More competition, higher costs, slowing sales could hurt property agents' earnings

Published: Jun 01, 2023 by 
PropertyGiant Singapore

After a year of robust earnings as commissions rose while transaction volumes slipped in 2022, Singapore housing agents now face increasing competition in the industry.

For a start, sales volumes have slowed this year, observed Joel Kwok, a marketing director at ERA. It is now taking a longer time to clinch a deal - from less than a month in 2021 and 2022, to around four to six weeks in the current market, said Kwok.

Quarterly data from the Urban Redevelopment Authority showed that overall sales (excluding executive condos) dipped by 22.9 per cent year on year in Ql 2023. New sales volume was down 31.2 per cent year on year, while sales volume in the secondary market (consisting of sub-sales and resales) dropped 18.6 per cent year on year.

On the rental front, Kwok typically took a week or less to secure a deal for tenants between 2021 and 2022. Now, he takes two to three weeks to do so.

There is also the question of affordability, pointed out Joshua Ho, a property agent at Singapore Realtors Inc (SRI). He too noted that it seems "tougher to close deals and find clients" in the current high-interest-rate environment.

Agents are also incurring high hidden costs. Marketing, for instance, can be an exorbitant expense that many at traditional agencies have to pay for out-of-pocket, said chief executive officer and co-founder of PropertyLimBrothers (PLB) Melvin Lim.

Listings on property portals can range from S$8,000 to S$12,000 a
year; home staging can cost S$2,000 a month to make a property look more appealing to potential buyers; the production of videos costs S$500 to S$1,000 a pop; and social media advertisements cost another $$1,000 to S$2,000 a month.

A single listing can cost an agent up to $$6,000 a month, depending on the size of the home, said Lim. "This is a big risk since you might invest all that money for just one listing, and it might not even get sold."

PropNex associate branch director Christian Oh currently closes four to five deals a month, with a conversion rate of around 20 per cent. He estimates spending close to S$10,000 a month on YouTube ads alone.

SRI's Ho said he earns around S$10,000 a month - but that is before deducting a 10 per cent cut for his agency and marketing expenses that can amount up to $$2,000.

He estimates that his earnings are the same as an average nine-to-five office worker, just without the corporate insurance and 17 per cent Central Provident Fund contribution by employers. But the lack of financial stability makes it difficult to plan for the future, he said. "You have a more flexible schedule... (but) time is an invaluable asset that you might lose. It's not all sunshine and roses for every agent."

The emergence of zero-commission platforms brings an added element that could in future erode agents' earnings.

New portal Mogul.sg allows homeowners to sell their property at 0 per cent in sales commissions. Sellers are charged a fixed $$150 administrative fee, out of which agents, who facilitate deals and handle paperwork, receive a cut for closing the deal.

Geospatial data and other analytical tools "democratise" the selling process, providing buyers and sellers with detailed insights, said chief executive officer and founder Gerald Sim. Agents get a stable income of around $$5,000 a month, he said.

"The role of the middleman has grown so exponentially in the past few years... The removal of the dependency on the agents will ultimately benefit both the developers and consumers," said Sim.

Nevertheless, PropNex chief executive Ismail Gafoor noted that buying a property in Singapore is "an expensive affair', so people cannot afford to make a mistake in their decision.

"Consumers will always have new policies, grants and updates to know, and many struggle to understand the deeper implications they have on their property purchase and need help to understand them," he said.

ERA key executive officer Eugene Lim said agents are the "force multipliers" and the "secret sauce" in securing buyers for new launches. "Agents are able to adopt a proactive approach to bring in buyers to (developers') projects and achieve their target sales rate much quicker than depending passively on buyers to walk in," he said.

Even if developers were to save on commissions for new sales, it is not "an absolute guarantee" that the savings will be passed on to buyers, especially in a demand-led market, added Gafoor.

Savills' Cheong pointed out that zero-commission platforms account for just a "fraction of a percentage" of all agents, compared to larger agencies which have cornered around two-thirds of the market.

"These platforms are like meteorite showers - they burn the atmosphere and might cause some superficial damage, but nothing of greater impact to larger agencies," he said. "They need to gain mass so developers will start going to them instead of these bigger agencies."

Credit: The Business Times

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