Homeless People Facing “Freezing Winter”

For Mr. and Mrs. A in their mid-forties, who own a small eatery in Namgajwa-dong, Seoul, this winter, despite its warmer weather than previous years, feels colder. That is because they are at risk of losing their 27 pyeong (one pyeong is about 3.3 ㎡) apartment, purchased on loan of 75 million won, half of sales price as of April 2003, at auction.

Mr. and Mrs. A, owners of an eatery, paid 400 thousand won of monthly loan interest completely up until December last year. Yet, their decreased sales rendered them unable to pay for the interest, not once this year. The bank, accordingly, applied for auction of their apartment in October, and Mr. and Mrs. A are now miserably rushing around in order to make some money to pay for their undue interest money of 12 million won.

The gloomy side of an ever-worsening recession of the South Korean economy is now being reflected on the court-auction market as it is. According to the explanation by Digital Taein, an auction information provider, on December 19, the number of apartments and tenement houses released in the auction market in November was 24,797, a whopping increase by 35.5 percent from 18,327 in May 2000, when the overall monthly number of units was the biggest since the economic crisis that hit Korea hard in the late 1990s. The whole number of auction sales in November 2004 stood at 45,427, nearing 49,717 in May 2000.

▽ Apartments Numbers on Auction Market Are Greater than “Financial Crisis-Influenced Times”

Monthly numbers of apartments on auction stood at somewhere around 6,000 to 9,000 up until September, yet it passed the 10,000 mark in October, finally reaching 12,961 in the following month, up by 30 percent.

Amid the prolonged economic recession, not only tenement houses for low-income earners but also apartments for the middle class are analyzed to be facing a great threat. Among the largely affected are those like Mr. and Mrs. A who had purchased their house on house mortgage loan, as the economy worsens.

An employee at Kookmin Bank, responsible for withdrawal of loans, explained, “Many of those who fail to pay back their interest on time bought their apartment by taking out house mortgage loans,” adding, “There is an increasing number of people who come to banks and file a civil appeal or make disturbances in times of bad economy.”

▽ Increase in “Auction en Masse”

These days, there are increasing cases where tens or hundreds of apartments are released en masse on the auction market, not one or two of a specific apartment complex. Estimates have it that the increase resulted from worsened economic condition faced by enterprises that own real estates.

At present, Ulsan District Court is operating an auction of a leased apartment located at Yangsan, Gyeongsangnam-do. As many as 627 units are on auction. The first round of auction was held in October and the fourth is scheduled on December 27.

Sixty-three small-sized apartments (of around 17 pyeong) in Nonhyun-dong, Gangnam-gu, Seoul, are in the auction market en masse.

Offices and stores are no exception. Lately, a massive group of around twenty offices came out to the market in Yeoksam-dong, Gangnam-gu, Seoul.

▽ Stores in Popular Areas Are Also Auctioned

Stores that were rarely seen in the market in the past are now intermittently auctioned, a sign that the economic recession is worsening more and more.

A recently released three-story store (255 pyeong) is situated on a main street near the Bangbang intersection, Yeonksam-dong, Gangnam-gu, Seoul. In regard to this, GG Auction, an auction-related information provider, explained stores like this are rarely seen in the auction market as they are situated in popular areas with crowds of offices and on main streets. Mr. Lee Yeong-jin of Digital Taein predicted, “Many more units will appear in the auction market as it takes upward of one year for real estate to be released to the market.”

Jin-Suk Huh jameshuh@donga.com