Housing agent fees: How low can they go?

Aug 7, 2008
Housing agent fees: How low can they go?
With guidelines axed next month, rates will come under pressure but
big fall unlikely, say experts
By Jessica Cheam

PROPERTY experts expect agents to feel the pinch once fee guidelines
are abolished next month, but the big question in the industry is
just how low fees can go.

Real estate insiders concede that fees will come under pressure with
buyers and sellers free to haggle, but dismiss the notion that rates
could plummet to zero.

'In a buyer's market, perhaps, buyers can get away without paying.
But agents also need their salaries and ultimately consumers will get
the service they pay for,' said PropNex chief executive Mohamed
Ismail.

Agents spend about 40 per cent of their commission on the marketing,
transport and operational costs of selling a flat. Active agents earn
about $5,000 a month, said Mr Ismail, so how low rates go will depend
on the individual.

Those who aim for a large turnover of properties might be willing to
slash rates but this could be at the cost of service quality, he
added.

Mr Eugene Lim, assistant vice-president at ERA Asia Pacific, does not
see rates falling drastically as the current rate is one of the
lowest in the region.

Fees will be negotiable next month, thanks to a decision by the
Competition Commission of Singapore, which told the Institute of
Estate Agents to axe its guidelines on commissions.

The 1999 guidelines were based on a 1974 Government Gazette that
stipulated a 2 per cent fee payable to agents from sellers. In the
past, when Housing Board prices were relatively low, agents began
charging buyers a further 1 per cent.

The Consumers Association of Singapore is advising people not to be
held to old guidelines and to avoid giving exclusive rights to
agents. It also said agents should not collect fees from both buyers
and sellers, due to conflict of interest.

The new playing field will offer plenty of scope for buyers, sellers
and agents to negotiate, but agency boss Albert Lu of C&H Realty
pointed out that the real estate market is 'already very
competitive'.

For private property sales, for example, agents are known to cut
their commission charges from the recommended 2 per cent to 1 per
cent for sellers.

'It's not in the interest of agencies to start price wars, as we end
up hurting ourselves,' said Mr Lu. But he suggested that agencies
might devise ways to entice buyers and sellers, such as bundling home
services.

Industry leaders do not rule out a 'one-stop shop' concept where
agencies could offer agent and legal services along with loans, for
example.

Analysts believe consumers will be quick to take advantage of the new
system and start haggling, but given the slow market, it is unclear
who has the upper hand. Prices have eased in favour of buyers but
many sellers are not budging, so with volumes down, agents may see an
incentive to give discounts.

Homebuyer Vivian Wong, 25, said she will bargain harder while agents
vow to fight and justify commissions. HSR Property Group's Mr William
Tan, 43, said he was confident of retaining the 2 per cent
commission.

'In this new landscape, the better agents will survive because they
will offer quality service consumers will pay for.'