PropNex bulks up, ready to seize bigger market share

/ EdgeProp Singapore
January 6, 2022 12:12 PM SGT
(Front, from left:) Josephine Chow (chief operating officer), Eddie Lim (Senior vice-president), Kelvin Fong (executive director), Ismail Gafoor (executive chairman and CEO), Alan Lim (director), Lim Yong Hock (key executive officer), Cheong Yew Meng (chief financial officer). (Back, from left:) Kenny Tan (senior director -corporate strategy & development), Lee Heng Eam (assistant vice-president), Derrick Law (assistant vice-president), Michael Koh (director of information technology), Goh Kee Nguan (strategic & development officer), Johnsonwill Hon (financial controller), Alvin Tan (executive director- project marketing), Carolyn Goh (senior director, corporate communications and marketing)
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SINGAPORE (EDGEPROP) - PropNex Realty, Singapore’s biggest agency by headcount, scored another coup on New Year’s Day with its latest tally of 10,798 agents, based on the Council for Estate Agencies (CEA) public register. Over the past 12 months, 1,880 agents have joined the firm, says Ismail Gafoor, executive chairman and CEO of PropNex. He has also beefed up his management team with 14 key staff.
Meanwhile, ERA Realty Network, Singapore’s second largest real estate agency, started 2021 with 7,771 agents, and began 2022 with 8,146 agents. Regaining its position in third place is Huttons Asia, whose headcount jumped to 4,155 agents. It owed its position largely to four Navis Living Group managing partners and co-founders who joined the firm in October, followed by about 700 of their agents. OrangeTee & Tie has therefore moved to fourth place. SRI, which had crossed 1,000 agents at the start of 2021, added another 129 to its ranks, putting it firmly in fifth place with 1,139 agents to date.
As the five biggest agencies continued to bulk up, the bottom five shrank further, resulting in an even wider chasm between the two halves (see table “Estate agency rankings in 2022 vs 2021”).
Having attained over 10,000 agents, PropNex has raised the bar again. Its next target is to have a sales force of 12,000 agents by 2023. “Eventually, we want 15,000 agents,” says Gafoor in an interview with EdgeProp Singapore.
With 15,000 agents, PropNex would effectively have 50% market share of all the registered agents in Singapore. CEA statistics show that the numbers of realtors in Singapore have ranged from 29,416 in 2019 to 30,399 last year.
Gafoor: If we have 15,000 agents and 50% market share, we would be able to push the boundaries further to 60% to 65% of total transactions across these various housing segments (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Jostling for market share

By Gafoor’s reckoning, PropNex has brokered more than 50% of HDB resale deals last year, and about 45% of the units at new project launches and in the resale market. This is based on its headcount last year, which translates to about 30% of the overall sales force. “If we have 15,000 agents and 50% market share, we would be able to push the boundaries further to 60% to 65% of total transactions across these various housing segments,” he says.
PropNex’s financial results for the first nine months of 2021, posted on Nov 10, showed revenue doubling to $715.5 million from $358.4 million over the same period in the previous year. Earnings grew 114.8% to $49.9 million from $23.2 million a year ago. This was mainly driven by the increase in commission income from agency services and project marketing services.
The only other listed realtor on the Singapore Exchange is APAC Realty, which holds the ERA Realty regional franchise. It showed strong growth too, recording total revenue of $537 million for the first nine months of 2021, up 115% from the previous year. By segment, new home brokerage revenue was up 177% y-o-y to $211.3 million. Resale and rental brokerage services recorded $325.7 million in revenue, 88% higher than the year before. Earn- ings were up 139% to $26.1 million.
According to APAC Realty’s 3Q2021 business update, ERA’s market share for new launches was 32.6% for the first nine months of 2021, while its market share was 42.6% for the private residential resale market and 42.1% for the HDB resale market over the same period.

