New bill would crack down on Korea's real estate apps

Real estate agencies clustered at in Seoul on Monday. [NEWS1]

Korea's real estate apps like Zigbang and Dabang will likely take a hit from a bill aimed at empowering the Korea Association of Realtors (KAR) with the authority to regulate unfair brokerage practices.

The bill will be reviewed, and perhaps passed, by the Land Infrastructure and Transport Committee at next plenary session on Dec. 21, with less than four months left before the April 10 parliamentary election.

A bill was initially put forward by opposition Democratic Party (DP) lawmaker Kim Byung-wook in October 2022 that would grant KAR, currently a nonprofit organization, the legal authority to regulate and penalize its members within the bounds of the law.

The bill also makes it mandatory for all real estate brokers to join the association — including platform operators like Zigbang and Dabang.

“We need to give more rights to the KAR to promote higher ethical awareness to realtors,” Kim said as he proposed the bill.

The bill was put on the list upon ardent request from the DP, according to an anonymous official from the ruling party.

“The opposition party was said to have said that they cannot postpone the bill review any longer and requested it to be put on the table for discussion for the upcoming session,” said an anonymous official from the ruling party. “I believe that it’s because they want to pass the bill before next year’s election.”

There are around 112,817 real estate agents in business based on data from the third quarter of this year, according to the Ministry of Land, Infrastructure and Transport. Half of those professionals are concentrated in the capital area of Seoul and Gyeonggi.

There are around 521,421 realtors currently certified, based on data from October 2022. These are needed votes for the upcoming parliamentary election, the ruling party claims.

“It’s only natural that the Democratic Party is suddenly attempting to pass this bill, out of the blue, to gain more votes from the related people,” said an anonymous People Power Party (PPP) lawmaker who is on the Land Infrastructure and Transport Committee. “Even if the bill fails to pass, it’s a good cover front to claim that they’ve tried to prioritize their [realtors’] interests.”

Related platform operators worry that the passing of the bill would snowball into a battle, pitting them against the top association, and ultimately usher them to the sideline or limit their businesses altogether.

This would ultimately hurt consumer interests as well, as major real estate platforms play a considerable role in stimulating healthy competition among online brokerage services and skim the price tag of expensive broker fees.

Zigbang, Korea's No. 1 platform for real estate, has had a strained relationship with KAR during the two years since it expanded its service to actively engage in selling and renting properties. Offline real estate agents have argued that such expansion hurts their businesses.

Some say that the passing of the bill would lead to another sacrifice of up-and-coming platforms, as the so-called Tada Prohibition Act — a policy passed in March 2020 that revised domestic transportation laws — did to van-hailing service Tada by banning its primary revenue stream.

Although Tada's mobility service provided viable options for consumers, lawmakers pushed the bill revision in order to gain support from a taxi industry that feared the service would hurt their business. At the time, Tada's drivers were classified as freelance workers.

“Similar to the Tada case, some realtors are putting pressure on lawmakers associated with the Land Infrastructure and Transport Committee to pass the bill,” said the official from the ruling party. “This law can be viewed as the ‘Zigbang Prohibition Act.’”

The government is taking a more conservative approach to the bill.

“It’s essential to be prudent when entrusting authority to a certain association to protect the interests of the citizens and secure impartiality in administrative measures,” the Land Ministry has reportedly said it the papers from the committee. “We should also take into account that public credence toward the association is low due to the increase in victims of jeonse [large lump-sum deposits] frauds.”

The Fair Trade Commission also said that the group's “monopolistic” position could hinder the industry as competition dries up.

“The purpose of the bill is to give more authority to the realtors, and entrust them with social responsibility for engagement of a transparent service,” said DP lawmaker Kim Byung-wook. “The regulations will not be autonomously decided by the association, but will be set forward through discussion with the Land Ministry. KAR will not be able to arbitrarily wield its power.

“This bill is in no relation to, nor will affect business of platform operators, but we are open to hearing their side of the matter and will revise the law if necessary,” he said.

BY KIM HYO-SEONG [lee.jaelim@joongang.co.kr]