China’s largest property agents cut commission fees amid downturn

China’s largest property agents have quietly lowered their commission fees amid the worst property downturn since 2010 following unprecedented market cooling measures by government authorities.

In Beijing Homelink, China’s largest property agent, is offering rates below its 2.7 per cent commission fee in many cases. 5i5j, the second-largest agent, lowered its official rate from 2.1- 2.2 per cent to 1.9 per cent, according to interviews with individual agents and buyers in the city.

However, a 5i5j spokesman told the South China Morning Post that reports its commission fee was lowered company wide from 2.5 to 2 per cent were “totally untrue”. He said commission fees are decided on a case-by-case basis and that specific rates were determined by the “sophistication” of the deals.

Homelink declined to comment for this story. But the company told Beijing Youth Daily on Monday that each outlet determines the rate by themselves, and that the company hasn’t cut rates in a unified way. The Daily reported that many Homelink outlets have cut the rate to 2.2 per cent.

In reality, the “official” commission rate is the figure agents generally tell prospective buyers, which in many cases deviates from the actual rate. Even in boom times, agents would often lower the rate when homes were also listed by a rival agent and buyers approached the rival, or if the buyers were old customers, or for buyers who could pay in cash without bank loans. However, when a downturn hits agents are more willing to compromise a few basis points in the commission fee for a larger transaction, and buyers gain more bargaining power.

A typical home in Beijing now sells for between 6 to 10 million yuan (US$870,000 to US$1.4 million), so even a 0.1 per cent cut means 6,000 to 10,000 yuan [LESS?]commission fee.