Fee guidelines for property agents deemed anti-competitive
http://www.businesstimes.com.sg/sub/...91006,00.html?
Published August 6, 2008
Fee guidelines for property agents deemed anti-competitive
IEA has until Sept25 to remove its recommendation on fees, fee structures
By UMA SHANKARI
EXISTING commission guidelines for property agents - drawn up by industry body Institute of Estate Agents (IEA) - are likely to infringe the Competition Act, the Competition Commission of Singapore (CCS) said yesterday.
The guidelines stipulate fees and fee structures for agents and agencies dealing with various types of property transactions. For example, for HDB properties, the guidelines state that a seller pays a minimum 2 per cent of the contracted price as sales commission and a buyer pays one per cent of the contracted price as service fee to agents.
The IEA's position is that the guidelines are non- binding and that agents are free to negotiate fees with their customers.
However, the CCS holds the view that even if the price recommendations are not binding, they will still provide a focal point for prices to converge. 'This will dampen competition and facilitate price coordination,' the commission said in a statement yesterday.
CCS further noted that the fees payable by sellers are couched as a minimum fee recommendation in the guidelines. Said CCS: 'This practice discourages any price competition below the recommended rate. More efficient estate agents or agencies, which are able to charge lower rates, will have little incentive to do so.'
Estate agents and agencies should set their fees independently, the commission advised.
Likewise, consumers should exercise their right to negotiate fees and terms with estate agents as this will encourage competition among estate agents and agencies, CCS said.
CCS' decision came about after the IEA had applied to it for guidance on whether its published fees guidelines could restrict competition in the real estate agency market in Singapore.
CCS, which found that the guidelines are indeed likely to infringe the Competition Act, informed the IEA on June 25 and advised it to remove its recommendation on fees and fee structures. IEA now has until Sept 25 to comply.
Property firms here said that the removal of the guidelines is unlikely to have much of an impact.
'IEA's guidelines shadow what most property agencies have in place,' said Eugene Lim, assistant vice-president of property agency ERA Asia-Pacific.
The fee structures are unlikely to change with the removal and agencies will not undercut one another by lowering their fees, he said.
'IEA's guidelines were, in essence, just that - only guidelines,' said PropNex chief executive Mohamed Ismail. 'Many agents on the ground often negotiated their own commissions anyway.'
The move by CCS, Mr Ismail said, was not unexpected. The Singapore Medical Association and Law Society were also subject to a similar removal of guidelines, he added.
Separately, the Consumers Association of Singapore (Case) said it is glad that the guidelines will be removed. 'In our view, the guidelines are anti-competitive in orientation and work against consumers' interest,' Case said.
Housing agent fees: How low can they go?
http://www.straitstimes.com/Singapor...ry_265321.html
Aug 7, 2008
Housing agent fees: How low can they go?
With guidelines axed next month, rates will come under pressure but big fall unlikely, say experts
By Jessica Cheam
PROPERTY experts expect agents to feel the pinch once fee guidelines are abolished next month, but the big question in the industry is just how low fees can go.
Real estate insiders concede that fees will come under pressure with buyers and sellers free to haggle, but dismiss the notion that rates could plummet to zero.
'In a buyer's market, perhaps, buyers can get away without paying. But agents also need their salaries and ultimately consumers will get the service they pay for,' said PropNex chief executive Mohamed Ismail.
Agents spend about 40 per cent of their commission on the marketing, transport and operational costs of selling a flat. Active agents earn about $5,000 a month, said Mr Ismail, so how low rates go will depend on the individual.
Those who aim for a large turnover of properties might be willing to slash rates but this could be at the cost of service quality, he added.
Mr Eugene Lim, assistant vice-president at ERA Asia Pacific, does not see rates falling drastically as the current rate is one of the lowest in the region.
Fees will be negotiable next month, thanks to a decision by the Competition Commission of Singapore, which told the Institute of Estate Agents to axe its guidelines on commissions.
