Homelink plans course correction to ride out China's property downturn
Beijing's leading real estate agency is continuing to open branches but at a slower pace as it braces against the housing market downturn
Bracing for a long struggle amid a housing market downturn, Homelink, Beijing's largest real estate agency by market share, has slowed its pace of expansion while diversifying into the new home market.
"We haven't set any targets in adding branches and agents since the end of last year," said Lin Qian, Homelink's vice-president.
The agency, which used to focus on the secondary home market, would continue to open branches to maintain its leading position but at a slower pace, said Lin, a Taiwanese who joined Homelink in 2009.
Founded in 2001 with a team of 27 staff, Homelink's expansion has been on the fast track over the past few years with staff almost doubling to the current 30,000 from 16,600 in 2012.
The realtor expanded to other cities in 2011 and now runs 1,500 branches in eight cities, including Beijing, Shanghai, Tianjin and Dalian. It claims a 52 per cent share in its target market.
"This year, we are more focused on the per capita income of our real estate agents," Lin said.
Income from commission dropped about 30 per cent in the first half from the previous year, she said, but the company still outperformed the overall market.
The value of deals assisted by its agents also slumped, by about 30 per cent to 58 billion yuan (HK$73 billion) in the first seven months.
Secondary home sales in Beijing fell 53.5 per cent in the first half to 44,000 units, data from real estate agency Century 21 showed.
"The downward cycles over the past few years were short-lived as they were driven by government tightening measures, but we see a longer-term downturn as it is driven by market forces," Lin said.
High home prices in Beijing and increasing supply were among the factors that contributed to a cooling of the market.
"This is a good chance for us to make adjustments," Lin said.
Homelink, a rival to Centaline China, the largest real estate agency on the mainland by number of branches, has also made a change this year by diversifying into new home sales.
"We didn't participate in new home sales during the previous downward cycles as we think the professional capability required in this market is different from the secondary market," Lin said.
But the company had to ensure agents' income, especially when the transaction volume in the housing market was shrinking, she said.
Reports that some developers delayed commission payments worth more than 1 billion yuan was a concern for Homelink.
"Even Centaline, which is large and experienced in the new home market, also suffered from unpaid commissions," she said. "We must be more cautious, and we are therefore picky in choosing new property projects."
As such, the location of the project should match Homelink's branch network, which meant the company would not participate in projects in districts that it was not familiar with, Lin said.
The company focuses on one or two projects at a time to better utilise resources and minimise the impact on daily operations in the secondary market.
For example, the company worked with developer China Vanke on two to three projects and the cooperation was smooth, according to Lin.
"We have outlined our future business model - as a sole agent of good quality new residential projects," she said, adding that the strategy would also protect the interest of the company's agents.
Homelink has not set long-term targets on the number of cities it plans to cover or for revenue, but its target is to serve a population of 100 million by 2016 when the company celebrates its 15th anniversary.