Dwellings seized for failing to repay loans or jeonse deposits on time or for unpaid taxes have surged by nearly 40% in five years. It suggests more self-employed people and low-income residents are hitting their limits as high interest rates and a prolonged economic slump persist.
According to the court's Registration Information Plaza on the 22nd, from January to November this year, applications to register seizures of multi-unit buildings (apartments, low-rise apartment, etc.) totaled 183,296, up 10% from the same period a year earlier (167,483). Annual applications, which were around 130,000 in 2020 and 2021, rose 36.2% to 180,000 this year.
If a debtor fails to repay money, the creditor can file a lawsuit, and if successful, can seize assets, including dwellings, and pursue a forced auction through the court. Provisional seizures, which temporarily freeze a debtor's asset, have also been rising over the same period. Applications to register provisional seizures of multi-unit buildings rose 39.2% from 85,300 in 2020 to 118,709 this year.
Ko Jun-seok, a professor at Yonsei University Sangnam Institute of Management, said, "Seized dwellings proceed to forced auction, which means the number of self-employed people in difficulty has increased significantly," adding, "The economy remains sluggish, but the lending rate is high, so delinquency among the self-employed continues to rise."
According to the Financial Stability Report released by the Bank of Korea in Sep., as of the end of the second quarter this year, the number of vulnerable self-employed borrowers (those with multiple debt and in the bottom 30% by income) was 437,000, of whom 25.6% had failed to repay for more than a month. In other words, one in four are in arrears, and the share in arrears has more than doubled from 11.3% in the first quarter of 2021.
High interest rates have been a direct blow. Rates need to fall to ease interest burdens, but cuts have been slow. The Bank of Korea's base rate climbed steeply from an annual 0.50% in May 2020 to 3.5% in Jan. 2023, then stayed on hold for 1 year and 9 months through Oct. last year, the longest stretch on record. The Bank of Korea (BOK) has cut the base rate four times since late last year, but some now raise the possibility that the rate-cut cycle may be over.
Those who stretched to buy a home and cannot repay loans on time amid higher interest—the so-called "yeongkkeul" who "scraped together even their soul" to purchase dwellings—have also increased. Through Nov. this year, applications nationwide to register changes in ownership due to voluntary auctions of multi-unit buildings totaled 22,562, up 17.9% from the same period a year earlier (19,132). A voluntary auction enforces collateral rights such as mortgages, revolving mortgages, liens, pledges, jeonse rights, and provisional collateral registrations established on real estate that a creditor received as collateral from a debtor. It typically occurs when borrowers fail to repay principal and interest on loans secured by dwellings, among others.