What is the most lucrative job in the world’s costliest property market? A sales agent, of course
A toxic combination of rising interest rates, a looming vacancy tax on empty flats and the sharp decline in the city’s stock market is making developers jittery
It’s a great time to be a Hong Kong property agent.
In some cases, developers are paying more than double their usual 3 per cent agent commission for selling a flat, as they get aggressive in paying agents to drum up sales. The step signals the growing eagerness of developers to speed up sales as market sentiment continues to sour. The higher commissions are on top of sweeter mortgage deals and discounts that developers are offering potential buyers.
A toxic combination of rising interest rates, a looming vacancy tax on empty flats and the sharp decline in the city’s stock market is making developers jittery.
“Developers sped up launches [of flats] after the vacancy tax was proposed. Apart from giving buyers more discounts, they also offered higher commissions to agents to boost sales of the completed stock of new flats,” said Sammy Po Siu-ming, chief executive of Midland Realty’s residential division.
For instance, New World Development increased the rate of commission on the last handful of more expensive flats at its Pavilia Bay development in Tsuen Wan in the New Territories from 3 per cent to 7 per cent.
For a new three-bedroom flat of 826 square feet at Pavilia Bay that sold at HK$24.7 million (US$3.2 million) on September 5, the commission would increase from HK$741,000 (US$94,400) to HK$1.73 million (US$220,000).
The agent, who shares 30 per cent of the commission, can net HK$518,700 for brokering the deal, while the remaining 70 per cent, or HK$1.21 million, goes to his or her company.
Lai Sun Development raised the rate of agent commissions to 5 per cent from 3 per cent after only five flats sold on the launch day of its 144-unit Monti development on Hong Kong Island.
New World Development and Lai Sun did not respond to requests for comment.
Developers have sped up the launches and promotion of new flats since the vacancy tax was proposed on June 29. The average monthly number of new flats sold in July and August rose to 1,606, up 27 per cent from the average of 1,264 new units sold in January to June of this year.
Another reason developers are boosting commissions is that it is a way to accelerate sales without officially cutting sales prices, said Billy Mak, associate professor at the department of finance and decision sciences at Hong Kong Baptist University.
“They have concerns and negative outlook about the market [under the] trade war and rise in interest rate in the US, which slows down Hong Kong’s economy,” said Mak, referring to developers’ worries that the property market in Hong Kong may cool down. “[But] they do not want to cut prices, [which will] give a further negative signal to the market.”
Four investment banks – Citibank, UBS, CLSA and Nomura – have predicted home prices in the world’s least affordable housing market could plunge by as much as 15 per cent in 12 months. Local banks are also likely to increase the prime rate this month, the first rise in 12 years, further squeezing homebuyers’ pockets.
Added challenges of certain projects, such being located in distant or unpopular areas, also are playing a part, said Louis Chan Wing-kit, Asia-Pacific vice-chairman and chief executive of residential sales at Centaline Property Agency.
But a higher commission rate may not automatically translate into fatter wallets for Hong Kong’s agents. There are more of them than ever – 39,591 agents as of August.
“With more agents, there is more competition in the market. There are seven to eight agents chasing after one transaction under declining sales in the secondary market. Most agents have no choice but to sell new flats for developers,” he said.