'Half-Price Brokerage Fee' Implementation Nears... Foreseeing Major Changes in the Real Estate Brokerage Industry

Offline Profitability Deterioration Inevitable
Intensified Competition Expected in Online Platforms

[Image source=Yonhap News]

[Asia Economy Reporter Jo Gang-wook] The so-called 'half-price brokerage fee' plan, which reduces real estate brokerage commissions by nearly half, is expected to be implemented as early as this month, drawing attention to whether it will cause a seismic shift in the brokerage service market. As the profitability of frontline brokerage offices is inevitably deteriorating, competition is expected to intensify further with the emergence of online brokerage platforms.

According to the Ministry of Land, Infrastructure and Transport on the 12th, the amendment to the Enforcement Rules of the Licensed Real Estate Agents Act, which includes the plan to reform brokerage commissions, recently passed the Regulatory Reform Committee as originally proposed. Once it passes the review by the Ministry of Government Legislation, it can be implemented within this month.

The core of the brokerage commission reform plan is to lower the maximum rates for sales over 600 million KRW and lease contracts over 300 million KRW. For sales transactions, a maximum rate of 0.4% applies for amounts between 600 million and less than 900 million KRW, 0.5% for 900 million to less than 1.2 billion KRW, 0.6% for 1.2 billion to less than 1.5 billion KRW, and 0.7% for 1.5 billion KRW or more. Compared to the current maximum rate of 0.9% for amounts over 900 million KRW, this represents a reduction of 0.2 to 0.5 percentage points. For leases, the rate is reduced to 0.3% for amounts between 300 million and less than 600 million KRW, 0.4% for 600 million to less than 1.2 billion KRW, 0.5% for 1.2 billion to less than 1.5 billion KRW, and 0.6% for 1.5 billion KRW or more.

Once the system is implemented, the maximum brokerage commission for a 600 million KRW sale will decrease from 3 million KRW to 2.4 million KRW, and for a 1 billion KRW sale, from 9 million KRW to 5 million KRW. Also, the commission for a 600 million KRW jeonse (long-term lease) transaction will be reduced by about half, from 4.8 million KRW to 2.4 million KRW.

In particular, the implementation of the system is expected to have a significant impact on the saturated brokerage market. According to the Korea Association of Licensed Real Estate Agents, in August nationwide, 1,075 real estate brokerage offices opened and 815 closed, both recording the lowest monthly figures this year. The number of openings is the lowest since September 2019 (994 cases), and closures set a record low in six months. The association explains that the simultaneous decline in openings and closures of brokerage offices is due to the existing brokerage market being oversaturated and the market itself stagnating this year due to a sharp drop in real estate transactions.

In recent years, the rapid rise in housing prices has increased expected earnings from brokerage commissions, leading to a surge in entrants into the real estate brokerage market. As of the end of last month, there are 466,000 licensed real estate agents and 115,000 operating brokerage offices. However, due to the spread of COVID-19 and repeated government measures to strengthen real estate regulations, there is an extreme nationwide drought in transactions this year. Additionally, as online brokerage platform companies aggressively engage in sales and marketing, the space for brokers who maintain traditional offline-centered sales methods is gradually shrinking. The Korea Association of Licensed Real Estate Agents, opposing the brokerage commission reform, plans to file a provisional injunction to suspend enforcement and a constitutional complaint with the court within this month.

This content was produced with the assistance of AI translation services.