Price cutting takes its toll on market's development

Vicious price-cutting strategies will affect the quality of property management services and undermine the market's development, according to one of the largest industry players.

Alkin Kwong, director and general manager of Hong Yip Service, said the improved property market might have raised many people's expectations about the growth prospects of the property management business.

But he was concerned about the low pricing offers by companies competing for building management contracts.

'My concern is the growing presence of 'cowboy' companies which try to win contracts by reducing their management fee to an unreasonably low level. Such low prices would adversely affect the quality of management service, and put pressure on the management fee. It is definitely not a healthy phenomenon for the industry as a whole,' he said.

If the situation continued, many property management companies could end up being forced to compete in a vicious circle of price cutting, he said

Fewer management contracts and intensified competition in recent years had made many players more aggressive in offering low prices, effectively cutting the profit margins of property management businesses.

Mr Kwong said when those so-called cowboy companies tried to win contracts by lowering their prices, they had to cut their costs, including the wages and benefits of their workers.

People were the greatest asset in the property management industry and if the frontline and management staff were not awarded properly for their work, the quality of services would be at stake, he said.

Mr Kwong said cutthroat competition was not healthy, and he suggested the government set up a licence scheme for players in the industry.

'It would be an effective way to protect the interest of property owners and tenants when only professional companies with a required amount of capital and professional staff in various aspects can receive certification and enter the market.'

He said the recent recovery in the property market would not necessarily give a boost to the property management sector's growth if the unhealthy phenomenon of price cutting continued.

Hong Yip, a wholly owned subsidiary of Sun Hung Kai Properties (SHKP), has been growing steadily in recent years despite strong competition and the weakened property market.

The group now has more than 7,400 employees, compared with 6,400 in 2002. Its portfolio of properties under management exceeds 1,000 blocks of buildings, with a total floor area of more than 97 million square feet all over Hong Kong.

Mr Kwong said the company had a 10-year plan of expansion to grow its business, and its market share had been increasing steadily by 10 per cent per annum.

He said Hong Yip had secured great support from its parent group SHKP, which allowed for access to high-quality properties for expansion of its management portfolio.

Among the latest SHKP residential projects to be managed by Hong Yip are 18 Farm Road in To Kwa Wan, Sham Wan Towers in Aberdeen and 8 Waterloo in Yau Ma Tei.

'But we are also very active in bidding for new projects, which include luxurious apartments,' he said.

Up to February this year, about 52 per cent of its total managed floor area belonged to SHKP properties and the rest were properties from other sources.

Mr Kwong said Hong Yip, established in 1967, managed a diversified portfolio of properties comprising residential, commercial and industrial buildings, parking areas, deluxe houses and large-scale housing estates.

He said it was active in bidding for contracts from different sectors with a view to providing high-quality and customised services to customers.

'We target the customers who know the importance of quality and will build a strong brand of professional services,' he said.

Mr Kwong said the group was committed to providing hotel class management with high-quality and value-added services, which included laundry, home cleaning, maintenance repair, special discount offers and express banquet service.

It also organised activities and seminars to enrich customers' lifestyles and increase awareness of their interests, he said.