This year, the number of properties sold through forced auctions in Seoul has reached its highest level since relevant statistics were made public. Notably, one-third of these sales occurred in Gangseo District, highlighting the ongoing impact of past jeonse fraud and deposit non-return issues concentrated in the southwestern region.
According to data from the Supreme Court's registration information portal, 4,386 properties had ownership transfer registrations due to forced auctions in Seoul from January to August this year, marking the highest level since the statistics were first released.
By district, Gangseo accounted for 1,432 cases, or 32.6% of the total in Seoul. This represents an 82.9% increase from 783 cases during the same period last year. Essentially, one in three properties that changed ownership through forced auctions in Seoul this year were located in Gangseo.
The concentration of forced auction sales is not limited to Gangseo but extends across the southwestern region of Seoul. Geumcheon saw an increase from 282 cases last year to 441 this year, a rise of 56.4%. Guro increased from 266 to 374 cases, a 40.6% rise, while Yangcheon rose from 293 to 343 cases, a 17.1% increase.
The four districts of Gangseo, Geumcheon, Guro, and Yangcheon accounted for 2,590 forced auction sales, or 59.1% of the total in Seoul. In contrast, Gangnam had only 47 cases, Seocho had 38, and Yongsan had just 7, highlighting a significant regional disparity.
The concentration of forced auction sales in the southwestern region is believed to be influenced by the accumulation of past issues related to the non-return of jeonse deposits, particularly in areas like Gangseo and Guro. A forced auction occurs when a creditor secures a court judgment and sells the debtor's property at auction. Unlike voluntary auctions initiated by financial institutions, forced auctions can also include cases where tenants seek to recover unpaid jeonse deposits.
In areas densely populated with villas and multi-family homes, many properties have gone to auction due to past jeonse fraud and deposit non-return issues, often experiencing multiple failed sales before finally being sold. This delay between the occurrence of the fraud and the actual auction and ownership transfer has resulted in the lingering effects of past jeonse fraud appearing in recent statistics.
In fact, the number of jeonse deposit return guarantee incidents reported by the Korea Housing and Urban Guarantee Corporation (HUG) surged from 1,870 in 2022 to 5,065 in 2023, more than doubling. The total amount involved in these incidents reached 1.32 trillion won in 2023. The properties that transitioned to auction as a result of these incidents have continued to affect the increase in forced auctions.
In Gangseo, some non-apartment properties have been sold at prices significantly below their appraised values after repeated failed auctions. For instance, a 27-square-meter unit in the 'Signature 6' complex in Hwajeong-dong sold for 14.55 million won, or 44.1% of its appraised value of 33 million won, after four failed auctions. Similarly, a 20-square-meter unit in 'J.E House' sold for 9.88 million won, or 41% of its appraised value of 24.1 million won, after also failing to sell four times.
However, there are signs of a shift in the auction market, with private buyers beginning to absorb the backlog of properties. Of the 5,672 homes for which HUG applied for forced auctions in the first half of this year, 4,347 (76.6%) were purchased by private bidders.
The partial recovery of the non-apartment market in Seoul may also be contributing to this trend. According to the Korea Real Estate Agency, the price of multi-family homes in Seoul rose by 3.37% from January to May this year, and the volume of non-apartment rental transactions increased by 11.5% compared to the same period last year. Analysts suggest that demand for auctions is increasing for properties with good locations and rental demand, particularly among those that have seen price reductions due to repeated failed auctions.
Shin Bo-yeon, a professor at Sejong University’s Department of Real Estate AI Convergence, noted, “The auction market for villas shows significant variation in sale prices depending on the potential for redevelopment and location. Areas with redevelopment or reconstruction issues tend to see higher sale prices, while other areas experience lower prices, indicating a sorting process.”
She added, “Particularly in multi-family and multi-household properties, prices have fallen, leading to a buildup of properties that have gone to auction due to landlords being unable to return deposits. As awareness of jeonse fraud among tenants increases and demand for monthly rent rises, we expect the number of such properties to gradually decrease over the next year.”
* This article has been translated by AI.
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