Hong Kong home prices have been hitting new highs but turnover has stayed flat thanks to government efforts to stabilize the market.
Average deals per month are just 7,000 this year.
For perspective, Hong Kong has 36,000 licensed agents, which means each has to wait five months for a deal to come along.
In its heyday in 2008, the property market had as many as 17,000 transactions per month, according to the Land Registry and the Estate Agents Authority.
There were 21,000 property agents at the time.
Home buyers and sellers have been quick to use the low transaction volume to their advantage, pushing agents to slash commission charges.
The ailing sector is forcing brokerage firms to cut their sales networks.
One company, however, is bucking the trend
Qfang is hiring 7,000 agents and opening 200 branches in the next two years.
The Shenzhen-based firm has poached some senior executives from Midland and promising attractive commissions, reportedly up to 60 percent for frontline agents against the 10-30 percent norm.
For newcomers, the best time to expand is when the market is stagnant — rentals would be cheaper and it would be a lot easier to attract agents to a new setup.
Qfang is known for its nimble online-to-offline model, so it looks like the company is about to modernize Hong Kong’s property brokerage sector, one of the very few industries yet to fully embrace technology.
But the fact is many people don’t feel comfortable buying property online. After all, such deals involve millions of dollars and these are not something you do every day.
They want to conduct business in a physical setting, face-to-face with real people.
But Qfang’s success in the mainland has shown the synergy of its online and offline services.
Buyers and sellers are encouraged to list and search for properties through Qfang’s website and app to keep costs down.
The digital platform facilitates cross-matches and helps initiate negotiations between prospective buyers and sellers.
Agents help complete the last mile as consultants, solving problems, answering questions and cementing the deal.
The government’s 15 percent buyer’s stamp duty and other tightening measures are considered benign, so these may not deter overseas buyers.
Cash-rich mainland investors still find Hong Kong’s property market a profitable proposition as evidenced by the hundreds of monthly stamp duty transactions.
Previously, mainland agents did not have access to Hong Kong’s property market and their local counterparts were unable to conduct business in the mainland.
Qfang’s Hong Kong foray is seen as an attempt to bridge the gap.
Mainland buyers can use Qfang’s online service to search for Hong Kong properties and its local agents can then arrange site visits and walk them through the process.
However, it remains to be seen whether Qfang’s formula will work in Hong Kong where deals are still made in a more traditional way.
Incumbents are also not going to sit idly by while a newcomer rewrites the rules.
This article appeared in the Hong Kong Economic Journal on June 26.
Translation by Frank Chen
[Chinese version 中文版]
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