Larger property agencies managed to stay afloat while smaller firms sank into the red amidst the dismal property market conditions, media reports said.
PropNex and ERA Realty, Singapore’s two biggest agencies by agent force, saw profit after tax climb 3.8 percent and 10.6 percent to $6.3 million and $11.5 million respectively, even as revenue fell for the year ended 31 December 2014.
Citing economies of scale, these property heavyweights said small and mid-sized agencies will find it hard to replicate their ability to generate activities to stimulate sales as well as support agents with value-added services.
“When you don’t have scale, your compliance and overheads will kill you,” noted ERA Realty’s chief executive Jack Chua.
Although ERA’s revenue decreased 9.9 percent to $214 million in 2014, its profit was buoyed by commercial transactions and higher-margin investment sales.
PropNex chief executive Mohamed Ismail revealed that while revenue slipped two percent to $194.8 million last year, the company streamlined its processes and upgraded its software for the back-office, allowing it to reduce headcount by about five percent. In fact, the $7.9 million profit shared among leaders and team managers was similar to that in 2013.
However, OrangeTee did not share the same fortune. The fourth largest agency in Singapore posted a net loss of more than $690,000 for the year ended 30 June 2014 after recording a net profit of $3.9 million in the previous year.
HSR International, which is ranked seventh by number of agents, also registered a net loss of $5.2 million during the fiscal year ended 31 December 2014 after posting a loss of $5.4 million in 2013.
Meanwhile, SLP’s agency business under SLP Scotia and SLP Realty saw revenue soar 66 percent to $32.3 million for the fiscal year ended 31 May 2014, due to higher commissions offered by developers. But since most of these commissions went to agents, the company’s net profit plunged 98.6 percent to $7,295 from $533,921.
With the present commission structure skewed towards higher commission payouts to sales agents, Ismail reckons that a small and medium-sized agency will find it hard to make ends meet.
“As such, only the mega or bigger agencies can make some profits.
“Looks like in Singapore, there is only room for two or three or at best four big agencies to make any meaningful business with our existing commission-sharing scheme,” he added.
Romesh Navaratnarajah, Singapore Editor at PropertyGuru, edited this story. To contact him about this or other stories email romesh@propertyguru.com.sg
