Ahead of the enforcement of the amendment to the Enforcement Regulations of the Certified Real Estate Brokers Act, which lowered the real estate brokerage fee, the number of openings and closings of real estate brokerages decreased concurrently. The oversaturated offline brokerage market seems to have entered a plateau. The rise of online brokerage platform companies is also having a significant impact on the market.
According to the Association of Real Estate Brokers on the 12th, the number of real estate brokerage openings and closures nationwide in August was 1,075 and 815, respectively. The number of openings has steadily decreased since January of this year (1833 cases), barely exceeding 1,000 cases. It is the lowest since the number of openings (994 cases) in September 2019, when transactions were frozen due to the government’s high-strength real estate regulations.
The number of business closures broke the record low with 815, which was lower than the previous minimum level in February (833).
An official from the Association of Certified Realtors said, “It is common that the number of openings and closures decreases as the year-end approaches,” but, “This year, the brokerage market is booming, so the number of closures is not decreasing. Many brokers even missed the timing of closure due to sluggish sales,” he said.
In recent years, home prices have soared, and the craze for acquiring a certified real estate agent’s license has swelled in anticipation of receiving a high brokerage fee proportional to the house price. As of the end of last month, there were 466,000 licensed real estate brokers, of which 115,000 were real estate brokers. Considering that the economically active population aged 15 and over was 28,346,000 as of last August (data from the National Statistical Office), this means that 1 in 60 people is a certified real estate agent.
However, the brokerage market workers are having a hard time due to the transaction cliff caused by the corona pandemic that has continued from the beginning of last year to the present and the government’s successive measures to tighten real estate regulations. The amendment to the Enforcement Rules of the Chartered Brokers Act, which is scheduled to take effect this month, is also expected to take a hit to the brokerage market. This is because the main goal of the amendment to the Enforcement Rules of the Chartered Brokers Act is to lower the brokerage commission rate by up to half.
The amendment to the Enforcement Rules of the Chartered Brokers Act has recently passed the Regulatory Reform Committee and is only left for review by the Ministry of Justice. The brokerage fee reform plan lowered the maximum rate for sales of 600 million won or more and rental contracts of 300 million won or more. In the case of trading, the commission rate of more than 600 million won to less than 900 million won was lowered by 0.1 percentage point from the current 0.5% to 0.4%. A rate of 0.9% is currently applied for orders over 900 million won, which is subdivided according to price (0.5% for more than 900 million won to less than 1.2 billion won, 0.6% for more than 1.2 billion won to less than 1.5 billion won, and 0.7% for more than 1.5 billion won).
For rentals, the commission rate of more than 300 million won to less than 600 million won was lowered from 0.4% to 0.3%. Those over KRW 600 million were lowered by 0.2~0.4%p from the current 0.8% to 0.4% from 600 million won to less than 1.2 billion won, 0.5% from 1.2 billion won to less than 1.5 billion won, and 0.6% from 1.5 billion won to 0.6%, respectively.
As online brokerage platform companies jump into aggressive sales, the place for brokers who stick to the existing offline-oriented sales method is getting narrower.
A company that started its service in March last year surpassed 400,000 and 1,700 monthly active users (MAU) and member brokers, respectively, in six months. Monthly registrations are over 10,000. As more and more companies are offering low brokerage fees based on their online business model, the view of brokerage industry officials is that existing offline brokerages without competitiveness will inevitably be eliminated.
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