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Owners collude to stop drops in apartment prices

Residents gang up to report homes that are selling below set value
Apr 10,2018
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After Mr. Kim decided to sell his apartment in western Seoul, he discovered his neighbors using an underhanded tactic to raise the value of their homes.

Kim, who requested anonymity, listed his apartment on a popular website for home sales, and dropped his asking price after failing to find a buyer. A few hours after lowering the price, he found out that his listing had been reported as false.

His realtor later told him that several homeowners in his apartment complex reported his listing to prevent it from being sold at a price they considered too low.

“I had to ask my realtor to sell the apartment discretely, as every time I would post the actual price I was selling for, it would be reported as false,” he said.

Many legitimate apartment listings are being reported as false on popular websites such as Naver. Areas with hot real estate markets, such as Songpa and Gangdong Districts in southern and eastern Seoul and Hwaseong, Wirye, Yongin and Giheung, Gyeonggi, are falling victim to the phenomenon.

As little as a year ago, false listing reports usually hit the right targets — fake listings that were used to lure in interested buyers. Now, most recent false reports are likely the work of apartment owners colluding to raise prices of units in their complex.

According to the Korea Internet Self-governance Organization (KISO), in the first three months of this year, there were 26,375 false reports, triple the 7,557 reports that were made in the first quarter of last year. It is the highest since the organization started keeping track of the reports in 2013.

KISO has confirmed that some of these reports are the result of owner collusion, as half of the 13,654 reports came from areas that produced more than 300 reports a month.

Gyeonggi is a hotbed for false listings reports. Yongin had the most, with 3,972 reports, followed by Hwaseong with 2,674 and Songpa with 1,326. Suwon saw 1,202 reports made in the first quarters and Hannam had 1,108.

“When the reports are concentrated in a certain apartment complex or a certain area, we can speculate that these are acts of price collusion rather than individuals baiting buyers,” said Kwak Ki-wook, a researcher at KISO. “We have confirmed organized reporting of apartments sold below a certain price as false in an effort to keep raising apartment prices.”

Realtors report that apartment owners encourage each other not to sell under a certain price through neighborhoods’ online messaging boards and harass them if they post listings under their chosen value.

It is common for Korean apartment complexes to host their own online communities on sites such as Naver, where residents exchange information and buy and sell goods.

A realtor in Wirye, a fast-growing development between Seoul and Gyeonggi, tried to sell an 84-square-meter (904-square-foot) apartment for 900 million won ($837,000), but received calls saying not to sell it below 1.1 billion won. The realtor withdrew the apartment from sale.

“Realtors not only get complaint calls [for advertising the sale of apartment below a certain price], but even get cursed,” said a realtor in Yongin, Gyeonggi.

“There are many [realtors] that have been under stress due to apartment owners’ pressure for price collusion and reports of ‘false’ sales,” said an official at the Korea Association of Realtors’ Hwaseong chapter.

Some apartment owners argue that colluding to raise prices is a legitimate effort to get the right value for their apartments, as real estate agents play with the value of their homes.

“Usually price collusion on apartments happens when the real estate market has reached its peak and is at the point of falling,” said Kim Kyu-jung, an NH Investment and Securities’ real estate analyst.

The government said it is currently monitoring the situation closely.

“We are considering reforming real estate agency laws in order to levy penalties on apartment owners who pressure real estate agents [to fix prices],” said Kim Jeong-hee, an official at the Ministry of Land, Infrastructure and Transport.

Korean collusion laws only apply to businesses, not real estate.


BY HWANG EUI-YOUNG [lee.hojeong@joongang.co.kr]