Property

Cooling measures block transactions

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Last week, I had the opportunity to visit Beijing for the China Real Estate Agency Industry Annual Conference. During the two-day event packed with meetings and discussions,

I attended a number of talks given by real estate industry leaders across the region. One common topic shared by the speakers was the demand for genuine property offerings, which goes to show the harm that false offerings have caused Chinese homebuyers.

Mainland law enforcement agencies are taking actions to address the alarming problem where agencies are fooling buyers with made-up offers. In comparison, the Hong Kong Estate Agents Authority possesses more practical experience in making and executing industry laws and regulations than its mainland counterparts, therefore for mainland authorities, there is a lot to learn from Hong Kong real estate regulations.

However, when it comes to utilising the ever-evolving real estate online platforms, mainland China, with its abundance of IT talent and technological advances, has been incorporating artificial intelligence into agency services. Hong Kong has a lot of catching up to do in the technology area.

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A while ago, AlphaGo defeated China’s top-ranking chess player in a 3:0 landslide - a victory that has to be credited to the tech team behind it. I imagine, when artificial intelligence is finally incorporated into online property-selling platforms, it will be IT specialists that take the credit. At the Real Estate Agency Industry Annual Conference, most keynote speakers turned out to be IT wizards, while leading real estate agencies with traditional business models played a more subordinate role.

Last year, even the leading real estate agencies in the market only made a bare minimum of 4% operating profit, struggling to stay afloat and survive through the one-month sales freeze. It signals the end of the traditional operating model, which revolves around the tactic of setting up as many shops and hiring as many agents as possible. On the other hand, online platforms operate at low costs, and IT professionals are continuing to work on bringing big data and artificial intelligence into real estate services, aiming to bring cost down even more so to maximize return rate in a low-sales environment.

An easy example is the disappearance of people hailing cabs on the road in mainland China. Instead, people are using ride-hailing apps on their smartphones. Not only are the pick-up point and destinations clear, the price is negotiable between the two parties, therefore making it convenient for both drivers and passengers. In addition, routes are more efficiently planned, optimising road capacity. Meanwhile, app developers are running on a number’s game. Even though they only take a minimum cut from every ride, they can still hit revenue goals just by attracting huge numbers of daily active users.

As cooling measures have largely paralyzed Hong Kong’s property sales activities, it won’t be long till the traditional agency business model is dissipated. Only by understanding and adopting low-cost operating models does the real estate industry stand a chance of surviving and thriving in the internet age.

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