Online competition adds to property agencies’ woes on mainland

Moves to offer commissions to a wider range of people undercut the traditional relationship

PUBLISHED : Tuesday, 26 August, 2014, 12:39pm
UPDATED : Wednesday, 27 August, 2014, 5:31am

Life is becoming harder for mainland property agencies this year as the internet turns their clients into competitors amid an already debilitating market downturn.

China Vanke, the mainland's biggest homebuilder by sales, recently launched a WeChat platform in cities including Xian, Chengdu, Qingdao, Guangzhou and Shenzhen to allow almost anyone to help sell its projects. Once a deal is completed, Vanke will give them commissions of up to hundreds of thousands of yuan.

While the developer said it was part of efforts to sell down inventories, the move has made property agencies nervous and also stoked concerns about moral hazard.

Ding Zuyu, a co-president of leading real estate services provider E-House China, said in a column last week that Vanke was encouraging brokers to skirt around their current employers to seal deals so as not to share commissions.

"Put it in harsher words, isn't it poaching [our staff]?" Ding said.

In the following days, he and Vanke exchanged a few open letters, sparking a hot debate.

"In the silver age, everyone's role will be redefined," Yu Liang, Vanke's chief executive, told an earnings briefing last week, contrasting today's slower market with the golden age of the previous decade. "The days are gone that brokers sit in sales offices and wait for clients to come. They should join our efforts to cope with the property market slowdown in the internet era."

But he added that "agencies don't have to worry too much".

"We have no intention to get rid of them," Yu said. "We still want to work with them."

Vanke is not the only, nor the first, developer to have tried to speed up sales in order to reduce mounting inventories. Rivals such as Country Garden Holdings and Greentown China Holdings have encouraged all staff, not necessarily those in the sales and marketing departments, to introduce projects to friends and relatives.

Meanwhile, a rising number of internet-based property agencies, including and that have sprung up are expanding quickly across the mainland and grabbing their traditional rivals' businesses.

A government statement has also made the struggle for survival even tougher for agencies.

The State Council announced earlier this month that no qualification or licence would be needed for property brokers to conduct their business, with the move seen as part of Premier Li Keqiang's pledge to cut red tape.

Industry analysts said the new policy would intensify fierce competition among property agencies suffering from sluggish sales and slow commission payments from developers. Some have closed branches.

"Policy relaxation does not mean no restraint at all," said Li Zhenwei, the chief technology officer of Shenzhen Worldunion Properties Consultancy. "As the business environment turns harder, operating it legally becomes more important, even in the name of innovation."

He said the mainland needed to step up law enforcement to keep pace with the rapid development of the internet.