Property agents in Hong Kong may face a cold winter after a decade-long hot spell in the city’s home market. Mainland property agency Qfang now has offered 100% commission to their property agents instead of basic salaries in Hong Kong as a way of cutting down expenses as the property market cools.
Starting next month, Qfang will upgrade its frontline staff to a “win-win partnership scheme” that will see their profit-sharing scheme to rise to 50% from the present 27%. The Shenzhen-based company will not pay the basic monthly salary of HK$7,000 (US$892).
Qfang managing director Vincent Chan Kwan-hing said the company had hired 500 agents since the launch of the win-win agency program last April because its commission was about three times higher than that of its rivals. The change in the compensation system underlined how difficult new entrants such as Qfang have been finding in a home market that saw an imbalance that tipped towards price rather than volume.
Home prices in Hong Kong reached a record high last summer before dropping about 10% from their peak due to worries about a poor economic outlook amid the Sino-American trade war. While housing prices remained high, trading volume was relatively thin, which hurt the property agency business.
But there are signs of improvement in the housing market, thanks to an easing of the trade war and the unlikelihood of rate hikes. The number of transactions at 50 major private housing estates hit a 40-week high of 138 in the week ended February 3, according to Ricacorp Properties, another agent.
Last month, the overall sales volume of properties, including residential, commercial and industrial ones, totaled HK$70.53 billion (US$9 billion), a six-month high, according to Land Registry data. In 2015, Qfang entered the Hong Kong market with its nimble online-to-offline model and a mission to modernize Hong Kong’s property brokerage sector, one of the very few industries yet to fully embrace technology.
To keep costs down, the digital platform facilitates cross-matches and helps initiate negotiations between prospective buyers and sellers. Qfang agents were positioned as the last mile consultants to solve problems, answer questions and cement the deals.
Unfortunately, Qfang has yet to threaten its bigger rivals such as Centanet and Midland, which are unlikely to follow the full commission-based system.