New Reporter
04-09-23, 14:58
Agents brace for lean times as commissions take hit from slowing home sales
Aug 27, 2023
SEVERAL rounds of policy changes and a market slowdown have taken a toll on real estate agencies’ revenues, and agents are steeling themselves for lean times ahead.
Singapore’s two largest real estate agencies, PropNex and Apac Realty, which operates the ERA franchise, recently posted steep drops in commission income in their interim earnings reports.
PropNex’s revenue shrank 22.9 per cent to S$364.3 million, its lowest since 2020. Revenue from both its agency services and project marketing services segments fell sharply in the six months ended June 2023. Net profit dropped 18.4 per cent to S$22.1 million from S$27 million.
Apac Realty’s revenue dropped 24.2 per cent to S$259.6 million from S$342.6 million; net profit dived 70 per cent year on year to S$5 million from S$16.7 million.
This comes at a time when transaction momentum has slowed and prices in the residential market are expected to ease after the highs of the last two years. Gone are the days of new launches selling 80 per cent of the project in the first weekend; sales are moving much slower now.
Agents typically earn between 2 per cent and 4 per cent on marketing new projects, with developers sometimes throwing in additional incentives to push sales. For the private resale market and Housing and Development Board (HDB) properties, agents can earn 2 per cent on commissions.
“I cannot deny that the private (property) market is slowing down,” said Huttons Asia’s chief executive officer Mark Yip. “But whether it is perceived as a long drought or it is just an interim knee-jerk reaction is largely policy-driven,” he told The Business Times (BT).
OrangeTee & Tie associate director Jim Leong, who has been in the real estate marketing business for seven years, pointed to pandemic constraints leading to limited supply and subsequently, fewer transactions.
“Buyers will need time to get used to the new prices, and sellers generally have strong holding power and may not lower their prices too drastically,” he added.
The property market has witnessed three rounds of cooling measures since December 2021, with the latest in April 2023 targeted at foreign buyers and investment buying. With these measures in place, the persistently high interest rates and inflation have taken the wind out of the market’s sails.
Agencies that spoke to BT agreed that the housing market is also getting more competitive, with buyers feeling cautious and purchases being held back.
“On the ground, buyers nowadays buy on a need basis,” said Melvin Lim, CEO and co-founder of PropertyLimBrothers (PLB). In the current market, it is mainly locals buying properties for their own occupation rather than for investment purposes, he said. The many rounds of cooling measures have also led homeowners to hold on to their properties, rather than sell, he added.
“2021 was a unique year, when most properties flew off the shelves due to a combination of factors – the end of the ‘circuit breaker’, easing of Covid restrictions, people getting bigger properties due to work-from-home arrangements, and travel restrictions which had spilled over from 2020 to 2021,” said Lim.
As the first half of 2023 brought several major new launches to the market with thousands of units available at once, Huttons’ Yip said buyers have remained price-sensitive, typically going for projects with good location attributes and priced below the S$2 million benchmark.
Although commission levels have dropped in 2023 from 2021 and 2022, PLB’s Lim expects transaction volume for the second half to be similar to the first half of this year.
He said he expects no changes to transaction volume in the second half of the year, and “having more launches in the market will (help) motivate people to shop around more and think about moving, changing to a new home or upgrading”.
PropNex Realty’s executive chairman and CEO Ismail Gafoor agreed things would pick up in the second half, with more launches expected.
“Transaction volume is expected to be marginally higher or the same as last year for private properties,” he told BT. In public housing, he expects the HDB market to remain buoyant, with 27,000 to 28,000 units changing hands, similar to last year’s volume.
Smaller pie
OrangeTee’s Leong was less sanguine, noting that “the second half of 2023 will either be stagnant or worse off”. “Statistically, Q4 sales are usually lower than the first three quarters of most years,” he noted.
While the HDB’s new framework for Build-to-Order (BTO) flats would keep a lid on resale prices in the longer term, some agents reckon the market could see more transactions in Standard BTO and resale flats in the near future.
But if prices of Standard BTO flats and resale units were to start moving up too quickly, this may warrant other policy changes in the future, cautioned Huttons’ Yip.
For now, it is business as usual, said Marcus Chu, CEO of ERA Singapore, ERA Asia-Pacific and Apac Realty. As the bulk of HDB flats will not see any changes to their resale conditions, he does not foresee any decrease in transaction volume.
With the market pie getting smaller, consolidation and acquisitions may be on the horizon.
OrangeTee’s Leong said that “there is some amount of anxiety among agents, and it can be felt through movement of agents to other larger agencies”.
Propnex said its sales force has increased from 6,600 in 2018 to about 12,000 today, and the company has been the biggest beneficiary for such cross-agent movement over the years.
With about 40 per cent to 50 per cent of market share now for new project launches, PropNex’s Ismail said the company is “looking at crossing 60 per cent market share, with 15,000 sales persons onboard within a year”.
https://www.businesstimes.com.sg/property/agents-brace-lean-times-commissions-take-hit-slowing-home-sales
Aug 27, 2023
SEVERAL rounds of policy changes and a market slowdown have taken a toll on real estate agencies’ revenues, and agents are steeling themselves for lean times ahead.
