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Money matters
Looking at the effect falling property prices are having on realtors’ wages, Alex Frew McMillan discovers this is the year that will separate the men from the boys
Real-estate professionals in Asia are increasingly worried about their salaries and the likelihood of a slowdown in real-estate activity, and many employees of property companies no longer like their jobs. These are the conclusions of a report released recently by the professional standards group the Royal Institute of Chartered Surveyors (RICS) and the property recruitment consulting company MacDonald & Co.
“One in four of your staff is not at all happy or very unhappy. It is not an impressive statistic,” William Glover, the international director of MacDonald & Co., says.
The report, released during the MIPIM Asia real-estate conference at the Hong Kong Convention and Exhibition Centre, shows that the average salary of professionals working in the property sector in Asia is US$65,267 (HK$506,256), excluding bonuses and other benefits.
The report notes this is a “significant drop” when compared with the average salary last year, of US$82,636.
But the decline is explained by a higher number of professionals completing the survey from places where wages are lower, such as the People’s Republic of China and Malaysia, which together made up 25 percent of the respondents, up from 17 percent last year.
There are a couple of other factors at play as well. The respondents this year were slightly younger and more junior. Exchange rate movements also mean that the salaries in Australia and New Zealand, which together make up almost 30 percent of respondents, are down 20 percent to 25 percent in US dollar terms.
All these factors help explain why the average wage this year is 21 percent lower than in last year’s survey. But that does not mean individual wages have fallen significantly yet - just under two thirds (63 percent) of the 1,090 employees who completed the survey said their wages had risen since their last salary review.
That is down from 71 percent of employees who said they got a raise in the same survey this time last year, suggesting wages are reaching a plateau. Another 30 percent said their wages were unchanged this year, backing up that theory. But only 7 percent of respondents said they had seen a decrease in their own salary.
Senior professionals seem to have suffered the most, with salaries and bonuses falling the fastest among company directors, principals and owners. The average annual salary for a company director in Asia this year is US$135,400, while an associate director typically earns US$100,700, a manager makes US$66,400 and an analyst brings home US$28,900.
There are problems, of course. Since last year there has been major trouble not only in the financial-services industry, which indirectly affects real estate, but also in property development and property investment.
Younger staff seem to have fared better, and more junior employees have seen the bulk of any wage hikes that might have been doing the rounds.
“Guys and girls in their 20s or 30s have been getting the bigger increases”, in wages, according to Glover. “Most firms were recruiting at the mid-level, and therefore salaries have been going up for team members, rather than team leaders.”
One of the biggest changes in Asia is the amount of optimism people are expressing about prospects in real estate over the next year. In this year’s survey, 34 percent of respondents say they expect economic activity to decline in their chosen profession or area of specialty, a much higher number than the 6 percent who expected a decline in activity in last year’s survey. Another 40 percent expect no change in economic activity.
The number of pessimists is growing, in other words. Only 26 percent of respondents expect an increase in activity, compared with more than half - 57 percent - who were bullish about the next year’s prospects last time around.
Interestingly, real-estate professionals in China are considerably more upbeat about prospects, with just over 40 percent of respondents from the mainland expecting an increase in activity. For the region’s most developed markets - Hong Kong, Australia, New Zealand and Singapore - less than 20 percent expect an increase.
Perhaps there is good reason for that optimism. China has also seen the largest increases in wages, off that lower base. For workers that did get a raise, the average rate was 16.2 percent in China, followed by workers in Malaysia, at 11.1 percent, and then Hong Kong, at 8.6 percent, Singapore, at 8 percent, Australia, at 6.9 percent, and New Zealand at 5.3 percent.
Overall, the average salary is highest in Australia, at US$78,000, narrowly edging out Singapore at US$77,700, then Hong Kong at US$64,900, New Zealand at US$59,300, US$58,800 in mainland China and just US$39,900 in Malaysia.
The questionnaire was compiled by an independent research firm, David Burton Associates, between September 12 and October 13 last year, at the height of the market turmoil following the collapse of Lehman Brothers. This is the third year that RICS and Macdonald & Co. have organised the survey in Asia, and perhaps the most interesting.
”This year’s salary survey was conducted under very different market conditions to last year’s edition and provides us with a snapshot of the real-estate industry in Asia at the peak of this year’s economic turmoil,” Glover notes. “The data reflects the shock dealt to the market, in particular, to investment and development.”
But in presenting the survey’s findings, Louis Armstrong, CEO of RICS, notes that there are good job prospects in real estate in fields such as distressed assets, turnarounds and asset valuation. These professions are understaffed in Asia, and companies have been struggling to find employees to help them.
“The demand will be for people who can help turn around nonperforming assets, who can do due diligence, and aid on restructuring,” Armstrong says. The CEO believes the shakeout produced by the market turmoil will push more employees into these areas and correct the discrepancy in supply and demand.
“This story is not about investment bankers and bonuses being cut, jobs being lost - which is sad but inevitable,” Armstrong says. “It is about the shortage of skilled professionals across Asia in real estate and construction.”
The trends of emerging Asia’s rapid urbanisation and increased consumer spending, which spur retail real estate in particular, are not going to go away, although they may slow down. Malaysia, Hong Kong and China are also pushing forward infrastructure projects, in a bid to improve demand and sentiment, and so demand for people who can advise on those projects, oversee and run them is going to rise.
There will be a shake up in real estate, though. A Reuters poll conducted during the MIPIM Asia conference in late November suggested that apartment prices and office rents in both Hong Kong and Singapore are set to drop more than 20 percent by the end of 2009. Tokyo residential prices look set to fall 10 percent over the same timeframe.
This means prices in Asia would be falling faster than in the United States and Europe, where the price declines were more dramatic during 2008. The poll predicts US housing prices will fall 6.4 percent in 2009, while UK housing prices will fall 10 percent.
In China, where the government’s austerity measures have already caused housing prices in cities such as Guangzhou and Shenzhen to fall 20 percent to 30 percent, more aggressive investors are eyeing up prospects and trying to line up funding. But it’s unlikely that these investors will put any money that they raise to work until the second half of 2009.
“There are 200 shopping centres going to be built in China and India over the next two years,” Glover says.
But real-estate professionals should expect to have to work hard for their wages, and any future raises, until sentiment turns around. “It is not like the good times when anybody in the right place at the right time could make money,” Armstrong says. “It is really separating the sheep from the goats.”
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