October 24, 2021


From native P.o.V.

The real estate agent will be “group exterminated”? The official accelerated intervention, 20 trillion cheese can be moved?

8 min read

A storm may be brewing in China’s massive real estate agency industry.

A few days ago, Hangzhou’s official second-hand housing transaction supervision platform reintroduced the function of “individual independent listing.” Once the news came out, the network appeared to support the government-led trading platform and oppose intermediaries. The influx of visitors to the official platform even caused the network to collapse several times.

Some even predicted that the intermediary industry would see a storm similar to that of the education industry. Like the education and training industry, the real estate agency industry has also gradually completed head aggregation and deep capital involvement. When the giant shell house was listed in the U.S., it already had a market share of about 10% and a GTV (total transaction value) second only to Alibaba, and behind it stood a host of capitals such as Tencent, Sequoia China, High Tide, Softbank, Baidu, CDH and China Renaissance.

In contrast to its glamorous image in the capital market, the growth and development of Chinese real estate agents have been accompanied by an overwhelming amount of negative comments. Zuo Hui, the founder of Chain Home, who has passed away, once said, “Dignity is too far from our industry.”

By the end of 2020, the total number of real estate agents in China is close to 2 million, and the total size of China’s housing market exceeds 20 trillion. This industry, closely related to people’s livelihood, has grown wildly for 20 years and involves millions of people in employment. Therefore, when the official real estate transaction platform was introduced, agents were still reluctant to believe that this chub’s emergence would substantially impact the industry. Recently many industry players have been speaking out one after another, saying that “it is unlikely that there will be a real landlord direct sale in China.”

However, the role that the official platform can currently assume, although small, but is enough for all parties in the market to see some end: the role of intermediaries in real estate transactions is really facing weakening!

Officials in action

The recent signals involving the regulation of real estate agents are indeed a bit much.

Shell, a giant in the industry listed in the U.S. last year, has been caught in a cloud of suspicion of “anti-monopoly” and “de-intermediation” after turning a profit this year, and its share price has plummeted one after another.

On August 18, Hangzhou Housing Authority issued an article saying, “Landlord direct sales of properties are coming! The new function breaks the sales model that relies on intermediaries and provides a new, fairer and more reasonable channel for the masses to “hand in hand” their own transactions.

Hangzhou is not the only city to promote the direct sale of landlords. From the information available, many cities are carrying out preliminary work.

For example, in June, Shenzhen was briefly online a “second-hand housing transaction system,” which has a “personal self-service selling” option, later confirmed to be a new version of the online system is in the testing phase, after a period of time will be officially online.

In May last year, the city of Yongcheng in Henan Province also built an official second-hand housing trading platform and promised free information release, free property verification, free funds supervision, to ensure that the information is true, to ensure smooth transactions, to protect the attentive service, etc., to combat the “black intermediary.”

The local governments’ information construction of the second-hand housing trading platform aligns with the national policy requirements.

On July 23 this year, the Ministry of Housing and Construction released a wind direction: the property market to carry out a “major rectification.” Among them, the real estate agent is one of the key rectification objects.

The Ministry of Housing and Construction specifically mentioned several phenomena, including in the field of housing sales and purchases, publishing false housing information; taking or assisting in taking “business loans,” “consumer loans,” and other non-personal housing loans for the purchase of housing; assisting home buyers in avoiding housing transaction taxes and fees illegally; irregularities Charging “tea fee” and other fees, disguised as price increases; using unfair format clauses to infringe on consumer rights and interests; fabricating and spreading untrue information to disrupt the market order. All of these disorders point to real estate agents.

In addition, in May 2020, the National Development and Reform Commission explicitly requested to promote the “Internet + real estate registration,” accelerate the registration of real estate and online tax declaration, the establishment of a “one-window acceptance” online platform, to promote the use of electronic document photos and electronic materials The company’s main business is to provide a wide range of services and services. The government platform has the most authentic and authoritative information after all the real estate information is registered. At the same time, the Internet further simplifies the process and processing time, providing the possibility for homebuyers to go through the procedures on their own.

Difficult to be replaced in the short term

Hangzhou is seen as the first shot at “de-intermediation” because it has released several new signals.

Firstly, the government’s credit endorsement is replacing the agent’s endorsement for the most important concerns of homebuyers: the authenticity of the property and the safety of the transaction.

Secondly, for the first time, agents are really shielded from information resources – the new function sets up an intelligent classification of user identity, and the information of individual independent listings is only open to individual real-name certified users and cannot be viewed by brokers, eliminating information leakage and preventing harassment. In the past, even if the owner was listed independently on a commercial Internet platform, real estate agents could be pervasive, monopolizing almost all listings by constantly calling and promising to raise the selling price and other means.

