Market share gains give PropNex ringside seat in buoyant home sales market

Real estate agency's boss Ismail Gafoor credits its sales people as main reason for firm's performance

Tue, Sep 22, 2020

Siow Li Sen

AS NEW private home sales rebound sharply, PropNex, Singapore's largest real estate agency is sitting pretty given its ringside seat in the property market which has shown remarkable resilience amid the pandemic crisis.

The agency force of 8,748 agents lets the company enjoy economies of scale without the expensive cost of salaries as agents are paid only commissions, said Ismail Gafoor, PropNex co-founder, executive chairman and CEO. The group's agency force has grown organically, 18 per cent from a year ago, he noted. In January 2019, PropNex had 7,400 agents.

The group has increased its market share in all segments, he told The Business Times. It has taken a lion share of 68.7 per cent in Q2 2020 in the number of units sold for new launches of private property projects, jumping from 57 per cent in Q1 and 48 per cent in 2019.

From April, the beginning of the "circuit breaker" to end-July, PropNex captured about 53 per cent market share for closing 1,369 units in the new launches segment, based on 63 active projects that the group was marketing.

In the private property resale market, PropNex's market share is also up sharply to 54.7 per cent in Q2 2020, from 41.9 per cent in Q1 and 45 per cent in 2019. Its market share for HDB resale is 52.7 per cent in Q2 2020, up from 50.6 per cent in Q1 and 51.2 per cent in 2019.

"We're doing very well; the main reason is our sales people which represents 28.5 per cent of all agents," Mr Ismail said.

The top three agencies here are PropNex, ERA Realty Network (7,321 agents) and OrangeTee & Tie (4,359 agents).

Savills Singapore's associates arm - Savills Residential - will merge with Huttons Asia, and the move will see Huttons strengthen its current pool of 3,044 brokers, with all 582 Savills commission-only residential brokers being invited to join, said a Business Times report this month.

"I have (over) 8,700 agents, I don't pay a cent in salary (for them)," said Mr Ismail. As for its overseas network, PropNex operates on a franchise model in Indonesia, Malaysia and Vietnam where it receives "royalties from their business."

To be clear, the group has 172 staff and staff cost was S$3.5 million in Q2 2020.

Of course not all agents are active; Mr Ismail estimates about 20 per cent of the group's agency force do not earn at least S$20,000 a year in commission. He also pointed to the group's asset-light model which offers flexibility, especially in a fast-changing environment which will help it get through the current crisis.

Bringing value add to customers as the company leverages on technology and invests in digitalising its business processes more remains the strategy, Mr Ismail noted. Agents get continuous training as well.

Last week it announced a S$7.3 million career enhancement package, with each salesperson getting S$835 worth of financial assistance, digital tools support and training subsidies.

PropNex held a virtual expo in July with 30,000 viewers, where it hosted a series of 29 Webinars and showcased over 1,000 listings.

Next month, PropNex in a partnership with Mediacorp and will create a virtual Singapore Property Show 2020 to showcase close to 20 new projects with immersive features such as narrated 4D virtual tours embedded into every project listing.

PropNex which listed on July 2, 2018 posted stellar results for H1 2020, as net profit surged to S$16 million, up 150.7 per cent year-on-year and revenue growth of 45.2 per cent to S$241.5 million. The robust performance puts it among an enviable class of 69 SGX-listed companies out of 400 that posted higher H1 2020 profits over the same period last year.

The group expects the majority of the impact from the contraction of market volume during the circuit breaker period which ended in June to be reflected in its financial performance in the second half of the year. Q2 sales for private new homes, private resale and HDB plunged from Q1 20.3 per cent, 55 per cent and 42 per cent respectively. Generally, real estate revenues are recognised two to four months later, from the time transactions are concluded.

While Mr Ismail does not make light of the challenges posed by the pandemic which has thrown thousands out of work, he points to the market's resilience.

"Looking at the Q2 market performance, we think it is a testament to the resilience of the private residential sector. In our view, the property market entered the crisis with strong fundamentals, as various property measures over the years have curbed overexuberance in the market," he said.

Home buyers are young people, newly married couples and HDB upgraders who are the largest group, he pointed out.

Those who enjoy job security work in sectors such as IT and the civil service, and buyers are spurred by record low interest rates, he added.

Employment fell by a record 103,500 in the second quarter of the year, a staggering four times the previous record contraction - in the first quarter - of 25,600, according to the Singapore Ministry of Manpower's Labour Market Report released on Monday. Retrenchments more than doubled to 8,130 in the quarter, compared to 3,220 in Q1. This was still below previous peaks during the dotcom bubble and the global financial crisis.

"Overall the market is not better than last year; the pandemic has taken its toll," Mr Ismail said.

According to latest URA (Urban Redevelopment Authority) data, developers sold 1,256 private homes in August, 16 per cent higher than July's take-up.

In the first eight months of this year, developers sold an estimated 6,198 new private homes, 4.5 per cent lower than that in the same period last year.

For the full year, Mr Ismail expects new home sales to reach between 9,000 and 9,500 units in 2020 - or about 4 per cent to 9 per cent lower than the 9,912 new homes sold in 2019.

There is an anticipated line-up of 29 new launches with a total of more than 9,670 units to be rolled out in the subsequent quarters and PropNex has been appointed for 15 projects to date.