short sale data firm GG Auction.

“We’re going to continue seeing voluntary auction sales from people who took out excessive loans to buy houses during the period when prices were rising and have found themselves unable to keep up with the burden of paying back the principal,” he predicted.

By Choi Jong-hoon, staff reporter

Please direct questions or comments to [english@hani.co.kr]