In response to the intermediaries’ claim that the process of buying and selling houses is complicated and the intermediaries are indispensable, Hangzhou officials confirmed that “buying and selling houses is not necessary through the intermediaries” and that the government-run platform can guide buyers and sellers to carry out transactions per the standardized process of property verification and listing.

“Although the whole chain of property transactions is very long, the industry has a saying ‘the one who gets the source gets the world,’ once the government controls the core listing release, it will pinch the lifeline of the intermediary. You can imagine the future of the industry: pricing, the future according to the government second-hand housing guide price; listings, with government credit endorsement, better than the intermediary credit; transactions, with the government to guide the whole process.” A senior intermediary in Shanghai told Firstrade.

“Our biggest concern at the moment is those home buyers look at houses through intermediaries and end up ‘hand-in-hand’ transactions on the government platform.” Another agency source said.

“It is a feasible approach for the government to step in and build a trading platform for second-hand houses. The rise of the Internet economy makes de-intermediation possible. With the power of the Internet, the government can form a platform on its website where people can upload information on their own to reach a deal. Because the government has credibility, it can become a truly de-intermediated platform, thus effectively reducing transaction costs. This is why many cities are currently starting to conduct pilot projects.” Jiang Han, a senior researcher at Pangu Jiwu, told Firstrade.

However, the biggest problem facing the government may be the cost of operating the platform. After Hangzhou released the new feature, the website had crashed several times due to the number of visitors. Even after it was fixed, the site suffered from overly simple listing information and duplicate listings.

As a result, many analysts from intermediaries have recently written that intermediaries will not be afraid of government-run intermediary platforms and that similar platforms have had almost zero impact on intermediaries in the past.

Ding Zuyu, CEO of E-House Enterprise Group, believes that Hangzhou’s government-run second-hand housing trading platform is mainly an expression of an attitude that relies on this platform to complete market-oriented transactions, with few possibilities.

“Does the government platform charge a fee or not? If not, the high cost of operating the platform, a large number of follow-up transaction services in the end, who should provide? So under such circumstances, it is unrealistic for a government housing platform to kill the real estate agency industry completely.” Jiang Han said.

But at least for now, Hangzhou’s input action will not stop. According to Hangzhou Real Estate Market Comprehensive Management Service Center, the government platform will launch new functions, including information release for individual requests and fund supervision functions.

Logic may be changed.

In the past, some of the chaos in the agency industry has indeed brought about a great backlash from consumers, and the biggest problem behind “the world has been suffering from the agency for a long time” is the rising commission rate and high agency fees.

CIC report data, from 2014 to 2019, the total amount of domestic housing sales and leasing did through real estate brokerage agencies rose from 3.2 trillion to 10.5 trillion, the penetration rate rose from 33% to 47.1%; the national housing brokerage service rent increased from 63.6 billion yuan to 251.5 billion yuan, the average fee rate rose from 2.0% to 2.4%.

Zhang Dawei, the chief analyst of Centaline Property, believes that 10 years ago, when the house price was 10,000/square meter, the brokerage fee rate was 2%, and now a square meter is 50,000-100,000 yuan. The fee rate in some cities has risen to 3%, which indeed brewed a thunderstorm in the industry, and the second-hand house brokerage industry will surely usher in more fierce regulation.

Excessive agency rates have also overstretched the real estate brokerage industry. In the last five years, the number of real estate agencies has increased by 200%, and the number of agency practitioners has grown by more than 100%.

Last year, the national second-hand housing transactions amounted to 7.3 trillion yuan, even if intermediaries complete all transactions, according to the calculation of 2 million practitioners, the per capita completion of transactions 3.65 million yuan, that is, the average per capita annual turnover of only 1-2 sets of houses.

An intermediary in Shanghai said that a real estate agent in Shanghai only deals with an average of 1.5 sets a year, “a year does not open, open to eating a year” has become the norm. And if the government can provide a basic real estate transaction information platform, many intermediaries will be expelled from the track.

“The most basic real estate information provision services, in fact, no longer need real estate intermediaries to complete, from this point of view, shells have been over the top of the pass. For intermediaries, they need to provide more valuable value-added services, and most small and medium-sized intermediaries that only provide basic services are likely to be eliminated from the market.” Jiang Han believes.

In July this year, a “second-hand house brokerage fee shall not exceed three times the local social wage” news had circulated. Still, Chain Home, I love my home, Centaline Real Estate, and other companies responded “did not receive the relevant notice,” and the current brokerage fees have not changed.

Zhang Dawei also believes that the incident of the Hangzhou government-run platform reflects the controversy behind the brokerage fee and reflects the round of real estate regulation in the heavy blow to the real estate second-hand housing industry.

Perhaps after the government does a good job of basic information platform services, the unreasonable intermediary fees that are often hundreds of thousands of dollars will hopefully be adjusted downward.

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