Real Estate Agencies Closing Down Amid Harsh Warnings to Crack Down on Market Disruption

[Asia Economy Reporter Yoo In-ho] Recently, a real estate agency named A located in Daechi-dong, Gangnam-gu, Seoul received an official letter from the Gangnam District Office. The letter, titled "Request for Cooperation to Eradicate Real Estate Market Disruptive Activities," warned that "price collusion aimed at driving up housing prices is occurring mainly among some real estate offices and apartment residents."

It also specified that penalties would be imposed for posting listings that cannot actually be transacted (solicitation or false listings) on platforms such as Naver Real Estate advertisements, neglecting completed transaction listings, misrepresenting prices of brokerage objects, and joint advertising of brokerage properties by real estate offices not commissioned by clients. Upon receiving the letter, the agency immediately removed all listings posted outside their office, fearing possible penalties if caught.

As the Ministry of Land, Infrastructure and Transport and the Seoul Metropolitan Government announced a comprehensive crackdown on disruptive activities in the real estate market, the brokerage industry is becoming increasingly cautious. The industry complains that the market has cooled since the government's December 16 real estate regulations last year, and the additional crackdown has made conditions even more difficult.

According to the industry on the 11th, Seoul recently sent an official letter titled "Real Estate Brokerage Office Guidance and Inspection Plan" to 25 autonomous districts. Inspection teams plan to identify and take administrative actions or file charges against offices that promote real estate speculation or cause disorder, such as illegal resale brokerage of pre-sale rights, unregistered resale, drafting double transaction contracts, nondisclosure of brokerage object information, submission of false documents, and excessive brokerage fees.

The Ministry of Land, Infrastructure and Transport will deploy a special investigation team composed of special judicial police from the 21st to prevent various illegal activities such as violations of the Real Transaction Reporting Act, illegal trading of subscription savings accounts, and illicit gifting schemes. These special judicial police with investigative authority will conduct surprise inspections focusing on speculative overheated districts including Seoul.

The core focus of this government and local government crackdown on the real estate market is price collusion by apartment residents or brokers. The plan includes cracking down not only on visible forms such as banners or elevator notices but also on covert activities in online chat rooms and internet cafes. The government cites the amendment to the Licensed Real Estate Agents Act, effective this month, as the legal basis for this crackdown. The amendment establishes penalties for price collusion and prohibits false representation and advertising of brokerage objects, applying these rules to both licensed real estate agents and the general public.

With this news, brokerage offices in the so-called Gangnam area of Seoul, Mok-dong, and the 'Mayongseong' area including Mapo, Yongsan, and Seongdong districts are on edge. Some brokerage offices have already closed their doors and are conducting business only by phone. Some brokers have been seen conducting transaction consultations in nearby coffee shops.

The head of a brokerage office in Mok-dong said, "Recently, apartment prices have risen significantly and received media attention, so we believe the likelihood of inspections is high and have closed the office. Even if there is no violation such as collusion, we are concerned that inspections would cause inconvenience."

There are also concerns about excessive crackdowns. An industry insider said, "It cannot be ruled out that simply sharing actual transaction price information or expressing personal opinions about current market prices could become grounds for punishment," adding, "It is also controversial whether listings posted simultaneously by some residents at prices higher than the market rate should be considered collusion."