Okay goes online to fight cooling property market in Hong Kong
New business model helps the real estate agency save on rental expenses while offering staff higher commissions as HK home sales slump 40pc
Small real estate agents were once vulnerable to a market downturn in the highly competitive industry, but things have changed for those who turned themselves into an online operation.
With rental expenses at a minimum, Okay.com is an online property agency that appears to have come out unscathed from a cooling market and has already secured investments from veteran property investor Peter Churchouse and investment bankers, among others.
"We run the firm differently. We use technology to change the cost structure of what it means to be an agency," said Joshua Han Miller, the chief executive of Okay.
Okay resembles the Cantonese pronunciation for home or " nguk kei". It generated 70 per cent of revenue from leasing at a time when home sales in the secondary market slid 40 per cent since the government imposed higher property taxes to curb investment demand last year.
The firm shares an office with real estate and relocation operator Asia Pacific Properties, which owns Okay, in Central, where Miller used to work as a director. Okay has no retail outlets.
"We provide each agent with an iPad so they can respond to clients or conduct searches while on the road, from their home office or on-site with their clients. It is a more efficient way to cut costs. We don't need attractive retail stores to attract customers," said Miller.
By saving on rental expenses, he said the firm was able to offer agents higher commissions, flexible working hours and an ideal working environment that in turn attracted better agents.
Miller, who was the former vice-president at Morgan Stanley's global capital markets and investment banking divisions in Hong Kong and New York, said agents enjoyed commissions that started at 50 per cent, while those of base-salaried agents started at 20 per cent and could rise to 35 per cent. Both will receive 10 per cent commission bonuses if their listed properties are sold or leased.
Generally, traditional real estate outfits pay agents who mostly get a salary a progressive commission ratio of 10 to 30 per cent.
Miller said Okay offered 3,000 properties listed in Hong Kong and 7,000 overseas. Its revenue grew 270 per cent year on year in the first quarter of this year after jumping 120 per cent for the whole of 2013 from the year before.
But Hong Kong's largest realtor, Centaline Property Agency, says Okay may be on to something.
"Our operation in Singapore adopts this business model and agents receive commissions starting at 90 per cent," said Louis Chan Wing-kit, managing director of Centaline's residential department.
Hong Kong, however, is a different story. Centaline spends about HK$40 million on rental expenses a month to keep its 300-plus outlets, which employ 4,000 agents.
"We have no problem to go online overnight if this model works in Hong Kong. We have Centamap for users to locate flats around Hong Kong. Our website allows users to check transaction prices and volumes in different districts. It also has 30,000 listings," he said.
"But customers still like to view as many flats as they can before making a final decision."