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Nov 14 2016

BUSINESS Tech Disruption Comes to Real Estate Sector: Should property agents be worried?

‚ÄčLikening the arrival of digital real estate platforms to the technological disruptions that other industries such as transportation have seen, one property agent tells Channel NewsAsia: "We will have to embrace it whether we like it or not."

SINGAPORE: When she wanted to sell her flat along Hougang Avenue 4 earlier this year, Ms Lee and her husband engaged a property agent and at the same time, decided to have a go at creating their own listing on a few online property portals.

“Our friends told us about these DIY (do-it-yourself) platforms and we thought: ‘Why not? There’s no harm trying’,” said the 39-year-old who declined to reveal her full name. “It was quite easy. We took some photos of our house, wrote a description and posted them online.”

While the couple did meet a few prospective buyers through the property agent, Ms Lee said none went ahead with an offer. Nearly two months later, the Lees sold their flat to an agent-free buyer who contacted them through their listing online.

“We decided to settle the paperwork ourselves,” said the administrative manager, who added that the process was easier than she thought. “We were surprised because we thought it would be quite complicated. The officer at HDB (Housing and Development Board) was also very helpful to go through the paperwork with us.”

“Most importantly, I saved a commission that’s worth about S$10,000 so I think we are happy,” she told Channel NewsAsia. Property agents typically charge 2 per cent for the sale of an HDB flat.

People like Ms Lee, who have tried to complete a property transaction on their own, are growing in number in Singapore.

According to figures from HDB, the number of resale flat buyers and sellers who have gone the DIY way rose to 24 per cent in 2015, from 11 per cent in 2010. So far this year, 23 per cent of resale transactions carried out from January to May were completed without a property agent.

(Data provided by HDB)

Meanwhile, HDB also conducts seminars for the public on policies and procedures involved in the buying and selling of an HDB flat on the resale market. Its English sessions, conducted monthly, have a maximum capacity of 100 participants per session and are usually fully booked. The participation rate for the quarterly Mandarin seminars has been consistent at about 60 to 80 participants per session.

Apart from guidelines readily available from HDB, many digital platforms facilitating DIY property transactions have also sprung up over the past year.

Unlike established portals such as PropertyGuru and SRX Property, where listings are posted only by agents, newer sites such as DirectHome and Snappyhouse seek to connect buyers with sellers, as well as landlords with tenants directly, effectively doing away with the “middleman” property agent.

Other platforms such as OhMyHome offer people wanting to go DIY the back-up option of engaging an in-house agent at a flat fee, while Yotcha operates on a bidding system where property agents bid to serve home owners looking to sell or rent their properties.

“THIS IS A BIG THREAT”

With a wide variety of online portals and apps emerging, Minister for National Development Lawrence Wong urged the real estate industry to brace for technological disruptions. “We have opportunities but we also have to be realistic about these disruptions which are happening around the world and in Singapore,” he said at an event in August.

According to Mr Harry Yeo, president of the Institute of Estate Agents (IEA), disruptive technology is a “big threat" and a “real cause for concern”, especially with property agents in Singapore already reeling from the downturn in the local property market.

“The emergence of many DIY real estate platforms enable sellers and buyers, landlords and tenants to deal directly with one another and bypass the middlemen. The disruptors are taking away a big slice of the traditional real estate practitioners’ market,” Mr Yeo said.

“This results in a rapidly shrinking market that cannot sustain the current big number of licensed real estate salespersons. As a result, some fall away and leave the trade, due to the inability to compete and survive under this challenging market condition,” said Mr Yeo, referring to the latest annual report from the Council for Estate Agencies (CEA), which showed 30,423 licensed property agents in Singapore in the year to March 2016, down 1,583 from a year ago.

Likening the arrival of digital real estate platforms to the technological disruptions that other industries such as transportation have seen, ERA Realty agent Germaine Ong said the threat is limited for now.

“Going to these portals means that people will need to do a lot of homework, especially for first-timers. Also, these portals are still new and they still lack exposure. That means few responses to your listings,” said Ms Ong, 24, who first got her agent licence four years ago. “That’s why some people who have jumped on such portals come back to us at the end of the day.”

But Ms Ong told Channel NewsAsia that property agents seem to be losing their place as the first thought that comes to people’s minds when they think of buying or selling property.

“Especially among the tech-savvy, they seem to think of these platforms first … I still don’t think these platforms are much of a threat now but who knows in the next five years or so?”

AGENTS MAY SOON BECOME A LUXURY ITEM: DIRECTHOME

Another set of numbers from CEA seems to add on to the discouraging outlook for agents. Its Public Perception Survey 2015 showed that 31 per cent of customers were undecided about engaging agents for property transactions in 2015, up from 24 per cent three years ago.

In particular, those aged between 21 and 39 were more undecided, compared to those above 40.

Apart from the potential cost savings, a change in consumer preferences to do things independently and an increasingly tech-savvy generation are some factors spurring the DIY trend.

