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Domestic market sees the withdrawal of property agencies and agents

Domestic market sees the withdrawal of property agencies and agents .

In a "survival of the fittest" situation in the challenging domestic property market, property agencies and agents are continuing to bow out of the industry. The latest annual report of the Council for Estate Agencies (CEA) showed fewer licensed property agencies and registered property agents around at end-March this year compared to a year ago.

The number of licensed property agencies has slipped 3.5 per cent to 1,372 as at end-March 2016 from 1,422 a year ago. CEA granted 58 new licences in FY2015/16 compared to 109 in FY2014/15. Some 108 licences were not renewed compared to 136 a year ago. This comes as some firms have stopped offering services in estate agency work, although they continue to handle other types of work such as property management. There are also others that have merged with other agencies or left the industry, CEA said.

The number of registered property agents has likewise fallen 4.9 per cent to 30,423 as at end-March 2016 compared to 32,006 a year ago. There were 1,307 new registrations granted in FY2015/16 compared to 1,654 a year ago. But this was outnumbered by some 2,890 registrations that were not renewed in FY15/16.

CEA said: "Some agents may be taking a hiatus and may renew their registration later. Some could have left the industry."

CEA releases these statistics twice yearly - once in January after the October-to-December CEA licence-renewal period, and another time in its annual report in October.

When asked why fewer agents were joining, Heng Whoo Kiat, CEA's director of policy and licensing, said that with increased professional requirements added to the sector and new entrants having to pass a qualification examination, some people may find that they do not have the aptitude or interest for estate agency work after learning more about what it entails.

Also, there is the threat of technological disruptions competing with agents for their jobs, he said. "With the availability of convenient online tools and transaction information, more consumers may decide to handle property transactions on their own."

CEA's Public Perception Survey 2015 showed that more customers were undecided about engaging agents for property transactions compared to three years ago. A property expert is not surprised by the numbers and in fact expects more agents to leave next year. He extrapolates this from observing his own agency's licence-renewal exercise which began this month.

He said the market's current transaction volume is not enough to go around the same number of agents, so those who are underperforming may prefer to switch to another job with a more stable income. Real estate is not what it was at its most active and positive.

The market may have had a slight pick-up (in transaction volume) this year, but the agents who have not been closing deals for the last six to nine months may eventually fade away. The good ones may close more deals than before, because when the market is tough, it's the survival of the fittest.

It is the same for property agencies: small agencies without the economies of scale may struggle with high operating costs, he said. Agents from smaller agencies also tend to migrate to bigger agencies which get appointed to market larger projects, and are able to sign contracts with media organisations to allow their agents to enjoy discounts on advertising.

William Quek, who has been a real estate agent with ERA Realty Network for eight years, observes too that it is many of the dormant agents that are leaving the industry after not having closed any deal for the past year. Some of them are housewives, others run their own businesses, and others yet are part-time Grab and Uber drivers.

"The current transaction volume is still not sustainable for agents who are not really 100 per cent into this line," he said.

He added that it is indeed more difficult to close deals now. Marketing periods have to stretch longer, and there are fewer property viewings as buyers are hampered by loan restrictions. The government's new HDB flats also divert demand away from the resale market, he said.

Another reason for the fewer registrations of agents in FY15/16 is that the frequency of the qualification exam has dwindled from about 12 per year some years ago to just thrice yearly now, as CEA tries to optimise its resources. This means that new entrants have fewer opportunities to sit or retake their exams.

However, one should not let the shrinking in the property agent pool mar one's outlook of the property market, as the situation is more complicated than the numbers depict. This is because the CEA exam makes the inflow-outflow process an unnatural one, as it is easier to leave than to enter the sector.

There is a gatekeeper which is the exams; that venturi is there, it's not free flow. You can get out any time you want, but the inflow is difficult. It is like a tank where the water level is falling because the outflow is faster than the inflow. But the problem is that the inflow pipe been valved up, so it's not a proper measure, a property consultant explained.

Adapted from: The Business Times, 6 October 2016