Cash-strapped mainland developers delaying commissions to property agents
Delayed payment of commissions by developers comes as agencies on the mainland are hit hard by falling revenues amid a market downturn
Mainland property agents are reeling from a double whammy, as cash-strapped developers fail to pay them commissions for marketing and ancillary services at the same time as revenues plunge amid an extended slowdown in sales.
Leading real estate firms Hopefluent Group Holdings and DTZ said the credit squeeze in the mainland housing market was exacting a heavy toll on their operations. Centaline China said earlier developers owed it more than 1 billion yuan (HK$1.24 billion) in unpaid commissions.
"A third of all developers that we're helping sell projects have not paid us commission fees according to the payment schedule," said Fu Wai-chung, a director at Hopefluent.
The firm, which operates 280 branches across the mainland, was marketing about 600 to 700 property projects, Fu said.
"Developers are deferring their payment from 90 to 120 days as credit tightening and a decline in property sales hurt their cash flow," he said.
Fu said developers in third and fourth-tier cities were suffering the most as sales fell sharply and banks slowed the granting of mortgage loans.
Alan Chiang Sheung-lai, who heads residential property at DTZ Greater China, said his company was in the same boat as Hopefluent.
"Some developers should have already paid us commissions for helping them market their new projects late last year," Chiang said. "However, we haven't received anything so far. Chasing after them at this time is meaningless because they don't have money to pay us."
However, he said residential sales accounted for less than 5 per cent of DTZ's total revenue, so the delayed commissions had only had a limited impact on the company.
Sherman Lai Ming-kai, the chairman of Centaline China's parent Centaline Group, said developers owed the firm 1 billion yuan in commissions so far this year, lifting its accounts receivable to 2 billion yuan.
"Small developers are not the only ones that owe us money, but also major players," Lai said. "Some subsidiaries of national property firms are struggling to pay bills as liquidity dries up."
One such developer, Huizhou-based Guang Group, had paid Centaline commissions in the form of "several flats", he said.
"The flats that we received were not enough to cover the commissions that were owed to us," Lai said. "We sold them at below-market prices."
Centaline generated more than 7 billion yuan in commission revenue on the mainland last year.
Chiang said developers had to juggle many competing claims for payment after projects were completed.
"Paying staff salary and all sorts of construction fees will certainly be their top priority," he said.
A senior manager at one of the mainland's top property services firms, who declined to be identified, said his company was waiting one to two months longer for commission s to be paid and its accounts receivable were 20 per cent higher than usual.
"It is mainly due to slow mortgage approvals and fund s release from banks," the manager said.