Why firms are cut­ting agents

With Proptech shak­ing up the real es­tate in­dus­try, Prop­nex Realty and DWG’S merger may just be the open­ing salvo of more ti­tanic merg­ers to come.

Singapore Business Review - - CONTENTS -

More than half of the top 20 largest agen­cies slashed their sales­force as tech­nol­ogy in­no­va­tions opened up new plat­forms for con­sumers to han­dle their own prop­erty trans­ac­tions di­rectly in­stead of hir­ing a prop­erty agent. On the other hand, four of the top ten real es­tate agen­cies this year in­creased their staff: Prop­nex, Hut­tons Asia, Orange­tee. com, and KF Prop­erty Net­work added sales­per­sons to take ad­van­tage of a buyer con­fi­dence up­swing. Over­all, 2017 has been kinder to prop­erty firms. The roll­out of gov­ern­ment cool­ing mea­sures eased and pri­vate home sales surged. But for the big­gest player in Sin­ga­pore, even these pos­i­tive driv­ers might not be enough to shield smaller, mar­gin­squeezed firms.

“There is only space for two or three big real es­tate agen­cies in the coun­try,” said Is­mail Gafoor, CEO of Prop­nex Realty, ar­gu­ing that con­sol­i­da­tion in the Sin­ga­pore real es­tate in­dus­try has be­come a ques­tion of when, not if. “Ul­ti­mately, we can ex­pect more num­bers of small and mid-sized agen­cies to unite with the big­ger play­ers in the up­com­ing years,” he noted.

He reck­oned the Sin­ga­pore real es­tate mar­ket is rel­a­tively frag­mented and merg­ers are be­com­ing more at­trac­tive given the tougher op­er­at­ing en­vi­ron­ment. For Prop­nex, which rose to num­ber 1 in Sin­ga­pore Busi­ness Re­view’s Largest Real Es­tate Agen­cies 2017 rank­ings, the merger meant a tal­ent boost crit­i­cal to stay­ing ahead of the pack.

Nearly nine out of 10 ac­tive DWG sales­per­sons who earned at least $50,000 or above in the past year signed on to Prop­nex in July. “With the added strength and net­work, Prop­nex is con­fi­dent that our close to 7,000 strong sales­force will add greater value to all prop­erty de­vel­op­ers in their out­reach to home in­vestors whilst at the same time, match con­sumers to their dream homes with the wider range of list­ings avail­able,” said Gafoor.

Prop­nex has been flex­ing its mus­cles in the new homes seg­ment, with three new pro­ject launches — ARTRA, Mar­tin Mod­ern and Le Quest — do­ing well. All 531 units of Hun­dred Palms Res­i­dences EC in Hougang sold out within 7 hours in July. It also com­pleted seven col­lec­tive deals so far in 2017 val­ued at $2.5b, up from the three deals worth $1b for the whole of 2016.

An­other mega merger was an­nounced in Au­gust be­tween the as­so­ci­ate agency di­vi­sion of Orange­tee and Ed­mund Tie & Com­pany Prop­erty Net­work, the fourth- and fifth-largest agen­cies in this year’s rank­ing, re­spec­tively. This would cre­ate Orange­tee & Tie Pte Ltd., the third-largest agency with more than 4,000 agents, as well as a com­bined port­fo­lio of more than 50 ex­ist­ing res­i­den­tial projects and four up­com­ing launches.

“To do well in real es­tate, we need to be able to cre­ate economies of scale to en­hance pro­duc­tiv­ity and cost ef­fec­tive­ness, har­ness ad­e­quate man­power with broad skill sets for mar­ket cov­er­age and pen­e­tra­tion, and lever­age on tech­nol­ogy to max­imise ef­fi­ciency and ef­fec­tive­ness,” says Steven Tan, manag­ing di­rec­tor of Orange­tee.

“The sim­i­lar­ity of or­ga­ni­za­tional cul­tures is a good start to­wards a suc­cess­ful merger that is sus­tain­able over the long term. Ad­di­tion­ally, both firms com­ple­ment each other well in terms of ca­pa­bil­i­ties,” adds Ong Choon Fah, CEO of Ed­mund Tie & Com­pany.

“There is only space for two or three big real es­tate agen­cies in the coun­try,”

AI, au­to­ma­tion, and tal­ent glut

Whilst big­ger firms are tak­ing ad­van­tage of a buyer con­fi­dence re­bound, smaller firms might be tempted to join forces amidst the pres­sures of tech­nol­ogy dis­rup­tion and sales agent over­sup­ply.

Ar­ti­fi­cial in­tel­li­gence and au­to­ma­tion tech­nolo­gies are start­ing to force firms to in­vest heav­ily on dig­i­tal-friendly plat­forms or risk los­ing cus­tomers. They must also start spend­ing on ad­di­tional train­ing for sales agents to pro­vide bet­ter ser­vic­ing skills that au­to­mated sys­tems can­not pro­vide.

“Real es­tate agen­cies must pre­pare to in­te­grate their busi­nesses with in­for­ma­tion tech­nol­ogy and trans­form into a global in­ter­con­nec­tion which em­braces dif­fer­ences in cul­tures and prac­tices,” said Mer­son Chow Yi Tong, KEO at Mindlink Groups, which landed 15th in SBR’S rank­ing this year. Chow noted that the con­sol­i­da­tion trend is driven by the fact that a ma­jor­ity of real es­tate agen­cies have seen a

profit nosedive in re­cent years and made it more tempt­ing to sell to or merge with a big­ger com­pany. This has cre­ated a rip­ple of fear amongst sales­per­sons, driv­ing them to be­come more pru­dent on choos­ing what they per­ceive to be more re­li­able agen­cies.

