Mainland real estate agencies have started cutting staff and closing outlets because of low transaction volumes due to stringent government controls on property sales, and agents expect more cuts in the coming two months.
'In the last two months, the industry has been shrinking, with the number of property agency outlets reduced by about 30 per cent. First-tier cities such as Beijing and Shanghai are the most severely hit,' said Victor Cheung Kam-shing, Midland Holdings' executive director who overseas the company's mainland business.
Cheung said his company was one of the first to streamline its workforce and branches. It has cut the number of branches and offices on the mainland to about 250, from nearly 300 in the second quarter. Staff numbers were reduced by 10 to 20 per cent.
But the wave of lay-offs and branch closures that followed had only started to kick in across the industry since August, Cheung said, with some smaller brokerages in competitive cities such as Beijing shutting down their entire business.
Those firms that ignored the trend and continued to expand aggressively in the second and third quarters now faced the problem of sustaining their businesses as property transactions slumped.
'The present transaction volumes are unable to support the number of agents. Only about 20 to 30 per cent of the agents can manage to seal a deal every month, and over 60 per cent are struggling for clients,' Cheung said.
'For example, in Shenzhen there are about 20,000 to 30,000 agents, but only a few thousand transactions can now be sealed in the secondary market and another few thousand for new homes every month.'