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(Yonhap Feature) Fake divorces emerge as a way to buy an apartment on the cheap

All Headlines 09:00 July 27, 2018

By Kim Kwang-tae

SEOUL, July 27 (Yonhap) -- A middle-aged South Korean woman got married to and divorced from the same man twice, a rare occurrence in most parts of the world. But the couple's on-again, off-again relationship may have been motivated by more than just their feelings for each other: The couple's fake divorce appears to be part of a collaborative attempt to buy an apartment on the cheap.

In South Korea, before apartments are built, construction firms usually sell the right to buy units to ordinary people through lotteries and points-based systems, both of which are overseen by state authorities.

Marital status can be one factor in determining who wins those rights. Being divorced on paper means the woman could be categorized as someone who does not own a home, a status that could give her an advantage over homeowners and other potential buyers in the oft-fierce competition to win the right to buy apartments.

The woman -- whose exact age is not known but appears to be in her 50s -- divorced from her husband in November 2013 after 25 years of marriage, then tied the knot a second time with the same man in October 2014 before ending the union again in December 2017, the Ministry of Land, Infrastructure and Transport said, without identifying the woman.

The case may be extreme, but it illustrates how far some South Koreans are willing to go to win the right to buy apartments amid a surge in home prices in Seoul in recent years.

This photo taken on March 18, 2018, shows visitors lining up to be among the first to get inside a model house for apartments being built in Gangnam district. (Yonhap)

The ministry -- which oversees the country's housing policy -- said it suspected that the woman "had a fake divorce to boost her chances of winning the right to buy an apartment."

The woman eventually won home purchasing rights for an apartment being built in Hanam, just southeast of Seoul. More than 55,100 people applied for home purchasing rights for the apartments, resulting in a competition ratio of 26.3:1.

In the latest sign of just how heated South Korea's housing market has become, a competition ratio of 649:1 was recorded for apartments being built by Hyundai Engineering & Construction Co. near Ewha Womans University in western Seoul.

Apartments have long been the most-favored housing choice for many South Koreans. In this densely populated country, apartment complexes often provide the most comfortable dwellings, as well as convenient access to amenities, such as schools and shopping. Also, apartments tend to steadily appreciate in value and are regarded by many not just as a home but as a means to get rich.

Apartment prices in Gangnam district -- a posh neighborhood in southern Seoul that gained global attention thanks to rapper Psy's 2012 mega hit "Gangnam Style" -- soared 110.9 percent between December 2002 and June 2018, according to data compiled by KB Kookmin Bank, South Korea's biggest retail bank.

In this file photo taken on July 1, 2018, a passerby walks in front of a realtor's office displaying signs for home leases and home sales. A sign shows the sale price of a 148-square-meter apartment near in Gangnam district is 2.05 billion won (US$1.8 million). (Yonhap)

"Most South Koreans prefer apartments, as this type of home is convenient and generally allows people to accumulate wealth over time," said Yoo Seon-jong, a professor of real estate studies at Konkuk University in Seoul.

Statistics Korea said the number of apartments in South Korea came to 10.03 million, accounting for 60 percent of all houses across the country, in 2016, the latest year for which statistics are available. New data is set to be released in August.

"Apartments have become something that symbolizes the status of the middle class," said Park Won-gap, a real estate economist at KB Kookmin Bank.

Seoul -- home to about one-fifth of South Korea's total population of 51 million -- is dotted with apartment buildings, including high rise ones. Data compiled by Statistics Korea showed 52.7 percent of the middle class and 74.6 percent of the upper class live in apartments in Seoul and its nearby metropolitan areas.

This photo taken from the observation deck of Lotte World Tower, the tallest building in South Korea, shows Seoul's cityscape dotted with apartments. This photo was provided by Lotte Group. (Yonhap)

People can buy apartments after construction has been completed, but winning home purchasing rights often ends up being more profitable, as construction firms usually sell home purchasing rights at prices somewhat lower than nearby existing apartments.

Park said comparatively-low home purchasing rights are the cause of various illegal activities, including fake divorces.

He described securing a home purchasing right as tantamount to winning a lottery because it means buyers can make hundreds of millions of won in profit.

GS Engineering & Construction Co., a major South Korean builder, sold home purchasing rights of 84-square-meter apartments in central Seoul at 780 million won (US$693,000) in 2014, and those units are now worth around 1.45 billion won.

Song Young-ju, a 45 year-old office worker in Seoul, said the government should plug loopholes in the housing policy and crack down on illegal activities related to home purchasing rights.

"I have a sense of remorse and anxiety as apartments prices have risen by tens of millions of won overnight and hundreds of millions of won in years at a time when it is not easy to save 100 million won," Song said.

Still, she said getting divorced as a means of acquiring home purchasing rights is "crazy."

There is no data on how many South Koreans had fake divorces to try to win home purchasing rights.

An official handling housing issues at the Ministry of Land, Infrastructure and Transport said there are other cases of fake divorces and fake marriages related to home purchasing rights, though he declined to elaborate.

This photo taken from the observation deck of Lotte World Tower, the tallest building in South Korea, shows Seoul's cityscape dotted with apartments. This photo was provided by Lotte Group. (Yonhap)

The government has recently begun to probe into fake divorces and other illegal activities of those who won home purchasing rights, as a means to curb real estate speculation.

The ministry has referred the case of the suspected fake divorce to police for further investigation to determine whether the woman violated the country's housing law. A detective said he has yet to question the suspect. He did not elaborate and asked not to be identified.

Michael Breen, CEO of Insight Communication Consultants, a public relations company, and author of "The New Koreans" and "Kim Jong-il: North Korea's Dear Leader," said, "Fake divorces seem rather extreme, but in reality, this type of behavior to skirt the rules is quite widespread in Korea. That is because the law is often seen as petty and bureaucratic."

He added, "Fake divorces (or real divorces for law-skirting purposes) may be unusual, but other such tricks, like falsifying addresses (so that children qualify for the better schools), are very common, and yet are used as pretexts by politicians to vote against candidates for ministerial positions on the grounds that they reflect immorality."

The woman could not be reached for an interview as both the ministry and police declined to share her phone number, citing the confidentiality of personal information.

The woman could face up to three years in prison or a maximum fine of 30 million won (US$27,000) if she is found to have disrupted the housing market. She could also see her home purchasing rights canceled and be banned from applying for home purchasing rights for up to 10 years, according to the ministry.

Besides cases of fake divorces and fake marriages, a South Korean is suspected to have illegally bought home purchasing rights from two people with disabilities who were given special government benefits related to home purchasing rights.

The ministry said it has found a total of 108 cases of illegal activities in home purchasing rights for apartments being built in Hanam. It said the lion's share of illegal activities is false registration of addresses with 77 cases, followed by false income reports with three cases.

But for regular people like Song, the situation is still dire, with rising house prices making apartment ownership seem as though it is always slipping further out of reach.

She said, "I have had sleepless nights due to concern that my dream of buying a home may end up only a dream."


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