Who wins with no agent fee rules?
August 18, 2008
Jessica Cheam speculates on real estate… guidelines.
HOW much should you pay your property agent?
This has been the talk of the town this week, and no surprise, given how home ownership issues are tied so closely to the hearts of Singaporeans.
When the Institute of Estate Agents (IEA) first announced the Compeition Commission of Singapore’s (CCS) request to abolish a decade-old fee struture at a press conference: the initial mood all around was: “no biggie”.
IEA’s guidelines were non-binding anyway, said agency bosses. It was never compulsory, so its abolishment should have minimal impact. Many agencies, such as ERA, PropNex, C&H Realty told The Straits Times they will adopt IEA’s fee recommendations as their own agency guidelines anyway so the status quo is maintained.
But as the industry digests the news, it seems that the removal of these guidelines will have far-reaching effects.
Already, the CCS and consumer watchdog Consumer Association of Singapore (Case) has issued statements to alert consumers to their rights.
Consumers should not accept agents “that are harping on the old fee practices” and should be free to bargain, Case said. It encouraged consumers to report any evidence of collusion on the part of the agencies, and advised consumers not to give agents exclusivity to sell their houses.
Already, home buyers and sellers that The Straits Times spoke to said that with the wide publicity of the guidelines removal, they feel their bargaining power has been enhanced.
House-hunter Vivan Wong, for example, said agents used to wave the guidelines in front of her, to justify collecting a 1 per cent fee for HDB transactions. “Now I can wave the CCS statements back at them,” she said. She doesn’t see why she has to pay 1 per cent to the sellers’ agents. “Unless I specifically engaged a agent to hunt for a house for me, then I’ll be happy to pay.”
Generally, the mood on the ground is people are expecting fees in to dip in favour of the consumer. It’ll be interesting to see if agencies’ records on commission amounts will go down. PropNex agents collected $126 million in commission last year; ERA Asia-Pacific agents raked in $166 million. Both agencies are major players in the local property market. This was in the boom-time, of course, so any change in this year’s earnings will be a combination of factors due to market conditions and the removal of fee guidelines.
Agents, however, are quite adamant that they will stick to their rates. PropNex agent Damien Goh, who sells an average of five properties a month, said 2 per cent was “already a very reasonable rate”. Marketing just one property costs about $500 a month in advertisement costs, and another $100 in transportation costs, not to mention phone bills and overhead costs such as renting an office cubicle etc.
“I will show by actions and service, that I deserve that commission. If buyers or sellers still demand lower rates, I’ll have to decide on a case by case basis. But if the fees are too low, I’ll just look for another buyer and seller. I believe people will pay for good service,” he said.
Other agents are less optimistic. Some say Singaporeans, known for their haggling, will demand the same level of service at low prices. “This may lead to more errant agents, who have less loyalty to their customers,” said one agent who declined to be named. Complaints about agents to Case might even go up, he suggested.
PropNex chief executive Mohamed Ismail pointed out that the fees removal comes at a time where the industry is moving towards greater self-regulation, and agents are encouraged to move towards professionalism. “The impact of the fees removal can have two effects: agents will start to up their quality to be able to charge higher fees. Or two, a consumer-led dip in fees might lead to more irresponsible actions, if agents don’t feel they’re being paid enough.”
On the other hand, home-buyer Tania Goh said unscrupulous agents who have a gem of a property could also jack up commissions if they know buyers or sellers are desperate.
Ultimately, the onus is on the consumer to be informed and educated about what the market rates and decide for themselves what are reasonable rates they should pay their agents.
The CCS move encourages competition in the market, and if agencies or agents can offer the same services for less money, there’s no reason why market-based rates cannot prevail.
Time will soon tell who will be the real winners: consumers, or agents - or perhaps, both.
Source: Straits Times
Singapore Property Watch - August 2008
August 17, 2008
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Removal of property fee guidelines unlikely to have deep impact
August 7, 2008
SINGAPORE: Market players said on Wednesday that the move to scrap guidelines on property agents’ fees by September 25 is unlikely to leave a deep impact on the real estate sector. However, they warned against rogue agents who may try to cash in on the change in rules.
The Competition Commission of Singapore (CCS) ruled on Tuesday that the fee guidelines adopted by the Institute of Estate Agents (IEA) should be removed as they are uncompetitive. Under the current guidelines, property agents stand to pocket a commission of 2 per cent of the transacted price.