For DirectHome’s founder Kiegan Chia, that shift opens up an untapped opportunity.

“Especially with the emergence of social media, people get connected much easily compared to 10 years ago. That’s why many home owners are now able to find home seekers by themselves or vice versa,” the 35-year-old, who was a property agent from 2010 to 2015, told Channel NewsAsia.

Mr Chia said that during the later years of his career, he noticed an increase in clients approaching him solely for help on the paperwork of their transactions. “The property market has been very opaque and there’s a gap in the market in terms of information available about the paperwork process. After five years in the industry, I started thinking what else I can do, and that is why I decided to come up with a platform that will transparentise (sic) the process.”

Mr Kiegan Chia left his job as a property agent to start online portal DirectHome. (Photo: Tang See Kit)

Started in February this year, the online portal provides a platform for DIY property transactions at flat rates of S$80 for landlords looking to rent out their property and S$800 for sellers. DirectHome also provides its users with a step-by-step guide to complete a transaction. Since its launch, the portal has attracted “thousands of users”. Mr Chia declined to reveal a specific number, citing market competition.

On DirectHome’s Facebook page, it is not uncommon to spot negative reviews from other property agents. On whether he thinks his new start-up is a threat to the industry he came from, Mr Chia said: “If you’ve already found a buyer and there’s a portal that is able to complete the process for you, would you still want to pay S$20,000 for a S$1 million property that you are thinking of selling?

“I would put it this way - property agents will become a luxury item to have. If prawns are good enough, would you eat something luxurious like lobsters every day?”

PROPERTY AGENCIES, AGENTS URGED TO EMBRACE TECHNOLOGY TO STAY AHEAD

To be sure, there are observers who feel that the up-and-coming digital portals and apps will not be a direct replacement for property agents.

“The roles of these intermediaries are likely to complement those in the property sector, not replace, as there are still aspects of this business that cannot be replicated with technology yet,” said Mr Sanjay Modi, manager director for APAC and Middle East at recruiter Monster.com.

However, to fend off the threat of new competitors, property agencies and its agents will need to embrace technology, according to industry groups.

“We recognise that property agents are working in an increasingly complex and challenging environment,” Mr Heng Whoo Kiat, director of policy and licensing at CEA, said. “Property agencies should embrace technological changes to remain relevant and competitive. They should also enhance service standards and find new ways to better serve their customers by raising the bar for themselves in areas such as their professionalism, productivity and customer-centricity.”

Among real estate agencies, many observers singled out OrangeTee as the frontrunner in embracing change with the rollout of its Property Agent Bank - a platform that allows customers to write reviews and rate their agent.

In an interview with Channel NewsAsia in May, managing director Steven Tan cited the rising threat of technology upending the local property sector as a reason why the homegrown company created the new platform.

Over at PropNex Realty, apps that provide real-time information on property news and upcoming projects have also been introduced to help its salespersons become more productive.

 

While property agencies and agents are concerned about the threat of disruptive technology, they told Channel NewsAsia that there are things they can offer which technology will not be able to replicate.

Mr Ku Swee Yong, CEO of International Property Advisor, noted that DIY platforms are only ideal for "simple, straightforward deals". He added: "Unless a website can act like an encyclopedia that explains all kinds of exceptional cases, otherwise once something goes awry, what are you going to do?" 

OrangeTee agent Lee Kang Kian, 44, raised the example of property agents adding a “personal touch” to transactions. “We speak to our clients and from there, we understand their needs and can refine our list of options if something doesn’t work out. We do the research for you and save you time.”

Mr Andrew Wong, who recently purchased a four-room flat in the Chinatown area, echoed that view. During his search for a property, Mr Wong sought the help of a relative who is an experienced property agent. She was able to help Mr Wong to negotiate for a price that was around S$20,000 lower than the initial asking price.

“Considering how much property in Singapore costs, it is better to have someone experienced and knowledgeable to negotiate on your behalf, especially when the other party also has an agent,” Mr Wong told Channel NewsAsia.

“Experienced property agents also know what issues to look out for, such as potential leaks or quality of fittings. They can advise on whether you have to rewire a home or the extent of needed renovations, costs which can easily balloon and should be taken into consideration before you buy a house,” he added.

Apart from traditional promotional activities such as flyer distribution, more property agents are moving into social media platforms to promote themselves.

In the meantime, property agents agree that they will need to keep up with changing trends.

“We will have to embrace it whether we like it or not. The impact will be there but if it helps us to improve, then it will only be a good thing,” Mr Lee said.

Moving forward, apart from updating his account on the Property Agent Bank which has a five-star rating, Mr Lee said he will devote more time on social media platforms moving forward. “I know my colleagues have been really active on Facebook. I do share links of my property listings on Facebook sometimes, but I’ll probably need to spend more time cultivating my personal page from now on.”

Follow See Kit on Twitter @SeeKitCNA