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Developers hiring more realty firms to sell homes

Benefits include more competition but it may not be a sure-win strategy

Published on Apr 01, 2014

By Rennie Whang


THE tough property market is forcing developers to turn to multiple marketing agencies to help move units, property analysts said.

The developers' aim is simple: More agencies fighting over commissions increases the competition to move these homes.

And as different agencies have more experience in dealing with certain types of clients, a joint effort can bring benefits.

Take MCC Land. It launched The Santorini condominium in Tampines Avenue 10 last Saturday with four agents - ERA Realty, PropNex, CBRE and GPS Alliance. It sold 80 units out of 200 units released.

The block has 597 units in total.

Most of the sales were of one- and two-bedders units, an MCC Land spokesman said. The average price was $1,100 per square foot.

The spokesman said the cooling market was a factor in the unusual move to appoint four agents.

Ms Christine Li, research head at property firm OrangeTee, said that it is "very rare" to have two large agents and two smaller ones.

"In the past, unless it's more than 800 units, a developer would usually have a sole marketing agent. If it's more than 800 units, it might go for a big firm and a smaller firm," she added.

ERA Realty and PropNex boast more than 5,000 agents each.

Mr Ku Swee Yong, chief executive of property firm Century 21, noted: "It's a reflection of how tough the market is. In theory, one large agency can handle 597 units... I'm surprised even the third and fourth agencies were willing to participate."

Having multiple agents for one project has been a "consistent strategy" for the firm, the MCC Land spokesman said.

He said the firm's last few projects - executive condominiums One Canberra, Forestville, and Sea Horizon - all had three agents each.

PropNex chief executive Mohamed Ismail said that while competition would be greater, developers ultimately benefit when agencies are motivated to outdo one another.

"Our surveys have shown that more than 80 per cent of consumers are not ready to buy a property now... The days where buyers were excited and queued overnight are no longer. Now, developers need the outreach (from multiple agencies) to explain the benefit of a property."

The shift in strategy to using multiple agencies is due largely to the slowdown in sales, an outcome developers blame on the Total Debt Servicing Ratio (TDSR) framework that was introduced last June.

The measure, which caps loan limits at 60 per cent of a buyer's gross monthly income, has curtailed mortgage approvals.

Developers moved 9,950 private homes in the first half of last year but only 5,065 units in the second half following the TDSR implementation.

Ms Li said that while the market has had some successful launches since TDSR kicked in, many projects this year are not selling well.

She said: "The eligible pool of upgraders is shrinking, especially if the place has had a few launches. In the past two years, Tampines has had executive condominiums like CityLife @ Tampines; also others not yet fully sold like Tampines Trilliant.

"The Santorini is also priced higher than (adjacent condominium) Q Bay Residences. Upgraders in the area do compare different products. Right now, people are going for value for money."

She added that the number of marketing agencies does not affect the commission rate.

Rates are determined by the marketing agencies and the developer and "if the developer is not confident, it pays a bit higher".

The number of agents at The Santorini is not unprecedented.

In August last year, the developer of the 141-unit, mixed freehold Kensington Square engaged five agencies - ERA Realty, PropNex, KnightFrank, Teakhwa Real Estate and C & H Properties.

It moved 61 of 112 units launched that month.

A spokesman for World Class Land, which developed Kensington Square, said: "We feel it helps us to have more outreach."

This was one more agent than the four it had engaged for its 582-unit Tanah Merah condominium Urban Vista, launched in March last year.

More projects in the coming months are expected to be joint marketing efforts.

Singland has appointed Huttons, Savills and CBRE for its 106-unit Farrer Drive condominium Pollen & Bleu, which is due to be launched this year.

R'ST Research director Ong Kah Seng said developers may benefit from the different clientele marketing agencies specialise in.

"Home-grown agencies are seasoned in public residential marketing and suburban residential projects. More international agencies specialise in the high-end and mid-tier (sectors), also suburban condominiums."

But having as many as four marketing agencies is not a sure-win strategy, said Mr Ku of Century 21.

"Agents may get pushy due to the competition and higher pressure. There could even be misrepresentation," he added.

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