Commissions paid to property agents slashed

The government slashed the maximum commission for realtors on purchases of houses priced between 600 million won ($568,500) and 900 million won to stimulate the real estate market.

The Ministry of Land, Infrastructure and Transport said yesterday it will slash the current limit on commissions for real estate agencies from 0.9 percent of the selling price to 0.5 percent.

The maximum commission was raised from 0.4 percent to 0.9 percent in 2000 on houses over 600 million won, which were deemed expensive and only affordable by the wealthy.

The current government concluded that high commissions were holding the market back, especially since sales over 600 million won have become far more common since 2000.

Since 0.9 percent was the maximum set by the government, consumers have been trying to negotiate with realtors to cut the percentage as much as possible. Real estate agencies have been cutting the rate competitively to attract more buyers.

The 0.5 percent maximum commission will be applied only to purchases of houses between 600 million won and 900 million won. Units over 900 million won will have the same 0.9 percent maximum.

For two-year or monthly contracts that require more than 300 million won as deposits, the rate will be cut to 0.4 percent from the current 0.8 percent. The rate for purchases of studio apartments in mixed residential-commercial buildings, or officetels, will also be lowered to 0.5 percent from 0.9 percent

If the National Assembly approves the plan, the renewed rates will be effective from early next year.

“The original purpose of the plan is to prevent conflicts over commission fees between consumers and real estate agencies,” said a ministry official. “Along with that, the measure should help increase housing transactions.”

Real estate agencies are concerned about falling revenue in response to the government plan. The number of real estate agencies has risen to about 82,000 as of last year, from around 45,000 in 2000. Competition for lower fees may intensify, the Korea Association of Realtors said.

The Korea Research Institute for Human Settlements held a public hearing on lowering the commissions at the institute in Pyeongchon, Gyeonggi, at 2 p.m. yesterday, and around 500 realtors were close to staging a protest over the plan.

BY SONG SU-HYUN [ssh@joongang.co.kr]