For Knight Frank’s ex­ec­u­tive di­rec­tor and head of res­i­den­tial Tan

Tee Khoon, the is­sues of tech­nol­ogy dis­rup­tion and sales­per­son over­sup­ply are in­ter­twined. Con­sumers are be­com­ing less de­pen­dent on hu­man agents to han­dle their prop­erty trans­ac­tions, pre­fer­ring to do it them­selves through dig­i­tal plat­forms that cut down the com­plex­ity. “To­day’s more ed­u­cated and tech-savvy con­sumers are in­creas­ingly com­fort­able with han­dling com­pli­cated pro­cesses them­selves, or with the help of user­friendly dig­i­tal plat­forms. Al­ready, sev­eral play­ers have en­tered the mar­ket in re­cent years to cater to such con­sumers, and this will change how prop­erty mar­ket­ing and ne­go­ti­a­tions are car­ried out,” said Tan.

He pointed out that around 40% of Sin­ga­pore­ans in­tend to DIY (do it your­self), or are un­de­cided about whether they in­tend to hire an agent for their next prop­erty trans­ac­tion. With these shift­ing con­sumer pref­er­ences, nearly one in four Hous­ing and Devel­op­ment Board re­sale trans­ac­tions now have ei­ther a buyer or seller who did not en­gage an agent’s ser­vices — and Tan said this trend seems likely to con­tinue.

For the thou­sands of prop­erty agents in the is­land com­pet­ing for a shrink­ing pool of trans­ac­tions, this rep­re­sents a sink-or-swim ul­ti­ma­tum: Dis­tin­guish your­self as an im­pec­ca­bly pol­ished pro­fes­sional or be­come ob­so­lete. “I be­lieve that prop­erty agents would do well en­hanc­ing their pro­fes­sion­al­ism and main­tain­ing the trust of con­sumers. With in­creas­ing dis­rup­tion, it is all the more vi­tal that prop­erty agents main­tain a high level of pro­fes­sion­al­ism,” said Tan.

A wel­come re­cov­ery

Nav­i­gat­ing tech­nol­ogy and staffing con­cerns will be crit­i­cal for prop­erty firms that want to pull ahead of the in­dus­try as it ex­pe­ri­ences a con­fi­dence re­cov­ery. Col­lec­tive sales and pri­vate home sales, in par­tic­u­lar, have surged. Knight Frank, which shed three sales­per­sons this year to 61 and slid one place to 26th in this year’s rank­ings, had two no­table col­lec­tive sales deals this year: Hougang Av­enue 7 sold to Ox­ley-lian Beng Ven­ture

Pte Ltd for $575m and One Tree Hill Gar­dens for $65m to a sub­sidiary of Lum Chang Group.

Mean­while, JLL Sin­ga­pore had also been ac­tive in the col­lec­tive sales mar­ket. It sold Goh & Goh Build­ing for S$101.5m to a unit of BBR Hold­ings and The Al­bracca, a 10-storey res­i­den­tial devel­op­ment along Meyer Road, to Sus­tained Land Pte Ltd for $69.12m.

“The buoy­ant home sales has led to a de­cline in de­vel­op­ers’ hous­ing in­ven­tory, and this has brought about an ac­tive devel­op­ment land sales mar­ket, par­tic­u­larly on the col­lec­tive sales front, given the lim­ited state land sup­ply in the Gov­ern­ment Land Sales pro­gramme,” said Tay Huey Ying, head of re­search and con­sul­tancy at JLL Sin­ga­pore, who rose three places to 16th in the Largest Real Es­tate Agen­cies 2017 rank­ings.

San­guine out­look

ERA Realty Net­work, sec­ond-largest real es­tate agency in Sin­ga­pore with 6,178 sales­per­sons be­hind Prop­nex, chose to fo­cus less on re­cruit­ment and more on launch­ing projects driven by re­newed home buy­ing in­ter­est.

ERA was the agency for 8 out of the 9 new ma­jor pro­ject launches in 2017 that to­talled more than 5,000 units, in­clud­ing The Clement Canopy and the record-break­ing Hun­dred Palms Res­i­dences EC which sold out within 7 hours of launch. “Prices have largely sta­bilised and buy­ers feel that there are less down­side risks and more up­side po­ten­tial,” ERA Realty’s key ex­ec­u­tive of­fi­cer Eu­gene Lim said, point­ing out that new pro­ject sales in the first half of 2017 rose by 64% and pri­vate re­sale climbed 63% from the same pe­riod last year. ERA holds a san­guine out­look con­sid­er­ing re­silient house­hold balance sheets, low un­em­ploy­ment and sta­ble eco­nomic growth.

40% of Sin­ga­pore­ans in­tend to DIY, or are un­de­cided about whether they in­tend to hire an agent for their next prop­erty trans­ac­tion.

Le Quest is one of Prop­nex’ re­cent of­fer­ings in the homes seg­ment

Hun­dred Palms res­i­dences sold out within 7 hours af­ter it was launched.

One Tree Hill Gar­dens

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