The number of apartment and villa foreclosure filings in the Seoul metropolitan area in the second quarter neared 20,000. That was up 27.6% from the previous quarter and 62.1% from a year earlier. Completed sales also topped 5,000. Analysts said villa foreclosures rose in the outskirts of the metropolitan area due to the fallout from "can lease deposits," and the burden of debt repayment increased for self-employed people and others.
According to GGAuction, a data firm specializing in foreclosure and public auctions, the number of foreclosure filings for multifamily housing in the Seoul metropolitan area in the second quarter was 19,641. That was an increase of 4,254 filings (27.6%) from 15,387 in the first quarter. Compared with 12,115 in the second quarter of last year, it rose by 7,526 filings (62.1%).
Foreclosure filings for multifamily housing in the Seoul metropolitan area rose from 11,001 in the first quarter of last year to 12,115 in the second quarter, then continued to increase to 15,387 in the first quarter of this year and 19,641 in the second quarter.
Completed sales also increased. In the second quarter, the number of completed sales of multifamily housing in the metropolitan area was 5,093, up 660 (14.9%) from 4,433 in the first quarter. Compared with 4,023 in the second quarter of last year, it increased by 1,070 (26.6%).
By region, Gyeonggi Province saw the biggest gain. Completed sales of multifamily housing in Gyeonggi rose by 506 (24.6%), from 2,059 in the first quarter to 2,565 in the second quarter. Incheon also increased by 98 (10.5%) over the same period, from 934 to 1,032. Seoul edged up by 56 (3.9%), from 1,440 to 1,496.
Lee Joo-hyun, a senior expert at GGAuction, said, "Foreclosure volume for dwellings other than apartments, such as villas, is increasing, mainly on the outskirts of the metropolitan area," and "a significant number of properties appear to have come to auction due to the fallout from 'can lease deposits' or lease fraud."
In the market, there is an outlook that the increase in auction volume could continue for the time being. The Bank of Korea raised the base rate to 2.75% annually in July from 2.50%, and lifted it again to 3.00% in August. However, the second-quarter auction statistics are figures before the base rate hikes. The burden of repayment for borrowers due to rising rates could be reflected in the auction market with a time lag.
Lee Eun-hyung, a research fellow at the Korea Research Institute for Construction Policy, said, "If the base rate rises further, auctioned properties could increase, centering on self-employed people with unstable income or those who took on excessive loans."
There is also a view that not only voluntary auctions but also compulsory auctions could increase. A voluntary auction is one filed by financial institutions and others based on collateral rights. A compulsory auction is a procedure in which a creditor who prevails in a lending repayment lawsuit and the like disposes of the debtor's real estate based on a court ruling.
Ko Joon-seok, a professor at the Sangnam Institute of Management at Yonsei University, said, "If business loans or unsecured loans are not repaid, the creditor can provisionally seize the debtor's dwellings, then file a lending repayment claim and seek a compulsory auction," adding, "If arrears among vulnerable borrowers increase, compulsory auctions are also likely to rise."