"More Due to Economic Recession Than Boom"…The Era of 110,000 Newly Licensed Real Estate Agents

Last Year, Real Estate Agencies Closures at Lowest in 18 Years
Meanwhile, Openings Increased by 3.8% Compared to Previous Year
Housing Transactions Rise, Leading to More Licensed Realtors Opening

Some Analyze It as Due to COVID-19 Economic Downturn
110,000 Licensed Realtors Opened... Competition Intensifies

A commercial area densely populated with real estate agencies in Seoul (Photo by Yonhap News)

[Asia Economy Reporter Moon Jiwon] Last year, the number of real estate brokerage office closures was the lowest in 18 years. On the other hand, the number of newly opened brokerage offices, which had been declining for two consecutive years since 2017, began to increase again. As a result, the number of licensed real estate agents surpassed 110,000 for the first time last year. This is somewhat different from the voices on the ground, where the explosive increase in the number of licensed real estate agents each year has pushed the brokerage industry’s 'survival competition' to the extreme.

Industry insiders explained that the overall real estate brokerage market cannot necessarily be said to be booming just because closures decreased and openings increased. This is largely because, due to the spread of the novel coronavirus infection (COVID-19) last year, unemployment rose and the number of self-employed people closing their businesses increased, leading many to flock to brokerage offices, which require relatively low initial capital.

Increase in Real Estate Brokerage Offices Despite Successive Regulations

According to the Korea Association of Licensed Real Estate Agents on the 23rd, the number of licensed real estate agent closures nationwide last year was 12,773, the lowest level in 18 years since 2002 (10,794 closures). Closures decreased by 17.5% compared to 2019 (15,496 closures), and decreased by more than 2,000 compared to 2018 (16,256 closures) and 2017 (14,911 closures).

On the other hand, new licensed real estate agent startups last year totaled 17,561, an increase of 3.8% compared to 2019 (16,916). The number of openings had shown a declining trend for two consecutive years, with 21,021 in 2017, 19,673 in 2018, and 16,916 in 2019. This was due to the housing market stagnation caused by the real estate policies aimed at stabilizing housing prices after the inauguration of the Moon Jae-in administration.

Last year, the government also introduced strong real estate regulations such as the June 17 measures, July 10 measures, and expansion of regulated areas, but the number of brokerage offices actually increased. An industry insider said, "The market has somewhat gotten used to the repeated announcements of real estate measures, and it seems that the increase in transactions due to policy side effects last year had an impact."

In fact, the nationwide housing transaction volume last year was 1,279,305 cases, the highest ever recorded since the government began compiling housing transaction statistics in 2006.

(Photo by Yonhap News)

Reduced Closures Do Not Mean Boom... Economic Recession is the Cause

However, there are criticisms that the decrease in closures and increase in openings do not mean the brokerage industry is booming. The net increase in licensed real estate agents last year was more influenced by the decrease in closures (17.5%) than the increase in openings (3.8%), which is explained as a result of the overall economic downturn.

A representative from the Korea Association of Licensed Real Estate Agents explained, "Last year, as COVID-19 spread, many brokerage offices wanted to close, but they often postponed closure because they could not find someone to take over the office or goodwill payment," adding, "It is hard to say that the current situation in the brokerage industry is good."

The increase in openings is also analyzed to have been influenced by the severe damage suffered by other self-employed and small business owners. Due to the economic difficulties caused by COVID-19, many entered the brokerage industry aiming for brokerage commission profits that had risen during the housing price increase period. In fact, the number of applicants for the licensed real estate agent exam (second stage) last year was 129,033, the highest since 2009 (155,024 applicants).

It is also known that many people who already held a licensed real estate agent certificate but had not opened offices started many brokerage offices last year. An association official explained, "Many people with licensed real estate agent certificates decided to try running brokerage offices," adding, "Since the startup cost is relatively low compared to other industries, openings have slightly increased."

110,000 Licensed Agents Open... Competition Intensifies

Accordingly, the number of licensed real estate agents with open offices surpassed 110,000 for the first time last year. As of December last year, the number of licensed real estate agents nationwide was 110,786, surpassing 100,000 in 2017 (101,965) and exceeding 110,000 just three years later. Among agents, there are criticisms that the current brokerage market is saturated, leading to excessive competition and repeated openings and closures, which increases social costs.

The rapid increase in licensed real estate agents is due to the steady emergence of about 20,000 certificate holders each year. The average annual number of licensed real estate agent exam passers over the past five years is 21,311. The cumulative number of licensed real estate agents reaches 466,586.

The association argues that to stabilize the market, the qualification exam should be changed from absolute evaluation to relative evaluation to start supply and demand control, but the Ministry of Land, Infrastructure and Transport has a negative stance, stating that if the number of passers decreases, competition over brokerage commissions and service quality may deteriorate.