Does the Korean real estate market need restructuring? Many people are waiting for an answer to this question. The Korean real estate market has flourished greatly in the past four to five years, in a sense piggy-backing on the boom in the U.S. real estate market. However, the market’s recent downturn has led to such a severe stagnation that many agents are leaving the business for jobs in other sectors.

One successful Korean real estate firm in Flushing has reduced its number of agents to four, down from 12 at the beginning of the year. Agents who have been in the business for a short period – one to two years – have transferred out. Another famous company, the “B” Real estate Agency in Bayside, is in the same situation. These are two widely known large-volume real estate agencies. But these and many smaller agencies are feeling the pressure of the economic depression. Trading has hit such a slump that many agencies cannot meet their office expenses, overhead, or shares. This is driving agents into other sectors.

One Korean real estate broker noted, “Agents with long-standing experience in the field, with a large client base and solid client contacts, who may even have enlarged their portfolios to include the mainstream American market, can survive in such a stagnant market. It’s the newcomers who cannot adapt to the situation and are leaving the field.” Another agent said, “People with other job skills, training, profession, or other sources of income such as life insurance, cleaners tend to go back to their main fields.”

The Korean real estate business has two different earning systems. In one, agents must make regular, monthly payments to their agency. In the other, agent and company share the service fee on each signing at an agreed upon rate (for example, 50/50, or 45/65). When the market is good, agents under the first system can easily meet their monthly share, because they are collecting service fees on signings. But when the market takes a dive, or bottoms out, as it has done, the same agents can no longer meet their monthly shares. This drives them out of the market.

The market is so bad that the situation is not much different among companies where the service fee is split. Last August, the average price of a one-family home dropped against last year’s prices. According to a statement issued by the National Association of Real Estate Professionals, prices went down to an average of $225,000, from $229,000. Although this may seem minimal, it is significant since it is the first time that prices have dropped in thirteen years. This is where divergent views on restructuring come in.

The Association insists that the market will recover next year. But many real estate professionals and economic experts note that housing prices have been inflated for so many years, and buyers have overextended themselves with housing loans to such an extent, that the market will probably be unstable for some time in the future.