A view of apartments in downtown Seoul from the Seoul Sky Observatory at Lotte World Tower in Songpa-gu, Seoul./Newsis
As the number of ‘tin can houses’, where the house price is lower than the jeonse deposit, is increasing, tenants who have not received the deposit back from the landlord on time are requesting a random or forced auction of real estate for reasons such as the return of the jeonse deposit, it has been found.
In the court auction market, which has been frozen in the aftermath of the slump in the real estate market, the rate of successful bids and successful bid prices is declining, and deposits that can be returned if the successful bid price drops due to successive failed bids are expected to decrease.
According to the Court Registration Information Plaza on the 16th, the number of registrations for the decision to start a random auction of real estate applications filed nationwide last month was 5897, an increase of 13.7% (711 cases) compared to September (5186 cases).
During the same period, there were 6,199 cases of registration of a decision to initiate a compulsory real estate auction applied nationwide, an increase of 26.9% (1,317 cases) compared to October (4,882 cases).
Auctions are divided into voluntary auctions and forced auctions. A compulsory auction is an auction in which a creditor applies to the court after obtaining a judgment through a lawsuit, etc., and is different from a random auction in which a mortgagee such as a financial company applies immediately without a trial.
The reason why ‘forced auctions’, which are conducted through lawsuits, along with ‘discretionary auctions’, which are carried out by setting up a mortgage right, has increased because the situation in which landlords are unable to return deposits for jeonse to tenants has increased due to the intensifying reverse jeonse crisis due to the recent decline in house prices.
In fact, according to the ‘rental market siren’ of the Korea Real Estate Agency, the amount of charter guarantee accidents that occurred nationwide in November last year was investigated at 186.2 billion won. Compared to last October (152.6 billion won), it increased by 22.0% (33.6 billion won).
In the industry, tenants have chosen auction as a way to get their deposit back, but there is an opinion that it will be difficult to get the entire deposit back through auction as the court auction market is currently experiencing an extreme slump.
According to the ‘December 2022 Auction Trend Report’ released by Jiji Auction, a company specializing in court auctions, the number of apartment auctions nationwide was 1,754, of which 483 were successful. The successful bid rate, which refers to the percentage of successful bidders out of auction bids, was 27.5%, the third lowest figure in history after October (27.2%) and December (27.3%) in 2004.
The national apartment bid price ratio (ratio of successful bid price to appraised price) was 75.0%, the lowest figure in 10 years since August 2012 (74.6%). The successful bid price for apartments in Seoul was 76.5%, which fell below the 80% mark for the first time in 9 years since December 2013 (79.6%).
Lee Joo-hyun, a senior researcher at Jiji Auction, said, “The rate of winning bids is getting lower and lower due to the burden of loan interest due to high interest rates and concerns about further declines in house prices.”