Singapore’s two largest real estate agencies, PropNex and Apac Realty, which operates the ERA franchise, recently posted steep drops in commission income in their interim earnings reports.
PropNex’s revenue shrank 22.9 per cent to S$364.3 million, its lowest since 2020. Revenue from both its agency services and project marketing services segments fell sharply in the six months ended June 2023. Net profit dropped 18.4 per cent to S$22.1 million from S$27 million.
Apac Realty’s revenue dropped 24.2 per cent to S$259.6 million from S$342.6 million; net profit dived 70 per cent year on year to S$5 million from S$16.7 million.
This comes at a time when transaction momentum has slowed and prices in the residential market are expected to ease after the highs of the last two years. Gone are the days of new launches selling 80 per cent of the project in the first weekend; sales are moving much slower now.
Agents typically earn between 2 per cent and 4 per cent on marketing new projects, with developers sometimes throwing in additional incentives to push sales. For the private resale market and Housing and Development Board (HDB) properties, agents can earn 2 per cent on commissions.
“I cannot deny that the private (property) market is slowing down,” said Huttons Asia’s chief executive officer Mark Yip. “But whether it is perceived as a long drought or it is just an interim knee-jerk reaction is largely policy-driven,” he told The Business Times (BT).
OrangeTee & Tie associate director Jim Leong, who has been in the real estate marketing business for seven years, pointed to pandemic constraints leading to limited supply and subsequently, fewer transactions.
“Buyers will need time to get used to the new prices, and sellers generally have strong holding power and may not lower their prices too drastically,” he added.
The property market has witnessed three rounds of cooling measures since December 2021, with the latest in April 2023 targeted at foreign buyers and investment buying. With these measures in place, the persistently high interest rates and inflation have taken the wind out of the market’s sails.
Agencies that spoke to BT agreed that the housing market is also getting more competitive, with buyers feeling cautious and purchases being held back.
“On the ground, buyers nowadays buy on a need basis,” said Melvin Lim, CEO and co-founder of PropertyLimBrothers (PLB). In the current market, it is mainly locals buying properties for their own occupation rather than for investment purposes, he said. The many rounds of cooling measures have also led homeowners to hold on to their properties, rather than sell, he added.
“2021 was a unique year, when most properties flew off the shelves due to a combination of factors – the end of the ‘circuit breaker’, easing of Covid restrictions, people getting bigger properties due to work-from-home arrangements, and travel restrictions which had spilled over from 2020 to 2021,” said Lim.
As the first half of 2023 brought several major new launches to the market with thousands of units available at once, Huttons’ Yip said buyers have remained price-sensitive, typically going for projects with good location attributes and priced below the S$2 million benchmark.
Although commission levels have dropped in 2023 from 2021 and 2022, PLB’s Lim expects transaction volume for the second half to be similar to the first half of this year.
He said he expects no changes to transaction volume in the second half of the year, and “having more launches in the market will (help) motivate people to shop around more and think about moving, changing to a new home or upgrading”.
PropNex Realty’s executive chairman and CEO Ismail Gafoor agreed things would pick up in the second half, with more launches expected.
“Transaction volume is expected to be marginally higher or the same as last year for private properties,” he told BT. In public housing, he expects the HDB market to remain buoyant, with 27,000 to 28,000 units changing hands, similar to last year’s volume.
Smaller pie
OrangeTee’s Leong was less sanguine, noting that “the second half of 2023 will either be stagnant or worse off”. “Statistically, Q4 sales are usually lower than the first three quarters of most years,” he noted.
While the HDB’s new framework for Build-to-Order (BTO) flats would keep a lid on resale prices in the longer term, some agents reckon the market could see more transactions in Standard BTO and resale flats in the near future.
But if prices of Standard BTO flats and resale units were to start moving up too quickly, this may warrant other policy changes in the future, cautioned Huttons’ Yip.
For now, it is business as usual, said Marcus Chu, CEO of ERA Singapore, ERA Asia-Pacific and Apac Realty. As the bulk of HDB flats will not see any changes to their resale conditions, he does not foresee any decrease in transaction volume.
With the market pie getting smaller, consolidation and acquisitions may be on the horizon.
OrangeTee’s Leong said that “there is some amount of anxiety among agents, and it can be felt through movement of agents to other larger agencies”.
Propnex said its sales force has increased from 6,600 in 2018 to about 12,000 today, and the company has been the biggest beneficiary for such cross-agent movement over the years.
With about 40 per cent to 50 per cent of market share now for new project launches, PropNex’s Ismail said the company is “looking at crossing 60 per cent market share, with 15,000 sales persons onboard within a year”.
https://www.businesstimes.com.sg/property/agents-brace-lean-times-commissions-take-hit-slowing-home-sales