Real-estate industry not for the faint-hearted

Like many others, my jaw dropped when I read about the findings of a recent employment survey of fresh Nanyang Technological University graduates which showed that the top earner was drawing $20,000 a month with a firm in the financial industry.

That person was in a select club of fresh graduates earning close to a five-figure salary each. What is it that the employers of these new professionals expected of them in order to justify such a high starting salary?

Mind you, these are fresh graduates with little or no work experience. I am not trying to belittle the contributions of these high-flyers or their employers. There are probably sound reasons behind their decisions. Maybe these young talented people are financial wizards, prolific in churning out new and innovative financial products which will help the well-off become even wealthier and, in the process, earn their employers fat commissions.

This led me to thinking about the qualities a fresh graduate needs to have and what he or she has to do to earn a similarly high salary in the real estate industry.

Well, for one, that person has to be the child of a tycoon and who would have similarly-rich uncles and aunties, older siblings and distant relatives, all with strong business ties and connections with high society. He or she could get all these wealthy connections to invest or speculate in high-end bungalows, offices, shopping complexes and hotels. Yes, that will do.

In reality, that would never happen or the situation will not be sustainable because the role of a middleman in the real estate industry is a fiercely competitive one. After a while, someone will muscle in on your operations – after they become acquainted with your connections. For another, the rewards are likely to be based on commissions and not built into the salary.

It is a cut-throat industry and not for the faint-hearted, especially those plying their trade in the housing sector. The introduction of more regulation in this market segment is long overdue. It will help enhance the reputation of the industry and weed out the unscrupulous.

However, the new regulations have come down really hard on agents. A speaker at a recent seminar – a lawyer by profession – said the new regulations sought to criminalise almost every misdemeanour by housing agents. In other words, the agent’s action becomes a police matter and not for the civil courts. Is every salesperson – as they are now called – a suspect until proven innocent?

At present, most of the rules introduced by the Council for Estate Agencies (CEA) are to safeguard consumer interests. Are we assuming that there are no bad apples among the consumers?

I have heard many stories of agents being treated as free tour guides and of clients refusing to pay commissions or not paying the agreed amounts. This is not restricted to the housing segment. The deals are often bigger in the commercial markets and some clients there are even bigger bullies. The recent case of a housing agent successfully suing the client for unpaid commissions is more an exception than the norm.

Most times, these individual agents have no clout or time or financial muscle to enforce what was agreed. Often they do not have a real choice and they will simply shrug it off as a lesson to be learnt and never repeated.

The CEA now has its hands full trying to create some order in an industry that what was once free-for-all territory. However, as the situation settles, the CEA has to look into drawing up rules to protect agents as well – or at least to level the playing field in which the odds are now stacked overwhelmingly against these middlemen. In some situations, agents need protection from other agents.

A comprehensive approach would be good, and hopefully, it will not take another 10 to 15 years for this to happen.

By Colin Tan – head of research & consultancy at Chesterton Suntec International.

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