This photo taken May 26, 2024, shows apartment complexes in Seoul. (Image courtesy of Yonhap)
SEOUL, Dec. 17 (Korea Bizwire) – The number of properties auctioned off due to loan defaults in South Korea is on track to hit its highest level in 11 years, reflecting the combined impact of soaring interest rates and a sluggish real estate market.
Sharp Rise in Property Auctions
Data from the Court Registration Information Plaza shows that 129,703 foreclosure applications were filed for voluntary auctions between January and November 2024, already surpassing any full-year total since 2013, which recorded 148,701 cases.
Voluntary auctions occur when creditors, often financial institutions, seize collateralized properties from borrowers who have failed to pay back loans for at least three months.
The number of voluntary auction cases has been rising steadily, doubling in just two years. In 2022, 65,586 properties were put up for voluntary auction, and this surged to 105,614 cases in 2023—a 61% increase. In the first 11 months of 2024, the figure rose another 35% year-over-year.
Hard-Hit Residential Properties
Residential properties, particularly apartment complexes, officetels, and multi-family homes, accounted for the majority of cases. From January to November 2024, voluntary auctions for such properties reached 51,853, marking a 48% increase compared to the same period last year.
The surge is attributed to homeowners who took out significant loans during the housing boom, often at high-interest rates, and are now struggling to meet their repayment obligations as interest costs have skyrocketed.
Recent data has revealed that individuals in their 30s and 40s who have taken on debt to purchase homes are the ones who have most drastically cut back on their spending following the rise in interest rates. (Image courtesy of Yonhap)
Regional Impact
Gyeonggi Province saw the highest number of residential auctions at 16,094, representing 33% of the national total and a 73% increase from the previous year. Other areas with significant auction activity include Busan (6,428 cases), Seoul (5,466 cases), and Incheon (3,820 cases).
Market Outlook
The rise in foreclosures is expected to continue as high-interest rates persist, exacerbating financial strain on heavily leveraged borrowers. “The number of voluntary auctions typically increases with higher interest rates,” said Lee Joo-hyun, a researcher at real estate auction platform Jiji Auction. “Many borrowers who turned to high-interest loans during the 2021 housing price surge are now facing mounting repayment pressures.”
This trend underscores the lingering challenges in South Korea’s real estate market, with declining property transactions and a wave of unsold homes further compounding the problem.
Ashley Song (ashley@koreabizwire.com)
