Due to High Interest Rates, Borrowers Unable to Repay Loans... Voluntary Auction Applications Reach 11-Year High

Gyeonggi-do Leads with 1,639 Cases
Busan Sees 76% Increase from Previous Month with 751 Cases
Seoul Records 510 Cases, Incheon 363 Cases

[Image source=Yonhap News]

As high interest rates persist, the number of homes going up for auction due to unpaid loans is rapidly increasing.

According to the Court Registry Information Plaza on the 9th, the total number of applications for the commencement of voluntary auctions on collective buildings, including apartments, officetels, and multi-family houses, reached 5,117 in January. This is a 30.8% increase compared to December last year (3,910 cases).

This was the highest number of applications in 11 years since January 2013 (5,407 cases). A voluntary auction refers to a process where a creditor auctions off real estate collateral when a debtor who borrowed money against the property fails to repay the principal and interest on time.

Unlike compulsory auctions, voluntary auctions can be applied for directly to the court without a separate trial. Generally, financial institutions such as banks act as creditors in voluntary auctions.

The real estate industry believes that the surge in properties from "Yeongkkeuljok" (people who borrowed to the limit, even to the point of their soul) who bought apartments with loans during the housing price rise in 2020 but failed to repay due to over two years of rising interest rates is driving this increase.

Last year, the total number of applications for the commencement of voluntary auctions on collective buildings was 39,059, a 62% increase compared to the previous year (24,101 cases). The monthly average number of applications, which was around 3,000 last year, exceeded 5,000 in January this year.

By region, Gyeonggi had the highest number of voluntary auction commencement applications in January with 1,639 cases. Busan saw a 76% increase from the previous month with 751 cases. Seoul recorded 510 cases, and Incheon had 363 cases.

Although auction listings are flooding the market, the bid success rate is falling, creating a sluggish auction market atmosphere. According to Gigi Auction, a specialized company for auction and public sale data, there were 630 residential facility auctions held in Busan last month, but only 111 were successfully bid on, resulting in a bid success rate of 17.6%.

This means that fewer than 2 out of every 10 auctioned properties find a buyer.

This content was produced with the assistance of AI translation services.