Hong Kong's property agents are bracing for the long haul as a shrinking market dents their take-home pay and forces some to quit the industry.
Salaries, which are largely anchored by sales commissions, have dropped about two thirds in the current market slump, according to some agents, after buyers shunned showrooms and flat viewings this year to avoid contracting Covid-19.
Falling stock prices and job losses have dented the wealth of homebuyers and investors, causing many to batten down the hatches. The result is a pullback in spending on big-ticket items, prolonging the gloom since last year when anti-government protests rocked the city.
"Those who have not sold any flat in the past couple of months, are likely to resign," said Sammy Po, chief executive of Midland Realty. "We have seen 200 to 300 agents quit last month because they cannot survive on just the basic salary. The dropout is about 20 per cent higher than in a normal month."
Midland issued a profit warning in December after incurring HK$25 million in losses in the first 11 months of 2019, according to its exchange filing. It earned HK$58 million in 2018.
Financial Secretary Paul Chan Mo-po proposed last month a record expansionary budget to help the economy rebound from a contraction last year as property investments have slowed almost to a standstill.
Property agents receive on average HK$6,000 to HK$7,000 in basic pay a month, and split their commissions on a 20-80 basis with their employers, according to Po.
They tend to get higher commissions from selling new flats, as opposed to used homes, with developers dangling wider discounts to clear unsold units as seen in launches in the past two weeks.
In a city where the average new flat sold last year was priced at a five-year record of HK$10.87 million (US$1.4 million), an agent's take-home commission would be HK$130,000 on two average-size deals per month. The number of new home sales rose to a 16-year high last year, with 20,668 homes finding buyers, according to data compiled by Ricacorp Properties.
"This is the most difficult period I have ever experienced in my 20 years in the industry," said Ken Fan, an agent at Japsignal Property Agency in Tsuen Wan. "My income has fallen as I only managed to close a few leasing deals since January."
His commissions have dwindled to HK$14,000 in recent months. In good times, Fan said he generated HK$7 million a month in sales and earned more than HK$42,000 in commissions.
The decline in the primary residential market has pushed some of the city's 40,000-odd agents to focus on the leasing market while waiting for a rebound despite lower commissions.
Louis Ho, a director of Centaline Property Agency, has seen about a 70 per cent drop in commissions in the past two months in the industry. Those who are still in the market are dipping into their savings acquired during the market's golden years.
Still, there is a glimmer of hope.
Sales of new flats over the past two weekends are giving Ho some optimism. Buyers snapped up 187 of 208 flats at Wheelock Properties's Ocean Marini project in Tseung Kwan O on Saturday.
The response was better than the 35 per cent take-up rate at China Evergrande's Emerald Bay project in Tuen Mun on the previous weekend.
"People are starting to come out to look for bargains since last week," Ho said. "In this industry, we have to save for the rainy days for the downturn, like what we are facing today."
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