With the removal of the guidelines, buyers and sellers will be free to negotiate the fee payable to their agents. Real estate agencies are generally supportive of the move, but they are concerned that the lack of fee guidelines could trigger more rogue practices.
Chris Koh, director of Dennis Wee Group, said: “If the owner is not aware of what the market price of his property is, then he may fall into a trap where the rogue agent says, ‘Ok, you want a million dollars, that’s what you said you want, I will get you that S$1 million.
“But if I sell your property at S$1.2 million, then that S$200,000 is for me to keep since there is no guideline that it must be a percentage’.”
Another real estate company, Propnex, warned against agents who offer unnecessary services just to quote a higher commission.
Without any fee guidelines, market players said it is down to the agencies to set their own commission structure. Propnex said consumers must assess their agents based on their commitment, track record and knowledge of the market.
Some industry players said the removal of the commission guidelines will not spark a price war because the cost of marketing a property has nearly doubled in the past ten years, and it will not be sustainable for agents to start under-cutting each other.
On average, about 10 to 20 per cent of the agent’s commission goes into marketing efforts, such as taking out advertisements to promote a property. Paying a lower commission does not necessarily mean a better deal as agents may not put in as much effort to sell a property.
Some Singaporeans prefer to sell their properties on their own. Rosanah Mon helped her mother sell her three-room flat at Jalan Bukit Merah for S$230,000, saving over S$2,000 in the process.
“I don’t see the necessity (to get a property agent), if you know the procedures well and you follow the guidelines,” she said.
In fact, the Housing and Development Board (HDB) said it has seen an increase in the number of such transactions – rising from 5.5 per cent of total resale transactions in 1998 to about 8 per cent now.
To boost greater understanding of the sales procedures, HDB holds monthly resale seminars, with the next one scheduled on September 6. More information is available online at www.hdb.gov.sg.
Source: Channelnewsasia.com
IEA to remove guidelines on property agents’ commissions
August 5, 2008
SINGAPORE: If you’re shopping for a new home or selling one, you can now negotiate with your property agent on the appropriate commission.
The Institute of Estate Agents (IEA) will remove its guidelines on property agents’ commissions next month, to fall in line with the Competition Act.
Consumer watchdog CASE has welcomed the move, pointing out that it is not compulsory to have agents facilitate a property transaction.
Property agents currently get about 2 per cent of a property’s sale price from sellers, while buyers pay a fee of 1 per cent of the price. These guidelines were put in place some ten years ago.
IEA said the guidelines were meant to serve more as a reference point for agents, as well as consumers, to prevent over-charging.
But since the guidelines have been widely accepted and practised in the industry, the Competition Commission of Singapore (CCS) thinks that they may be harmful to competition.
Jeff Foo, president of Institute of Estate Agents, said: “We submitted our professional guidelines to CCS sometime in July 2007 because we were concerned whether our guidelines do or do not infringe the Competition Act. So after over a year of meetings and consultations, they finally came back to us on June 25 and said that our guidelines are likely to infringe on the Competition Act and advised us to remove them.”
With the removal of the guidelines, it is now up to individual real estate agencies to set their own commission guidelines. It is still unclear if this will reduce commission fees paid to property agents.
IEA said the removal of the guidelines actually puts a greater burden on property buyers or sellers to do their own checks on market rates for such fees.
Mohamed Ismail, chief executive of Propnex, said: “With such a move, the industry will find its own footing in terms of the kind of support as well as service. Overall, I must say that this will help the consumer because at the end of the day, the agents do not have a choice but to increase their level of service.”
Last year, the Singapore Medical Association withdrew its fee guidelines for doctors, paving the way for private doctors to set their own fees.
Source: Channelnewsasia.com
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Private home prices up 0.2% in Q2, slower than earlier estimate
July 28, 2008
SINGAPORE: Prices of private homes in Singapore grew at a slower pace in the second quarter than initially projected – climbing at just 0.2 per cent against an earlier estimate of 0.4 per cent.
This is a far cry from the 3.7 per cent growth in the previous three months.
Analysts said this is the first time that final numbers have come in lower than flash estimates, suggesting that home prices are finally softening.
