PropNex Realty has retained its position for the second year running as the biggest real estate agency in Singapore, with a sales force of 7,513 as at Feb 24. “It’s nice to be Number 1,” says Ismail Gafoor, executive chairman and CEO of PropNex, at a press briefing on Feb 25, where it announced its FY2018 results. “We don’t just sit on our laurels and think we are the biggest. We keep trying to add value to our various stakeholders by capturing a greater market share.”
Its sales force grew by 12.4% in 2018, with most of it attributed to “organic growth” – agents and leaders with their teams moving over to PropNex.
“Organic growth will continue to be ‘a strong engine’,” says Gafoor. Of the agents who joined PropNex in 2018, about 70% were experienced real estate agents while the rest were new agents.
Ismail: At the rate we are growing, I won’t be surprised if our sales force exceeds 8,000 by the end of the year (Credit: Samuel Isaac Chua/EdgeProp Singapore)
PropNex’s agent figure does not include the strategic collaboration with China Real Estate Group, where sales agents from the latter’s wholly-owned indirect subsidiary Global Alliance Property (GAP) will be transferred to PropNex. GAP operates under the Century 21 franchise. Following the collaboration, China Real Estate Group will discontinue its real estate agency business and focus on real estate development in China.
GAP has about 400 agents today. “We don’t expect all the agents to come over [to PropNex],” says Gafoor. Of interest to him are the “active agents from GAP” and it will be another two to three weeks before they decide whether they want to move over to PropNex. “To me, it doesn’t matter if 100 or 200 agents cross over,” he says. “At the rate we are growing, I won’t be surprised if our sales force exceeds 8,000 by the end of the year.”
The sales force is key to PropNex’s continued growth across all segments: new project launches, private resales, HDB resales, landed property deals and leasing.
Agents at the launch of Mayfair Gardens in 4Q2018 (Credit: Property Agent)
Even though 4Q2018 registered a 16.4% drop in revenue and a 57.7% fall in earnings, the full year saw a 30% increase in revenue to $431.54 million and earnings increase of 19.3% to $19.41 million. “It was indeed a record year, despite the property cooling measures,” says Gafoor.
Implemented on July 6, the property cooling measures slowed the pace of new project launches in 3Q2018, with developers rolling out their projects in 4Q2018 such as Oxley Holdings’ 215-unit Mayfair Gardens, City Developments’ 861-unit Whistler Grand and MCL Land’s 1,399-unit Parc Esta.
According to PropNex, transactions for the three segments of rental, HDB resales and landed housing contributed to 43% of revenue in FY2017. The three segments contributed 41% of revenue in FY2018. “This is because the three segments are relatively unaffected by the property cooling measures,” says Gafoor.
Parc Esta, one of the new launches in 4Q2018 (Credit: MCL Land)
He expects the HDB resale market to perform better this year compared to last year. Likewise, the landed housing market – from Good Class Bungalows to terraced houses – is likely to remain active.
This year, the private resale market is also expected to be buoyed by en bloc beneficiaries shopping for a replacement home. “Most will be looking at the resale market,” says Gafoor. “If they buy a unit at a new launch, they will have to rent an apartment for two to three years until the completion of the new development.”
Some of the en bloc beneficiaries may consider downsizing and buying an HDB resale flat, while others may want to upgrade to a landed property.
About 69 projects are in the pipeline for launch, with an aggregate supply of 25,307 units, estimates Gafoor. However, the actual number of projects that will launch in 2019 is likely to be closer to 50. So far, PropNex has been appointed marketing agency for 37 of these projects with a total of 16,188 units earmarked for launch. More are under negotiation, he adds.
Crowd at the sales gallery of the 1,410-unit The Florence Residences, the first mega project to be launched this year (Credit: Logan Property)
Last year, PropNex was appointed marketing agency for 31 projects with a total of 12,893 units. Out of the 31 projects, 26 saw PropNex appointed as joint marketing agency from the start. For the remaining projects, PropNex was appointed subsequent to the launch. For 21 of the 31 projects, PropNex sold the highest number of units out of the appointed marketing agencies, notes Gafoor.
He is therefore confident that new home sales this year could exceed last year’s. In 2018, PropNex’s market share of the private residential resale market was 38.6%, while its share of the new launches segment was 45.6%. Meanwhile, in the HDB resale market, PropNex held 50.3% market share of transactions in FY2018, up from 45.3% in FY2017.
Having brokered about half of the 23,099 HDB resale transactions in 2018, PropNex is launching a new mode of sale for HDB flat owners, namely by auction.
Auction is already a familiar mode of sale among property owners as it offers greater transparency for both buyers and sellers. At most public auctions, properties listed range from houses, apartments, development or redevelopment land, shophouses to strata commercial or strata industrial units.
However, auction has never been available for HDB sellers in the past. Even HDB flats that are in mortgagee sales are not put up for auction, but are only available for sale by private treaty. “Public housing is protected,” says Gafoor. “Banks can’t do a forced sale.”
In April, PropNex will open the auction market to HDB resale flat owners – those who have cleared the minimum occupation period (MOP) of five years. According to PropNex research, a total of 30,000 HDB flats would have fulfilled their MOP in 2019, compared to an annual average of 10,000 units over the past decade.
The greater transparency offered by an auction sale will help in facilitating HDB resale transactions that generally take a long time to conclude, for instance, those embroiled in conflicts as in the case of divorce, estate or trustee sales; or if there’s an ethnic quota, which limits the number of eligible buyers. “The auction platform will not guarantee a sale for these properties, but at least sellers can be assured of getting the best price,” says Gafoor.
Buyers and sellers of HDB flats in an auction will have to comply with HDB rules and regulations. Prior to the auction, the seller will have to register with HDB the intent to sell the flat. Likewise, the potential buyer will have to register with HDB the intent to buy.
At most auctions of private properties, the successful bidder will have to pay a 10% deposit on the day of the auction and complete the sale within eight weeks.
For the auction of an HDB flat, the successful bidder will adhere to HDB’s payment schedule: $1,000 deposit on the day of the auction, with 21 days to exercise the option to purchase. Upon exercising the option to purchase, the buyer has to pay another $4,000.
The successful bidder for an HDB flat is also able to back out of the purchase during the 21-day option period. This is unlike in the auction of a private property, where once a property is sold under the hammer, the buyer cannot pull out of the deal without forfeiting the 10% deposit and other transaction costs incurred, for instance stamp duty.
Ismail (left) and Clarence Goh, head of corporate sales & auction at PropNex (Credit: Samuel Isaac Chua/EdgeProp Singapore)
“Auction is not intended to replace the HDB resale market,” says Gafoor. “It’s just a new sales avenue for HDB owners to consider.”
Generally, most owners who list their property for auction have to pay the auction house an $800 listing fee. For a start, PropNex will waive the listing fee for HDB flat owners. HDB sellers will still have to pay the standard agent’s commission of 2%, which will be evenly split between the agent and PropNex’s auction house.
PropNex will conduct the first auction of HDB flats on April 5 at its office at Level 10 HDB Hub East Wing. “This is something new,” says Gafoor. “What gives us the confidence is the fact that we now have a 50.3% share of the public housing market.”