http://www.businesstimes.com.sg/real-estate/abysmal-sales-deal-body-blow-to-agencies
Abysmal sales deal body blow to agencies
More than 60 exit property business in 2013; over half of the remainder expected to sink into the red
By Lynette Khoo
[email protected]@LynetteKhooBT
WITH private residential sales falling off a cliff following several rounds of cooling measures, even some of Singapore's largest real estate agencies are reeling from profit slumps of as much as 20 to 50 per cent this year.
Several key executive officers of real estate agencies also project that over half of the 1,425 registered agencies here could find themselves in the red. A significant number of their agents have turned inactive, or not clocking in any sales in the past one year.
To get through the dry spell, many agencies have turned to marketing overseas homes and commercial properties. Others are consolidating their resources through mergers, acquisitions and alliances.
"Generally today, the volume of transactions has dropped by 30-40 per cent. The margin of the business doesn't provide such a big buffer of 30-40 per cent," said PropNex chief executive Mohammed Ismail.
"I would not be surprised that many small and mid-size agencies and even the larger agencies, if they are not nimble enough, will face challenges and many will end up in losses," he said.
While residential sales clocked by PropNex has dipped by a marginal 3 per cent this year, the total value of transactions has declined along with the fall in property prices. This is why profits have fallen "to the tune of 20 per cent", Mr Ismail added.
ERA Realty chief executive Jack Chua conceded that a 20-50 per cent slump in profits is taking place among the large agencies.
Last year, ERA Realty Network - the agency business of ERA - saw a 43.5 per cent decline in its net profit to S$10.4 million on the back of a 12 per cent drop in sales, according to its filings with ACRA. PropNex's total profits from its broking business, excluding consultancy and property management, slipped 10.1 per cent to S$5.93 million in 2013.
They are the two largest real estate agencies here with more than 5,600 agents each, followed by Huttons, OrangeTee, DTZ and HSR International Realtors in terms of sales force.
HSR had swung into a net loss of S$5.4 million in 2013 from a net profit of S$3.5 million in 2012, based on ACRA filings, as revenues and margins took a hit.
This year, the situation could be worse. Developers' sales, which now account for two-thirds of all private non-landed transactions, have fallen to 4,409 units in the first half: the full-year tally will in all probability fall sharply short of the 14,948 units for the whole of 2013 and 22,197 units for 2012.
With total private home sales fallen to levels last seen during the Global Financial Crisis, agencies that rely mainly on broking residential sales are seen as most affected, while international property consultancies have found some buffer from consultancy, property management and valuation services.
A near-doubling of revenue to S$16.4 million at Savills (Singapore) - involved in office, hotel and industrial services, investment sales, international residential and project management - helped mitigate a 66.3 per cent slump in revenue to S$2.9 million at Savills Residential last year, based on ACRA filings. Savills group profit still fell 30.7 per cent to S$14.1 million in 2013.
According to the Council of Estate Agencies (CEA), some 67 agencies closed shop last year, leaving 1,425 licensed estate agencies as at Jan 1, 2014. The number of salespersons registered with CEA, however, increased to 31,783 as of January from 31,040 the year before.
About one-third of the registered salespersons are holding another job. "Out of these salespersons, about one-third are not active in doing estate agency work," said a CEA spokeswoman. It is not known if the proportion of inactive agents have increased given that such data was not compiled previously.
Raymond Chow, key executive officer of boutique agency Ray International, told BT that his firm is "making at least a 20 per cent loss".
Only half of his 43 agents are active now and its number of registered agents could drop to 30 next year as some are giving up and not renewing their licenses.
"TDSR (total debt servicing ratio) is the one that kills," said Mr Chow. "It is a pity to see some good performers dropping out of projects, dropping out of the industry and becoming taxi-drivers or getting a job."
Though the commission from selling overseas properties is lower than from local projects, Ray International is marketing homes in Australia, Philippines, and recently India (to Indian nationals).
The biggest agencies that dominate new condominium launches here have also turned the spotlight on overseas markets.
PropNex is marketing properties in the Philippines, Malaysia, Australia, Thailand, London, Tokyo and Indonesia, while ERA has intensified marketing efforts for projects in Iskandar, Kuala Lumpur and Australia.
"Moving forward, we will also be concentrating on overseas projects that are spearheaded by Singapore-based developers," said ERA's Mr Chua. Having brokered more than S$233 million worth of commercial and industrial property deals in Singapore this year, ERA has set up a dedicated team for this market segment.
Meanwhile, some smaller agencies have found support through global franchises and alliances.
International Property Advisor (IPA) and UPG International are among 24 agencies here that have joined the "Century 21 Singapore" franchise, a subsidiary of US-listed Realogy Holdings.
Both agencies noted that this has strengthened their pitch for overseas projects, given Century 21's network of over 7,000 offices and 102,000 salespersons - known for their golden blazers.
Helmed by key executive officer (KEO) Ujeen Tan, former co-founder of Huttons, UPG's 28 sales agents now market projects in Singapore, Malaysia, the UK, Australia, and Japan.
IPA is also actively promoting properties in Australia, Japan and Indonesia to clients, including high net worth individuals and private banks, said key executive officer Ku Swee Yong, also the CEO of Century 21 Singapore since last October.
Other agencies have banded together in marketing alliances. Project Alliance Group (PAG) was formed in July by SLP International, OrangeTee, HSR and Dennis Wee Realty; Real Alliance was formed in August comprising RE/MAX, C&H Group and More Property.
While one might expect the one or two-person agencies to close shop, industry players note that it is the bigger firms that are hit harder, given their fixed overheads such as office rentals and salaries for full-time staff.
At the same time, agents are not loyal to their firms, Mr Chow said. "When the market is bad, they start to look elsewhere for jobs to do."