Mass market homes are carrying the overall price increase in the private residential property sphere as luxury home prices nudge downwards.
Prices outside the central region were up by 0.9 per cent, compared to a 0.1 per cent dip in the core central region.
Leonard Tay, director of Research, CB Richard Ellis, said: “Overall, we see a return of volume in (the) residential market in second quarter as quite encouraging.
“In the next two quarters, at least for the whole of 2008, we think volume will be sustainable and we expect transaction volumes for new home sales to finish the year at 4,000 to 5,000 units.”
In the second quarter, 70 per cent of new home sales were from the non-central areas. Colliers said Singapore’s positive mid-term prospects on the back of the completion of its two integrated resorts and Marina Bay Financial Centre will help to hold prices steady, and ensure that they do not decline by more than 3 per cent in the third quarter.
Overall, analysts said the residential property sector fared reasonably well in the first half of 2008, given the difficult external environment.
Ku Swee Yong, director of Marketing and Business Development, Savills (Singapore), said: “Transaction levels, price levels have held up pretty well. Most people have forgotten that the transaction in the first half of 2005 is similar to that of today. So it’s not as bad as what the market thinks.”
In the public housing market, resale prices continued to increase on the back of strong demand. They rose by 4.5 per cent, up from 3.7 per cent in the first quarter.
Meanwhile, office rentals went up by 6.3 per cent in the second quarter – the lowest increase in the past two years.
Analysts said they expect rents to remain flat for most of 2009 before trending downwards in 2010 to what they call more sustainable levels of S$12 to S$15 psf per month in the core business district.
In the next six to 12 months, landlords are expected to shift from profit focus to tenant retention as tenants start resisting further rental price increases.
In the industrial property sector, strong demand has pushed the average occupancy rate for factories to its highest since 2000, at 93.1 per cent. The take-up for warehouses also increased by 0.4 percentage point in the second quarter.
Despite the healthy take-up for both types of industrial space, the rental index for warehouses has remained unchanged for the quarter, while the index for factories rose by only 2.3 per cent quarter-on-quarter in the second quarter, compared to a quarter-on-quarter increase of 5.7 per cent in the first quarter.
As such, demand for industrial space is expected to remain healthy in the third quarter, but rents may only see a slight increase.
Source: Channelnewsasia.com
Public housing hots up while private cools
July 28, 2008
SINGAPORE : Prices for public housing on the resale market have risen, while those for private property have moderated for the second quarter of 2008.
According to latest official figures, there has also been little upward movement in the private property rental market.
Data for the HDB resale and rental markets based on transactions in Q2 saw HDB’s Resale Price Index (RPI) up 4.5 per cent, compared to the 3.7 per cent increase for the previous quarter.
Reflective of the interest in public housing was the rise in resale transactions, from about 6,360 cases in the first quarter to about 7,760 cases in the second quarter, an increase by about 22 per cent.
Meanwhile, subletting transactions in HDB flats increased by about 15 per cent to about 4,120 cases in the second quarter from about 3,580 cases in the first quarter.
In contrast, the private property market was a little more subdued, with home prices increasing 0.2 per cent, the third straight quarter of slower growth, signalling a definite slowing of the four-year housing boom.
Prices for non-landed properties saw a modest 0.1 per cent rise compared with 3.7 per cent in the previous quarter as prices for condominium and apartments in districts 9, 10, 11, downtown district and Sentosa fell 0.1 per cent compared to similar properties in areas outside of the region which rose between 0.7 and 0.9 per cent.
As for landed property, prices rose 0.6 per cent compared with 3.9 per cent in the previous quarter.
Indicative of the cooling in the property market are the 43,473 new units still unsold from a total supply of 67,569 uncompleted units from private housing projects.
This number includes more than 12,000 which developers have held back from launch and another 28,282 which are pending approval.
Source: Channelnewsasia.com
Singapore Property Watch - July 2008
July 20, 2008
A Singapore Real Estate Digest by Justin Ng Properties
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SINGAPORE: Office rents in Singapore are starting to show signs of peaking, said property analysts.
They noted that prime rental costs have generally increased at a far slower pace in the first half of this year, compared to 2007.
Looking ahead, they expect office rents to soften even more towards the end of 2009 and early 2010 as demand for prime space eases……………..