The 1999 guidelines were based on a 1974 Government Gazette that stipulated a 2 per cent fee payable to agents from sellers. In the past, when Housing Board prices were relatively low, agents began charging buyers a further 1 per cent.
The Consumers Association of Singapore is advising people not to be held to old guidelines and to avoid giving exclusive rights to agents. It also said agents should not collect fees from both buyers and sellers, due to conflict of interest.
The new playing field will offer plenty of scope for buyers, sellers and agents to negotiate, but agency boss Albert Lu of C&H Realty pointed out that the real estate market is 'already very competitive'.
For private property sales, for example, agents are known to cut their commission charges from the recommended 2 per cent to 1 per cent for sellers.
'It's not in the interest of agencies to start price wars, as we end up hurting ourselves,' said Mr Lu. But he suggested that agencies might devise ways to entice buyers and sellers, such as bundling home services.
Industry leaders do not rule out a 'one-stop shop' concept where agencies could offer agent and legal services along with loans, for example.
Analysts believe consumers will be quick to take advantage of the new system and start haggling, but given the slow market, it is unclear who has the upper hand. Prices have eased in favour of buyers but many sellers are not budging, so with volumes down, agents may see an incentive to give discounts.
Homebuyer Vivian Wong, 25, said she will bargain harder while agents vow to fight and justify commissions. HSR Property Group's Mr William Tan, 43, said he was confident of retaining the 2 per cent commission.
'In this new landscape, the better agents will survive because they will offer quality service consumers will pay for.'
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Removal of property fee guidelines unlikely to have deep impact
http://www.channelnewsasia.com/stori...365334/1/.html
Removal of property fee guidelines unlikely to have deep impact
By Wong Siew Ying, Channel NewsAsia | Posted: 06 August 2008 2137 hrs
SINGAPORE: Market players said on Wednesday that the move to scrap guidelines on property agents' fees by September 25 is unlikely to leave a deep impact on the real estate sector. However, they warned against rogue agents who may try to cash in on the change in rules.
The Competition Commission of Singapore (CCS) ruled on Tuesday that the fee guidelines adopted by the Institute of Estate Agents (IEA) should be removed as they are uncompetitive. Under the current guidelines, property agents stand to pocket a commission of 2 per cent of the transacted price.
With the removal of the guidelines, buyers and sellers will be free to negotiate the fee payable to their agents. Real estate agencies are generally supportive of the move, but they are concerned that the lack of fee guidelines could trigger more rogue practices.
Chris Koh, director of Dennis Wee Group, said: "If the owner is not aware of what the market price of his property is, then he may fall into a trap where the rogue agent says, 'Ok, you want a million dollars, that's what you said you want, I will get you that S$1 million.
"But if I sell your property at S$1.2 million, then that S$200,000 is for me to keep since there is no guideline that it must be a percentage'."
Another real estate company, Propnex, warned against agents who offer unnecessary services just to quote a higher commission.
Without any fee guidelines, market players said it is down to the agencies to set their own commission structure. Propnex said consumers must assess their agents based on their commitment, track record and knowledge of the market.
Some industry players said the removal of the commission guidelines will not spark a price war because the cost of marketing a property has nearly doubled in the past ten years, and it will not be sustainable for agents to start under-cutting each other.
On average, about 10 to 20 per cent of the agent's commission goes into marketing efforts, such as taking out advertisements to promote a property. Paying a lower commission does not necessarily mean a better deal as agents may not put in as much effort to sell a property.
Some Singaporeans prefer to sell their properties on their own. Rosanah Mon helped her mother sell her three-room flat at Jalan Bukit Merah for S$230,000, saving over S$2,000 in the process.
"I don't see the necessity (to get a property agent), if you know the procedures well and you follow the guidelines," she said.
In fact, the Housing and Development Board (HDB) said it has seen an increase in the number of such transactions – rising from 5.5 per cent of total resale transactions in 1998 to about 8 per cent now.
To boost greater understanding of the sales procedures, HDB holds monthly resale seminars, with the next one scheduled on September 6. More information is available online at www.hdb.gov.sg.
- CNA/so