Accelerated price growth

The URA and HDB flash estimates for 4Q2021, released on Jan 3, jolted the market with their unexpectedly strong showing. The overall private property price index increased 5% q-o-q, bringing the full-year price growth for 2021 to 10.6%, according to the URA flash estimate. HDB price index rose 3.2% in 4Q2021, bringing the full-year growth to 12.5%. (Find HDB flats for rent or sale with our Singapore HDB directory)
“No one had expected a double-digit price growth,” Gafoor says. In hindsight, the spike in prices in 4Q2021 and for the full year has meant that the new cooling measures introduced on Dec 16 were justified. “It would put the brakes on accelerating price growth,” he concedes.
However, the recent double-digit price growth in the HDB resale market was a welcome respite for homeowners who had seen the market in the doldrums for at least six years prior to the growth spurt. “The HDB price index had been languishing in negative territory for at least six years,” Gafoor notes.
The 12.5% jump in HDB resale prices last year was the highest annual growth since 2011 when resale flat values rose by 10.7%. Gafoor acknowledges that continued double-digit growth would have been unsustainable. He gives an example of an HDB property purchased at $500,000 today. If prices were to increase by 10% annually, the property would be valued at $805,255 by the end of five years. By the end of 10 years, it would be closer to $1.3 million.
The 12.5% jump in HDB resale prices last year was the highest annual growth since 2011, when resale flat values rose by 10.7% (Photo: Samuel Isaac Chua/EdgeProp Singapore)

‘Tougher’ market ahead

Having seen both the private housing and HDB markets scale new heights in 2021, PropNex had already been bracing itself for a more lacklustre 2022 in light of the limited inventory from new residential project launches and depleting unsold stock, particularly in the Outside Central Region (OCR).
“The cooling measures have made it even tougher,” Gafoor concedes. “But we are ready to face it and have already planned out all our activities for 2022. It’s tough times that gives PropNex an edge; when the market is bad, we need to help the stakeholders — property developers, the agents and consumers.”
PropNex is projecting price growth in 2022 to ease to 3% to 5% as new cooling measures weigh on investment demand. The Core Central Region (CCR), being more investor-reli- ant compared to other segments, is expect- ed to bear the brunt of the cooling measures. PropNex is forecasting prices to dip to –2% to 0% this year.

Bearing the brunt

The CCR is also a segment where foreigners have traditionally favoured. The hike in addi- tional buyer’s stamp duty (ABSD) to 30% is likely to take its toll. This is evident in a recent deal brokered by PropNex in the CCR. It was a $20 million apartment, where the buyer, a foreigner, was willing to pay the 20% ABSD, the equivalent of an additional $4 million on top of the price tag. With the new cooling measures, he would have to cough up another $2 million in ABSD.
The buyer requested for a price discount. Fortunately, the developer was willing to compromise, by offering a $1 million price discount, and the buyer agreed to go ahead with the purchase. “The cooling measures have put developers in a tight spot,” says Gafoor.
The other housing segments such as the Rest of Central Region (RCR) and OCR are expected to see price growth moderate to 2–4% and 3–5% respectively this year.
Gafoor expects executive condos (ECs) to be least affected by the cooling measures. There are three EC projects in the launch pipeline, and he expects take-up rate to remain strong. “These segments should remain fairly resilient owing to genuine demand from upgraders and local buyers, limited stock of unsold mass market homes, and in the case of ECs, their more affordable pricing and limited supply,” he notes.
However, some developers are still sitting on projects with unsold inventory in the CCR and RCR where the clock is ticking towards the end of the ABSD remission period. “Developers have to decide between two options: to reduce selling price in order to clear their inventory, or to pay the ABSD?” says Gafoor.
That’s why he feels that PropNex has a role to play in helping developers to clear their unsold stock. “Developers have to be sensitive in their pricing in light of the cooling measures,” he adds.

