Agency doubles commission fees
Centaline Property Agency, one of the biggest local real-estate brokerages, has doubled its commission charges to offset a decline in revenue caused by a fall in the number of property transactions.
Some Centaline branches recently posted notices indicating brokerage fees would be at least 2 per cent of the transacted property value, or no less than HK$15,000 per deal, the agency said.
Centaline and its rivals usually charge 1 per cent.
Rivals have criticised the move as an attempt to squeeze consumers.
Shih Wing-ching, chairman of Centaline, said the company set no rigid guideline for commission charges that applied to all branches. Branch managers had the flexibility to decide their own charges, according changes in the market.
But he said the commission fee for transactions worth less than HK$1 million was now higher than the usual 1 per cent.
'I know the highest commission rate achieved was between 4 and 5 per cent. Owners are willing to pay more when their units are difficult to sell,' Mr Shih said.
The average realised commission per residential deal in the New Territories was about 2.5 per cent to 3 per cent of the unit price, he said. This compared with the overall realised commission rate of 1.5 per cent.
The increase in brokerage fees would boost the income of property agents, he said, adding that the salesmen would gain between 10 per cent and 35 per cent of the commission.
'To charge higher commission at this moment might not be reasonable. But the high operating cost together with the substantial contraction of income had forced some property agencies into mergers or acquisitions, and some even closed down their business due to huge losses.'
He said Centaline's operating profit had been squeezed by the sharp decline in property values and in transaction volume.
The number of secondary residential sales had fallen by up to 80 per cent from the market's peak, according to Centaline. About 2,500 secondary residential sales were recorded last month, compared with 12,000 in June 1997.
Up to 60 per cent of the secondary residential transactions recorded last month were cheaper units worth between HK$300,000 and HK$1.2 million.
Centaline Property Agency, which has 160 branches in Hong Kong and a share of about 30 per cent of residential market transactions, recorded losses in January, February and April. The company reduced salaries and introduced other cost-cutting measures after the outbreak of Sars.
Mr Shih said the company had regained profits since June but he expected the commission rate would not fall even though competition was fierce.
