[Tracking Jeonse Fraud Reality]⑤ Hwagog-dong Devastated by the 'Villa King'

'Villa King' Has Listings at Ten Out of 50 Nearby Agencies
Newly Completed Villas and Commercial Spaces Mostly Vacant on First Floors
Commercial District Impacted, Local Mart Sales Drop by More Than Half

[Asia Economy Reporter Kwak Minjae] A recently visited real estate agency near Hwagok-dong, Gangseo-gu, Seoul. A ‘store for rent’ notice was posted on the door of the office. A representative from a real estate agency located opposite said, "Since the ‘Villa King’ scandal broke out, people looking for jeonse (long-term lease) have completely dried up. Transactions have stopped altogether, and our sales have recently dropped by more than 60%," adding, "Out of 50 nearby real estate offices, more than ten have either put up rental listings or changed their signs."

A building near Hwagok Station in Gangseo-gu, Seoul, recently visited. This place, which was a real estate agency office until recently, currently has a rental inquiry notice posted due to the impact of the 'Villa King'.
[Photo by Kwak Minjae]

The area around Hwagok-dong, Gangseo-gu, which suffered significant damage due to the jeonse fraud committed by the so-called ‘Villa King,’ has become a wasteland. As jeonse fraud damages continue to occur, the commercial district near Hwagok-dong also seems to have taken a direct hit. In fact, many of the newly built villas that appear to be completed have vacant commercial spaces on the lower floors. Seo (26), a resident of a newly built villa, said, "The villa I currently live in is near Hwagok Station, so it has a good location as a station area, and the building was completed last September," adding, "But seeing that the first floor is still vacant, it seems the real estate situation in this area is really serious."

A newly built villa near Hwaggok-dong, Seoul, which I recently visited. It was not difficult to see that the lower floor of the building was vacant in many places on site.
[Photo by Kwak Minjae]

Hwagok-dong in Gangseo-gu is a representative area where victims have surged after Kim, known as the ‘Villa King,’ who owned 1,139 villas and officetels in the metropolitan area, passed away without returning the jeonse deposits on time. The reason Gangseo-gu became a hotspot for ‘empty jeonse’ fraud is that it is an area densely packed with relatively affordable villas and officetels in the metropolitan area. Especially since it is near Gimpo Airport, height restrictions make it difficult to build tall apartments, naturally leading to a concentration of villas. Meanwhile, as housing prices soared, many young professionals sought well-located villas, and landlords aiming for gap investments increased, making Gangseo-gu a target for jeonse fraud, according to analysis.

According to the ‘Lease Market Siren’ released by the Korea Real Estate Board through Real Estate Tech, out of 277 jeonse deposit accidents that occurred in Seoul in November last year, 91 cases?about one-third?occurred in Gangseo-gu, overwhelmingly the highest. A deposit accident refers to cases where tenants fail to receive their jeonse deposit back within one month after terminating or ending the lease contract, or when an auction or public sale occurs during the lease period and the deposit is not returned after distribution.

Due to repeated jeonse fraud, the risk of ‘empty jeonse’ has increased, and the volume of jeonse transactions for row houses and multi-family villas in Gangseo-gu is also declining. According to the Seoul Real Estate Information Plaza, the number of jeonse transactions for row houses and multi-family villas in Gangseo-gu was 383 in December last year, down 16.6% from 459 in November. A representative from another real estate agency in Hwagok-dong said, "Nine out of ten people who come to look for houses are looking for monthly rent," adding, "Even though we try to ensure customers can get deposit insurance as much as possible after the Villa King incident, customers look suspiciously and refuse to even consider jeonse listings."

A newly built villa-dense area in Hwagok-dong, Gangseo-gu, Seoul.
Photo by Kwak Minjae

The jeonse fraud aftermath has also drained vitality from the Hwagok-dong commercial district. On that afternoon, a relatively large neighborhood mart nearby was eerily quiet with only music playing and no customers. Mart owner Oh (37) said, "This neighborhood already has many working-class residents, so the economy was tough, and the jeonse fraud by the Villa King made things worse," adding, "Sales have dropped by more than half compared to last year, and we reduced staff from six to four last month." Also, Choi (53), who has operated a gold and silver shop in Hwagokbon-dong for 10 years, said, "Even though gold prices are high and you would expect more customers, we had fewer than two or three customers in a week," adding, "Business has been so bad that we started selling soybean paste and red pepper paste in the gold shop a few months ago."

Experts have called for prompt measures to prevent jeonse fraud and revitalize the local commercial districts that have been heavily affected. Ko Joonseok, CEO of J-Edu Investment Advisory, said, "Gangseo-gu still has many homes needed by working-class people, but concerns about jeonse fraud are affecting even prime properties, causing the local commercial district to stagnate," advising, "It is necessary to reform the system to activate transactions, such as mandating that when signing jeonse contracts for newly built villas, the market price calculated by a certified appraiser must be referenced."