Singaporean upgrader market

Singaporeans continued to form the majority of private housing demand in 4Q2021, accounting for 82% of non-landed private new sales and 79% of non-landed private resale transactions during the quarter, says PropNex Research. It is projecting transactions to taper to 9,000 to 10,000 for private new home sales and 15,000 to 16,000 for resale properties in 2022.
HDB upgraders are likely to be hit too. Those who have not sold their HDB flats yet and are buying a private property would have to stump up 25% downpayment and 17% ABSD upfront, which is equivalent to 42% of the purchase price. Including the 3% buyer’s stamp duty, that is a total of 45% cash upfront. “The only way for the upgraders to avoid the hefty upfront payment is to sell their HDB flats, but if it’s a new project launch and completion is four to five years down the road, where will they stay in the meantime?” Gafoor notes.
The landed property segment is expected to be relatively resilient, driven by Singaporeans’ desire to own a house, says Gafoor. For instance, a bungalow sitting on a 6,000 sq ft freehold site in the eastern part of Singapore, such as Frankel Estate, may be priced at $9 million, which works out to $1,500 psf. “It’s hard to find a freehold condo for $1,500 psf these days,” he adds. “And with landed property, you have a big built-up area, and you can rear chickens in your garden.” (Discover insightful data of any Singapore condominium with our condo directory)
Landed home prices rose by 3.7% q-o-q in 4Q2021, despite lower transaction volume and fewer big-ticket Good Class Bungalows (GCBs) sold, which had helped support prices in the previous quarters, according to PropNex Research. For the whole of 2021, landed home prices rose 13,1% based on the flash estimate.
Henry Lim, new head of PropNex Good Class Bungalow and Prestige Landed Property Division (Photo: PropNex)

New GCB and prestige landed property division

Last year, PropNex transacted over 1,400 landed homes, capturing 40.4% of the market share in that segment. Its agents brokered the sales of 49 landed properties worth more than $10 million each in 2021. However, in terms of GCB deals, PropNex’s market share is less than 10%, says Gafoor.
Not to be outdone, PropNex is starting a new GCB and Prestige Landed Property Division which is headed by Henry Lim, who joined PropNex recently. Lim was previously head of the GCB division at ERA Realty. He is said to have more than 25 years’ experience in brokering sales of luxury landed properties and GCBs, chalking up $1 billion worth of deals in the course of his career.
In his new role at PropNex, Lim will work closely with the management team to grow the firm’s market share in this niche segment. Besides GCBs and landed property valued above $10 million across the island, Lim will also oversee landed property deals in Sentosa Cove.
PropNex expects price growth in the landed housing segment to moderate to 5% to 7% this year.
Gafoor points to the first new launch of 2022, Belgravia Ace, with 107 semi-detached and terraced houses. He expects to see strong interest and take-up rate even though it is not a conventional landed property, but a strata landed development. The project will preview on Jan 8 and is scheduled for launch on Jan 22. (Browse newly launched condos in Singapore right now)
After a 13.1% jump in landed property prices last year, PropNex expects price growth in the landed housing segment to moderate to 5% to 7% in 2022 (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Training and consumer outreach programmes

Knowing that transaction volume will dip this year, and with over 10,000 property agents in its fold, PropNex wants its agents to be re- trained to stay relevant. It is preparing for a JumpStart event on Jan 10, where 4,000 to 5,000 agents are expected to attend.
On Jan 24, it intends to hold an event on “prospecting” for its agents — using the market data in its research over the past year to help agents understand the buyers’ profile: those who had purchased property in trust, those who had decoupled, upgraders who had to sell their HDB flats to raise cash, and those who are still waiting for their ABSD remission.
These events had been put in place since early December, even prior to the cooling measures, notes Gafoor. He believes in the importance of training: “We need to train our agents and support them through our IT platforms,” he says.
PropNex also intends to continue focusing on educating consumers and is planning a nationwide outreach campaign. “When the market turns south, we need to help develop- ers, agents and consumers,” says Gafoor.
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