Singapore property recovery may leave agents behind
Kevin Lim on October 9, 2017
SINGAPORE (Nikkei Markets) -- Singapore's housing market is posting a strong recovery but the city-state's real-estate agents may not benefit much as newcomers in the property technology space displace them by matching buyers and sellers.
The approach taken by start-ups such as Ohmyhome and DirectHome contrasts with that of established property portals such as PropertyGuru, which relies on listings by developers and agents for the bulk of its revenue.
Ohmyhome, which was set up about a year ago, claims to have brokered over 100 million Singapore dollars ($73 million) worth of transactions so far involving government-built Housing and Development Board apartments. The start-up, which bypasses the middleman, says its matching services are free, but buyers and sellers can opt for a range of documentation services that start from as little as S$888.
The fees contrast with the 1-2% commission that agents charge based on the purchase price. This can amount to thousands of Singapore dollars since HDB homes can cost anywhere between S$200,000 and S$1 million on the resale market depending on their size and location.
HDB apartments account for about 80% of the housing stock in Singapore and are generally much cheaper than private homes in condominiums that have facilities such as swimming pools and tennis courts. HDB has been streamlining its processes to make it easier for buyers and sellers to handle their own transactions without the help of agents.
"People still value agents but they don't value the services as much as before. Agents will either have to raise their professionalism or lower their prices," Ohmyhome CEO and co-founder Rhonda Wong said at a recent forum on property-related technologies, or proptech, in Singapore.
According to the Council for Estate Agencies, Singapore had around 28,400 registered property agents at the start of 2017, down from 30,800 at the beginning of 2015. The shrinking number of agents and the need to invest in technology and other supporting services have also resulted in consolidation among several of the city-state's best-known property broking firms.
The number of licensed agencies fell to 1,286 as at January 1 from 1,369 at the start of both 2016 and 2015.
In June, PropNex Realty and Dennis Wee Group, both homegrown agencies, announced a merger resulting in Singapore's largest real-estate agency with more than 6,500 agents.
OrangeTee and Edmund Tie & Co joined forces in August to form the city-state's third-largest agency with over 4,000 agents.
Although the recovery in the housing market could provide a short-term boost to the number of agents, technological developments will reduce the need for such middlemen, say analysts.
Karan Girotra, associate professor in technology and operations management at French business school INSEAD, said that while housing agents still have a role to play in ensuring transactions comply with local rules, they are no longer essential in the search process.
"The services provided by property agents are not that different from what travel agents used to do 20 years ago," he said. Girotra, who is currently a visiting professor at Cornell University in the U.S., predicts that automated platforms will eventually replace agents for lower value property transactions in most developed economies.
However, agents will remain important players at the high end of the property market, since their role involves marketing the property to overseas buyers and working with interior decorators to make the property more appealing, he said.
Lewis Ng, chief business officer at PropertyGuru Group, said that while there could be fewer agents in future, those who remain in the industry would become a lot more productive thanks to the growing number of tools available to them.
Recent enhancements to PropertyGuru's platforms, including its online portals in Malaysia, Thailand, Indonesia and Vietnam, feature a system that allows agents to download floor plans of new developments as well as book units directly from the developer.
The system also allows the submission of down-payments to developers as well as real-time routing of leads to agents who can then follow up more quickly.
APAC Realty Ltd, which provides real-estate brokerage in Singapore under the ERA brand, remains confident about the prospects for property agents, despite the disruptions posed by new technologies.
"Technology is reshaping the way business is conducted in all industries, including ours...Nevertheless, a human touch will always be needed to close the deal," said its CEO Jack Chua.