In Seoul, where apartment prices continue to reach record highs, many local real estate agents are struggling to stay in business. A combination of government-capped commissions, intense competition from an oversaturated market, and a slowdown in property transactions is creating significant financial pressure on the country's 110,000 realtors.
For agents like 60-year-old Shin Choong-ho, the reality of the market is a stark contrast to the city's booming property values. He has been forced to take a second job as a handyman and share his small office space to cover rent, a situation becoming more common for small, independent agencies across South Korea.
Key Takeaways
- South Korean real estate agents operate with commission fees capped by the government at 0.7%, significantly lower than international standards.
- The market is highly competitive, with about 110,000 active realtors and 500,000 licensed individuals, driving actual fees even lower.
- Property transactions have decreased by more than 50% since their peak during the pandemic, reducing income opportunities for agents.
- The rise of online platforms for direct, agent-free property deals is creating a new challenge for traditional brokerages.
A System of Low Commissions and High Competition
Real estate agents in South Korea operate under a fee structure that is among the lowest in major global economies. For decades, the government has capped commissions on residential property sales, with the current maximum set at just 0.7 percent of the transaction value.
However, intense competition means most agents receive even less. According to industry professionals, the typical commission often falls between 0.4 and 0.5 percent. This is a fraction of the standard 5 to 6 percent in the United States or the 1 to 2 percent common in the United Kingdom and Singapore.
By the Numbers: A Crowded Field
South Korea has approximately twice as many realtors per capita as the United States, according to the Korea Association of Realtors. This density is a primary driver of the downward pressure on commission rates.
The profession's accessibility contributes to the oversupply. Minimal entry requirements, including no need for a college degree, make it an attractive career path for retirees and middle-aged married women seeking flexible work hours. An estimated 500,000 people in South Korea hold a realtor license, with about 15,000 new licenses issued each year.
“The exam to get the realtor licence is almost as popular as a driving test,” said Cho Chung-hee, a researcher at the Korea Research Institute for Human Settlements, highlighting the profession's popularity.
Market Headwinds and Government Regulations
The challenges for realtors extend beyond low fees. The overall volume of property transactions has declined sharply. According to the national real estate agents' association, total transactions have more than halved since the market's peak during the COVID-19 pandemic.
This slowdown has had a direct impact on the industry's stability. In 2023, government data showed that more than 13,300 real estate agencies closed, outpacing the roughly 10,300 that opened.
Government policies aimed at cooling the housing market have added another layer of pressure. Tighter lending rules, including a recent Won600 million mortgage cap, are intended to prevent overheating but also reduce the pool of potential buyers, further dampening transaction volumes.
For some agents, the impact is severe. Shin Choong-ho noted his business suffered after his neighborhood was designated a redevelopment area, which subjected property sales to public approval and slowed activity.
Surviving on a Few Deals
Despite the difficult environment, the high value of property in Seoul can make the business viable. The average price of an apartment in the capital recently hit a record Won1.35 billion ($975,000). In affluent districts like Gangnam, average prices can soar to Won2.6 billion.
Even a commission of 0.4 percent on an average Seoul apartment can yield a significant fee for an agent. HS Chung, a 63-year-old agent who has run her business since 1995, said it is possible to remain afloat with just one or two successful deals per month.
The Role of 'Jeonse' in the Market
South Korea's unique rental system, known as jeonse, also helps support real estate agents. Under this system, a tenant pays a large lump-sum deposit for a two-year lease and receives the full amount back at the end of the term. This system creates higher turnover in the rental market compared to other countries, providing a steady stream of commission opportunities for brokers despite the low rates per transaction.
The Rise of Technology and Direct Transactions
A growing threat to the traditional real estate model is the rise of technology. AI-driven online platforms and marketplaces are enabling more South Koreans to bypass agents altogether and conduct direct property transactions.
According to online real estate portal Ziptoss, direct deals accounted for more than 10 percent of all transactions in the first quarter of this year. On the popular online platform Carrot Market, agent-free property deals have reportedly increased 220-fold over the past three years, reaching nearly 60,000 transactions.
Questions of Service and Value
Some experts argue that the lower commission rates in South Korea are reflective of the limited scope of services provided. Kwon Dae-jung, a professor of real estate at Sogang University, noted that unlike agents in Western countries who may offer advice on mortgages, appraisals, and inspections, Korean realtors have a narrower legal obligation.
“There are too many realtors in the country, with most of them being small-size corner shops,” said Kwon. “It’s hard to expect quality service or in-depth consulting from them as you would expect from large-size US realtors.”
Their primary duties are legally confined to conducting due diligence to check for property defects, showing the property, and drafting the contract. This has led many consumers to question the value of paying a commission, especially when online tools can facilitate much of the process.
Despite the mounting pressures from a slowing market, intense competition, and technological disruption, many older agents remain committed to their profession. For them, the flexibility and ability to continue working later in life are valuable attributes.
“Although the business is getting more difficult, I still plan to continue the job,” said Shin, reflecting the resilience of many small-business owners in a rapidly changing industry.
