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HONG KONG (Nov 17): Developers have started digging deeper into their own pockets to double the commissions they pay to sales agents to encourage them to close more deals.
The extra incentives on offer already appear to have paid off, with 218 new homes sold over the weekend — up 67% from a week earlier and the highest since May 2008, according to Samsung Securities.
But sales in the secondary market have slowed, with just 12 deals done over the weekend and seven over the previous weekend, a survey by Midland Realty of transactions in the 10 largest residential estates showed.
The small number of deals was the result of buyers being lured to new homes, agents said, and compares with typical recent weekend deal volumes of around 30.
In September and October developers sold homes worth an estimated HK$20 billion (RM8.1 billion), according to analysts, but that buying spree has since shown signs of slowing.
"Developers will increase their commission rates when they are concerned that sales are starting to slow," said Sammy Po Siu-ming, a director at Midland Realty. Over the weekend, Wing Tai Properties Development paid 4.5% agency commissions to boost sales at The Warren, in Tai Hang. Chinachem Group offered agents a one% reward on top of a 4% commission fee to help sell eight special flats at Billionaire Royal, each pitched at prices of more than HK$40 million. The higher commissions on offer are double the 2% to 2.5% commissions previously offered.
Buyer sentiment in the primary market took a blow late last month when Sun Hung Kai Properties released the first batch of flats in its development The Wings in Tseung Kwan O at an average price of HK$12,698 per square foot, and later offered the next batch of flats at HK$8,750 per square foot — about 30% lower. SHKP was also offering sales commissions of 4%, said agents. Rival developer Sino Land released the first batch of 50 flats at its joint-venture luxury development in Tai Po, Providence Bay, at an average price of HK$10,731 per square foot, about 30% lower than its earlier target of HK$15,000 to HK$20,000 per square foot.
Although developers have begun resorting to higher commission payments to speed up sales, they have so far shown no signs of slowing the pace of releasing new projects.
Cheung Kong (Holdings) will release 1,536 flats at phase three of Festival City in Tai Wai this week.
"Developers are trying to speed up sales by raising commission rates to property agencies," said Lee Wee Liat, regional head of property research at Samsung Securities.
In the case of Chinachem, agents will receive about HK$2 million for every successful sale of a HK$40 million special flat.
Po said Midland planned to deploy nearly 1,000 agents or 76% of its 1,300 agents in the New Territories to focus on the Festival City phase three development.
"Our sales agents acknowledge that from now to pre-Christmas will be their golden opportunity to earn commissions, as the market will turn quiet again after Christmas and Chinese New Year," said Po.
Emilia Chan, marketing manager at Wing Tai Properties, confirmed the developer had paid 4.5% commission fees to agents for sales of units in The Warren. But such high rates had since been stopped, she said. Wing Tai said it sold 40 of the 68 flats it released for sale last week.
According to Samsung's Lee, Sun Hung Kai Properties generated revenues of HK$4 billion from sales at The Wings, while Sino Land earned revenues of HK$3 billion from sales of One Mayfair in Kowloon Tong, and another HK$2.7 billion from the sale of 120 flats at joint-venture Providence Bay in Pak Shek Kok, Tai Po.
Wing Tai earned HK$500 million from sales at The Warren. — SCMP
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