Lower commissions, developers being less dependent on agents, and digital disruption are posing threats to Singapore agencies, says industry veteran.
UPDATED: The property agency industry has been abuzz with recent mergers and how technology is disrupting the way agents do business.
It started in June when PropNex Realty announced a merger with Dennis Wee Group (DWG) to form the largest agency in Singapore with close to 7,000 agents.
Two more followed in August – OrangeTee and Edmund Tie and SLP and Scotia.
The newly formed OrangeTee & Tie will comprise more than 4,000 agents, making it the third largest agency and pushing it ahead of Huttons Asia with over 3,000 agents.
SLP Scotia will have a combined strength of 800 agents and will receive a cash injection of $3 million to grow the business.
Francis Tan, executive director of SLP Scotia said: “We are seeing signs that the real estate market is bottoming out and this is the best time for consolidation and expansion.
“We intend to grow the numbers, but we do not intend to grow too big or too fast as the well-being of our agents is the priority.”
It’s tough being small
PropNex CEO Mohamed Ismail believes it will be tougher for smaller agencies that do not enjoy economies of scale to sustain their operations and remain profitable.
He cited rising competition, low profit margins, rent and staff costs as some of the factors affecting smaller operators looking to run their businesses effectively.
Eugene Lim, key executive officer at ERA Realty, shares a similar view. “There are only 30,000 salespersons in Singapore, and now it is dominated by the big four agencies. We may see more consolidation as the mid-sized agencies will find it hard to survive going forward,” he said.
ERA previously had the most number of agents in Singapore at over 6,200, but is now in second place following the PropNex-DWG merger.
But Lim is not worried as he feels a good sweet spot to reap benefits is around 5,000 to 6,000 agents.
OrangeTee’s managing director Steven Tan, on the other hand, believes there is still room for other agencies to flourish.
He reckons that online agencies such as UK-based Purplebricks, with its flat-fee model, could enter the market in future.
“Looking at how these companies have done overseas, they may grow and become prominent players in the new ecosystem,” he said.
He added that smaller agencies tend to focus on niche markets and provide a more personalised service.
Meanwhile, SLP Scotia’s Tan is focused on rightsizing the company as he believes a bigger agency isn’t necessarily better. He cited lower commissions, developers being less dependent on agents, and the pressure of disruption as threats to the current agency model.
“The existing model of real estate work will not continue in its current guise for long, and we intend to be ahead of the curve because we are relatively nimble in terms of size, a perfect example of rightsizing,” he said.
Merger or takeover?
Interestingly, Lim pointed out that the mergers so far have only involved a transfer of salespersons from one company to another. “We have not seen senior management cross over together with their salespersons. Though the term merger has been used, it is in essence not a merger. What we have seen looks more like a takeover.
“In short, the salespersons who are used to their existing management leadership and company culture have to change to blend into the new company. This is very disruptive and is never easy as the new environment and culture is ‘forced’ upon them,” he said.
For now, he sees many of these agents crossing over for business continuity, but over the longer term he believes some agents may choose to join other agencies that they feel are more favourable for their career development.
Ismail admitted that there are challenges involved in any merger, especially when companies try to align themselves with similar values and cultures.
“It is up to the management to bring forward necessary initiatives to integrate the different parties involved,” he said. “The quicker this integration is carried out, the more favourable the outcome would be – in terms of the agency’s performance and output.”
OrangeTee’s Tan believes it comes down to the culture of both companies. “OrangeTee and Edmund Tie have a similar culture as both are not just providing agency services. Both have other departments providing consultancy and professional services. Furthermore, both are homegrown companies with similar core values,” he said.
Looking ahead, OrangeTee, PropNex and ERA are open to merging with other companies.
Digital disruption
At the same time, a few agencies are starting to pour money and investments into technology to remain relevant amidst the digital disruption.
Last year, OrangeTee launched its Property Agents Review platform, the first of its kind in Singapore, where customers can leave reviews of their agents after a successful transaction.
“We see the urgency to transform our business in view of the rapid advancement of technology which has disrupted many traditional industries,” said Tan.
However, other agencies say this technology isn’t new. “What OrangeTee has, most of the larger agencies also have, but they are used more for internal consumption,” said Lim.
PropNex, for instance, has developed its own Real Estate Management System (REMS), a one-stop platform that covers all aspects from agents’ daily transactions, millions of commission, taxation, trainings, legal cases, marketing and branding.
In addition, it has developed various mobile apps like the PropNex Virtual Office app, PropNex Co Broker app and PropNex Property Net app to increase productivity and raise consumer awareness.
SLP Scotia has also invested heavily in next generation technological platforms, including the move into virtual spaces.
“The company’s current headquarters has been transformed along the lines of hot desking and co-share work spaces,” said SLP Scotia’s Tan.
Separately, ePropertyTrack, PropertyGuru’s real-time project sales and marketing technology platform, which allows buyers to submit deposits online for properties in Malaysia and Indonesia, has added a function for real-time routing and tracking of leads to agents who can follow-up and track these leads in real-time.
“This gives all parties in the buying process full visibility and control at maximum process efficiency,” said Lewis Ng, chief business officer at PropertyGuru.
“Through technological innovations such as ePropertyTrack, we are able to help agents move up the value chain, and provide even more trust and relevance to consumers.”
Romesh Navaratnarajah, Senior Editor at PropertyGuru, wrote this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
