Property agencies say some developers are offering a higher commission to help boost sales at their projects.
This comes amid slowing demand as government property-cooling measures and tighter home loan regulations take effect.
Agents say the commission could be as high as 3.5 to 4 percent for hard-to-sell units, and that’s the highest commission rate in five years.
As a result, some agents are focusing on new units rather than resale homes.
Property agent Kelly Ho decided four years ago to switch from selling residential units on the resale market to those offered by developers instead.
Today, many of her peers are doing the same as sales activity in the resale market slows.
Ms Ho, an associate team director from PropNex, said some developers have been offering higher commission to drive sales since the third quarter of last year.
PropNex said 20 to 30 percent of its agents have shifted from marketing resale units to focus on new residential projects.
Of the 21 projects it is presently marketing, PropNex said the average agent commission rate is about 2.1 percent.
That’s about twice the commission compared to what’s offered when property sales were brisk.
PropNex CEO, Mohd Ismail, said: “The high commission of more than 3 percent only ‘triggers’ after the initial launch, when it is proven that the product is difficult to sell.
“In the past, even for those difficult projects, at its max, it is about 2%. Today I can say that projects that are at the tail end and difficult to sell, (the commission) can go as high as 3.5 to 4 percent.”
Ku Swee Yong, CEO of Century 21 Singapore, said: “In the past downturn, the commission for selling units went as high as 8% and that’s in the River Valley Road area.
“Today, in this slowdown, it is not a slowdown in transaction volume due to external economic conditions, it is an artificially created policy environment which is creating a 50% drop in transaction volume.
“So with these additional incentives coming in, property agents may still be hard pressed to find solutions to help buyers invest their money because of loan restrictions, age restrictions on borrowings.”
Agents said that property units that are difficult to sell are typically either very large, more expensive or have less attractive attributes.
In some cases, developers may try to spur sales in order to comply with Qualifying Certificate (QC) rules.
Under the Residential Property Act, developers whose shareholders and directors are not all Singaporeans have to get a QC to buy a residential property.
One condition of a Qualifying Certificate or QC requires them to complete construction of the development within five years and to sell all units within two years of obtaining the temporary occupation permit.
Property agents said that currently, executive condominium (EC) projects offer the lowest agent commission, at around 0.5 to 0.7 percent, partly because the demand for ECs is seen to be more resilient than other private homes.
Mr Ku added that EC developers who are launching new projects at S$700 to S$800 per square foot have very tight margins and are unlikely to offer high commissions to agents as well.
Source : Channel NewsAsia – 3 Mar 2014