Singapore home sales in June up 80% from May
SINGAPORE: June was the best performing month in terms of home sales since the property market tumbled last September, according to numbers released by the Urban Redevelopment Authority (URA) on Tuesday.
Altogether, 801 private homes were sold, a jump of 80 per cent from May.
But there were also more units launched. The number of units launched in June leapt 125 per cent from May to 1,069 units, meaning that there were more unsold properties in the market……..
June’s Property Transactions
| Flat Type | Units Sold |
| 4 Room | 854 units |
| 3 Room | 628 units |
| 5 Room | 584 units |
| Condominium | 428 units |
| Apartment | 307 units |
| Executive | 192 units |
| Terrace House | 80 units |
| Semi-Detached House | 40 units |
| Executive Condominium | 39 units |
| 2 Room | 25 units |
| Detached House | 12 units |
| HUDC | 9 units |
| 1 Room | 5 units |
| Multi-generation | 2 units |
Property Trend (Based on Past 6 months Transactions)
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Office rents in Singapore showing signs of peaking
July 20, 2008
SINGAPORE: Office rents in Singapore are starting to show signs of peaking, said property analysts.
They noted that prime rental costs have generally increased at a far slower pace in the first half of this year, compared to 2007.
Looking ahead, they expect office rents to soften even more towards the end of 2009 and early 2010 as demand for prime space eases.
Donald Han, managing director of Cushman & Wakefield, said: “The market is quite close to the peak, by virtue that we have seen the bulk of the expansion process by users, multinationals.”
Chua Chor Hoon, senior director of research, DTZ, said: “Rentals went up quite a lot last year – almost doubled. So there is a lot of resistance to that high level of rental, plus there is more cautiousness in the market now because of what’s happening in US and its impact on Singapore.”
Last year, Grade A office rents rose 96.5 per cent, compared to just 9.6 per cent in the first half this year.
Consultants said they expect to see more softness as some one million square feet of space may be released once major occupants complete their plans to move out.
“For banks like Standard Chartered, DBS and Citibank, you’ll probably see completion of these three portfolios in Changi Business Park in end 2009 and early 2010,” said Mr Han.
In addition, about 6.7 million square feet of space will come on-stream by 2011 and more than 60 per cent of it will be Grade A space.
While rentals for prime office space may be peaking, those for fringe locations have been increasing at a faster pace.
Ms Chua said: “The interesting thing we noticed is that for office outside the CBD, like the Harbourfront, Novena, Alexandra or Tampines, we see strong demand over there. Rental growth is slightly higher than in CBD.”
In the second quarter, rental growth for these decentralised areas was about 3 to 5 per cent.
Source: Channelnewsasia
Singapore home sales in June up 80% from May
July 20, 2008
SINGAPORE: June was the best performing month in terms of home sales since the property market tumbled last September, according to numbers released by the Urban Redevelopment Authority (URA) on Tuesday.
Altogether, 801 private homes were sold, a jump of 80 per cent from May.
But there were also more units launched. The number of units launched in June leapt 125 per cent from May to 1,069 units, meaning that there were more unsold properties in the market.
However, analysts said this would not deter developers from launching even more units in July to capitalize on the momentum, before the arrival of the Hungry Ghost month.
Colliers International expects around 1,300 units to be launched in July, as developers pre-empt the traditionally slow-moving 7th lunar month in August.
In June, most transactions occurred in the suburban regions, while prime locations saw some weakness in sales. No units valued at S$4,000 per square foot or more changed hands last month.
Nicholas Mak, director of Knight Frank, said: “The pick-up is predominantly in mid-tier mass market, because the buyers are owner occupiers. Residents in HDB estates around private condos for sale are forming the backbone of the demand.”
Tay Huey Ying, director for research and advisory at Colliers International, said: “In the current uncertain economic climate, developers are going to continue to delay launches of higher-end projects and likely to focus on mass-market tiers.”
With the suburban market being a price-sensitive one, analysts see developers continuing to employ pricing strategies.
Knight Frank’s Nicholas Mak said: “Developers must price their products quite attractively to generate sales. Any increase in prices, especially a sharp increase, will chase away buyers.”
Prices may be seen softening, but analysts say there will not be a free-fall as underlying demand will put a cap on how far prices may dip.
Source: Channelnewsasia