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Thread: Developers offer agents fatter cuts to push projects

  1. #1
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    May 2006

    Default Developers offer agents fatter cuts to push projects,00.html?

    Published July 9, 2008

    Developers offer agents fatter cuts to push projects

    In some segments, commissions have doubled compared to a year ago


    (SINGAPORE) Developers are paying property agents bigger commissions - in some cases almost double of what was offered a year ago - to push their new residential project launches.

    This is because the environment for selling homes is far more challenging now and agents have to work much harder to persuade potential buyers to part with their money.

    A modest-sized developer told BT he does not mind rewarding agents with commissions of 2 per cent or more as, to him, speed of sales is paramount. He needs to achieve enough cash flow to begin construction and move on to his next project. But even the big boys are having to pay a higher commission rate to agents these days - if they want their help to move units.

    An established developer launching a big project these days could pay its appointed marketing agent 0.8 per cent of sale price - compared with possibly 0.5 per cent 12 months ago. To further incentivise agents, the commission rate may go up to, say, one per cent nowadays, once a certain number of units have been sold.

    Developers of smaller projects, for instance in the Telok Kurau area, are understood to be paying even higher commissions - often up to 2 per cent - compared with around one per cent or less a year ago, BT has learnt from property agents and developers. On top of that, some developers are offering a bonus payout in the form of an additional 0.5 per cent commission if the project sells out within a certain time frame and at a price exceeding the developer's target.

    BT understands that high-end projects have also not been spared. Their developers are having to reward agents with 0.7 to 1.5 per cent commissions - up from 0.4 to 0.5 per cent a year ago.

    Teo Hong Lim, executive chairman of property group Roxy-Pacific Holdings, says: 'Speed of sales is most important to us. We don't want to target sales of just 30-40 per cent of total units in a project. We need to sell 80-90 per cent or even 100 per cent. We can then begin construction, and move on to our next project.

    'At the end of the day, agents are also very much incentivised by commissions. It's a sort of a no-lose situation for us when we achieve speed of sales and the final net sales value of a development is higher than our initial target, even after we less the additional bonus commissions we pay the agents.'

    While some market watchers may think that paying agents higher commissions will eat into the developers' profit margins, Mr Teo argues: 'Commissions are only part of our total project cost. It's definitely much, much lower than land and construction costs.'

    A property agent says: 'Developers are more concerned with cash flow and sales take-up. The higher commission is a small amount to pay for boosting their cash flow. If they don't have the cash flow, higher interest expense will be a much bigger cost item than the commissions.'

    Agreeing, Knight Frank executive director Peter Ow explains why agents need higher motivation today. 'The main reason for increasing our fees is that we're operating in a tougher market and, frankly, agents are highly motivated by fees. If you get two projects side by side, most agents will naturally push for the one where the reward is higher.'

    Industry players acknowledge that agents have to work a lot harder to convince buyers, given the more cautious economic outlook, thinner foreign buying and the fact that fewer speculators are left in the market after the deferred payment scheme was scrapped last October.

    BT understands that the extra work being put in by agents these days to realise sales at showflats includes studying the project's costing. 'We tell buyers the price we're offering is below current replacement cost, either because the developer bought the land cheap or locked in construction costs early.

    'Sometimes we also use pressure tactics. We tell potential buyers that the developer will raise prices once it achieves a certain percentage of sales. And it works,' an old hand in the game told BT.

  2. #2
    Join Date
    Sep 2014


    7 years later...

    May 30, 2015

    DEVELOPERS are ramping up sales commissions in a bid to spur property agents to work harder to sell their units.

    One developer is said to have offered a rate of 12 per cent to move a unit, but most increases are more modest.

    Agents told The Straits Times that most developers have lifted their commissions from the usual 0.5 to 1 per cent to 2 to 3 per cent over the past one year but some are going much higher.

    The Boutiq in Killiney Road offers up to 6 per cent, City Gate in Beach Road has a 4.5 per cent commission, while Lakeville in Jurong and Bartley Ridge offer 3 per cent, said agents.

    These commissions may be shared among co-broking agents.

    "Although developers offer high commissions, the projects have to be good and suitable for my clients too. I want to make money but I also don't want to shortchange my clients," said PropNex agent Alex Goh, who has sold three units in Lakeview, the last closing last month.

    Mr Goh, who focuses on condominiums, said developers with leftover units tend to raise their commissions to push sales. He knows of one developer with a leftover unit with a patio offering as much as 12 per cent commission to agents.

    While 2 or 3 per cent may sound small, it can reap huge rewards, as a 26-year-old PropNex agent can attest. Ms Shirley Seng made headlines this week when she pocketed $1.5 million - about 3 per cent commission from the sale of a $51 million penthouse unit at Le Nouvel Ardmore.

    While most developers tend to increase commissions within six months of launching their projects, a few big developers have been keeping rates at 1 to 2 per cent.

    Mr David Cheang, chief executive officer of DC13 Development, which is developing a 24-unit condominium in Balestier call Neem Tree, said he is looking at increasing commissions up to 4 per cent.

    "The property scene has reached a plateau. It is important to push projects to sell in the shortest possible time to cover any costs that the developer may be facing. A good commission to sales agents will encourage agents to highly recommend the project," said Mr Cheang.

    Agent Alice Ng said: "Who wouldn't be motivated by high commission? Closing a high-commission project easily doubles or triples your income. But projects with high commissions are also usually tougher to sell. Hence, developers have to dangle bigger carrots to motivate agents to bring buyers to them. So the current situation is not only a buyers' market, but also an agents' market.

    "That said, ultimately, high commission will help move a project only so much. It still boils down to developers pricing their projects right. Buyers are very much in the know these days and no buyer would be so foolish as to pay more than what is fair."

    The slow property market has seen some agents leaving the industry to pursue other jobs. There were 30,830 "registered salespersons" or property agents as atJan 1, down from 31,783 last year.

    Of these, 3,006 were new entrants, down from 3,336 last year and 4,567 the previous year.

    But Mr Goh feels that it is in fact a better time now for agents. He said: "I used to sell Housing Board flats for about seven years. Commission can only reach a cap of $20,000 for a $1 million sale, which is rare. Now if you... know how to sell to your clients, with just four to five deals, you can make the same amount of money than before when I had to close one deal every few days."

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