Real Estate Brokerage Fee Reduction Push Gains Momentum... Brokerage Industry Voices "Survival Concerns"

Four Recommendations to Improve Brokerage Fees by Anti-Corruption Commission Announced the Day Before
Ministry of Land, Infrastructure and Transport Forms TF for Review... Finalized in June-July
Direction to Reduce Brokerage Fee Burden on High-Value Homes
Brokerage Industry Opposes... "Start with a Reality Survey"

[Image source=Yonhap News]

[Asia Economy Reporter Moon Jiwon] The Anti-Corruption and Civil Rights Commission (ACRC) announced on the 9th a recommendation for improving the "Housing Brokerage Commission Rate System and Brokerage Services" aimed at alleviating the burden of brokerage commissions caused by the sharp rise in sale and jeonse prices. The improvement plan, expected to be finalized around June to July, will introduce new brackets for sales between 900 million and 1.2 billion KRW and jeonse between 600 million and 900 million KRW, applying a differentiated rate for each price range through a "progressive bracket system." This will result in reduced brokerage commissions for high-priced homes compared to the current system.

The ACRC proposed four main options for improving the brokerage commission rate system. Option 1 consolidates the sales commission rate to 0.5% for properties under 600 million KRW, applies 0.6% for 600 million to 900 million KRW, and 0.7% for 900 million to 1.2 billion KRW. For higher brackets, the rates decrease progressively: 0.4% for 1.2 billion to 1.8 billion KRW, 0.3% for 1.8 billion to 2.4 billion KRW, 0.2% for 2.4 billion to 3 billion KRW, and 0.1% for amounts exceeding 3 billion KRW.

For lease transactions, the rates are 0.3% for under 300 million KRW, 0.4% for 300 million to 600 million KRW, and 0.5% for 600 million to 900 million KRW. For higher brackets, the rates decrease similarly: 0.4% for 900 million to 1.2 billion KRW, 0.3% for 1.2 billion to 1.8 billion KRW, 0.2% for 1.8 billion to 2.4 billion KRW, and 0.1% for amounts exceeding 2.4 billion KRW. Both sales and lease options include measures to increase deductions for low- and mid-priced properties while imposing higher burdens on high-priced homes.

Option 2 applies the same progressive fixed rates as Option 1 but allows for negotiation of commission rates for high-priced homes exceeding 1.2 billion KRW in sales and 900 million KRW in leases. Options 3 and 4 propose either a single flat rate regardless of transaction amount or type or fully negotiated rates, but the government is reportedly leaning towards Options 1 and 2.

According to a survey conducted by the ACRC, 45.8% of 4,334 licensed real estate agents who participated agreed with Option 2. Consumers generally agreed with Option 2, which reduces their burden, but there is also a sentiment that further lowering the rates should be considered. If Options 1 or 2 are implemented, the brokerage commission for a 1 billion KRW apartment sale would decrease by 39%, from the current maximum of 9 million KRW to 5.5 million KRW.

This is because the 1 billion KRW price is divided into brackets: 600 million KRW at 0.5% equals 3 million KRW, 600 million to 900 million KRW at 0.6% equals 1.8 million KRW, and 900 million to 1 billion KRW at 0.7% equals 700,000 KRW, with the total commission being the sum of these amounts. For jeonse, a deposit of 650 million KRW would reduce the brokerage commission from the current maximum of 5.2 million KRW to 2.35 million KRW, less than half.

However, some real estate agents express dissatisfaction with simply lowering commission rates. A representative from the Korea Association of Realtors stated, "Increasing commission rate brackets every time housing prices rise is not a fundamental solution to the public's dissatisfaction with the brokerage commission rate system. If the reform is pushed through without verifying the overall status of the brokerage industry, agents could be driven to the brink of survival."

The Ministry of Land, Infrastructure and Transport plans to actively review the ACRC's improvement recommendations and promote brokerage service improvements by June to July. The comprehensive improvement plan will include not only brokerage commission reforms but also measures to enhance the quality of brokerage services and strengthen the competitiveness of the brokerage service industry. To this end, the ministry will establish a "Brokerage Commission and Service Improvement Task Force" by the end of this month.