Published August 29, 2014

HSR's 100% commission scheme raises eyebrows

Been done before, say industry players; bigger agencies not likely to follow suit

By Lynette Khoo

[email protected] @LynetteKhooBT

IN a sign of how property agencies are going all out to stimulate sales activity in the subdued Singapore residential market, HSR International Realtors has come up with a 100 per cent commission scheme for agents and touted it as a "game changer".

But the new scheme, which becomes effective from January next year, already has its detractors.

Industry players noted that such a scheme has been introduced before by other smaller agencies but without success. Hence bigger agencies are unlikely to follow suit.

Currently, the typical commission payout in the industry ranges from 70-90 per cent, depending on the experience and performance of the salesperson.

Under HSR's new scheme, salespersons earning 90 per cent commission will be entitled to a 100 per cent commission once they achieve earnings of S$38,000 in a 12-month cycle. Those currently on the entry-level 70 per cent commission will be lifted to the 80 per cent level.

HSR chief executive Anne Tong said: "We believe that the scheme will encourage our existing salespersons to grow their business together with us and thus increase their take-home income. At the same time, we believe this scheme will also attract other salespersons or new ones to join us."

According to HSR's illustration, a salesperson who earns a gross commission of S$500,000 would have received a maximum net commission of S$450,000 under the old scheme. But under the new scheme, the salesperson will take home S$496,200.

HSR said that there will be no let-up in support services for its salespersons, such as IT services, operational and administrative support, research reports, legal advice, marketing products and training.

So far this year, HSR has seen a 21.6 per cent contraction of its agents pool to 1,327 agents. Ms Tong noted that it is possible that some of the salespersons who left HSR may have left the industry completely.

According to her, more than 40 per cent of those who resigned were not active sales agents to begin with, as they had not made a single sale since they joined.

One management executive of a rival firm felt that HSR's new commission scheme "is essentially giving all its existing team managers a big pay cut".

"There may be no more incentive and purpose for these managers to recruit, train, manage and retain. It will become an every-man- for-himself culture," said the management executive who declined to be named.

Century21 chief executive Ku Swee Yong questioned if a 100 per cent commission scheme is sustainable as it requires the management to have a lot of reserves to tide through this period of very low transactions.

"At the end of the day, the agents must have enough transactions in the market to feed themselves. Then they will continue holding on to their licence and stick with the company," he said. "The reality now is many agents are leaving the agency pool and taking up full-time jobs. Although they are still holding onto a licence, some may have found work with other corporations."

Mr Ku pointed out that there are also other factors affecting how salespersons choose their agencies, including the corporate branding, systems and processes, working environment and areas of specialisation.

According to the Council for Estate Agencies (CEA), the number of licensed estate agencies and registered salespersons has "remained fairly consistent for the last three years".

On Jan 1 this year, CEA had on its rolls 1,425 licensed estate agencies and 31,783 registered salespersons, compared to 1,492 estate agencies and 31,040 salespersons on Jan 1, 2013. In comparison, there were 1,487 estate agencies and 30,577 salespersons on Jan 1, 2012.

The drastic fall in residential sales has prompted industry players to band together to share resources and leverage on one another's network.

In July, HSR formed an alliance with SLP International, OrangeTee and Dennis Wee Realty to collaborate on project marketing mainly for local projects. HSR has garnered three new residential projects since the formation of the alliance, Ms Tong said.

She added that HSR is also expanding its reach to overseas projects, such as those in Malaysia, Thailand, Australia and the UK, and has plans to diversify further into commercial properties.