The government of South Korea is cracking down on real estate fraud and other egregious activity in the industry.
This week, the Office for Government Policy Coordination announced the opening of the “Real Estate Supervision Task Force,” the Chosun Daily reported. The body was created to address “illegal activities” in real estate, such as “artificially inflating home prices, false transaction reports and fraudulent subscriptions” that “undermine market integrity, exacerbate anxieties among actual demanders and reduce the effectiveness of housing supply measures.”
The Real Estate Transaction Task Force consists of 18 members from the Office for Government Policy Coordination, the Ministry of Land, Infrastructure and Transport, the Ministry of the Interior and Safety, the Financial Services Commission, the National Tax Service, the Korean National Police Agency, the Korea Real Estate Board and the Financial Supervisory Service.
Kim Yong-soo, second vice minister of state affairs at the Office for Government Policy Coordination, is leading the new task force. By bringing together staffers from different agencies, the task force will act as a “permanent organization aimed at concentrating inter-ministerial capabilities to intensively respond to real estate crimes that threaten the livelihoods of ordinary citizens and youth and severely damage the people’s economy.”
“Going forward, the task force will be responsible for establishing a real estate illegal activities supervision organization, sharing and cooperating on inter-ministerial investigations and probes into illegal activities, and operating a council to respond to real estate illegal activities,” the Office for Government Policy Coordination added, saying “It will particularly oversee all practical preparations for the establishment of the supervision organization, including legislation and revision of laws, organizational design, and securing personnel and budgets.”
Both buyers and renters have fallen victim to fraudulent real estate schemes in recent years.
Just last month, authorities in Seoul arrested 36 individuals in a wide-reaching real estate fraud case, Chosun reported. Police claim developers deceived victims by using fake real estate expert broadcasts, selling land that they claimed had “development benefits” and was tied to a fake tourist complex they said was in the works. The parcels, however, were protected non-developable forest land near Sejong City. In the scheme, the fake ads led to a phone number that victims called, where their contact information was illegally collected and passed on to real estate development companies. The accused allegedly used the contact details to call viewers to their offices, purportedly for consultations or seminars, then sell them the land.
The accused reportedly collected 2.2 billion Korean won ($1.5 million) from 42 victims between 2021 and 2023.
“Real estate development fraud methods are becoming increasingly sophisticated every day,” the police said. “Before purchasing any land, you must verify the parcel information in advance and visit the site.”
Renters have similarly faced fraud issues of their own — namely, having to do with the “jeonse” (“key money”) Korean rental system, the Korea Times reported.
Under the system, tenants pay a large lump-sum deposit to the landlord in lieu of monthly rent. Landlords are expected to return the full deposit at the end of the lease, in the meantime using the large sums of capital to invest for returns or deposit in banks to earn interest. Tenants often drain their savings and take out additional loans for jeonse deposits, so if the landlords don’t return their money, they may lose nearly all of their assets.
As of July, the Ministry of Land, Infrastructure and Transport found that 32,185 people were jeonse fraud victims, with young adults in their 20s and 30s accounting for 75 percent of cases. The most common type of fraudulent contract reportedly involved landlords who were unable to return the deposits but still signed a lease agreement after buying homes. They often were left empty-handed when falling home prices prevented sales from covering the deposits, or when landlords in deep debt lost properties at auction.
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