Wednesday, October 25, 2006
[RealEdge] BT : Crackdown on errant agents rattles HK property market
| Published October 25, 2006  | |
| Crackdown on errant agents rattles HK property market Stiff competition leads to illegal kickbacks in property deals
By JANE MOIR
A SERIES of raids on estate agents by anti-graft officers has put the spotlight on Hong Kong's fiercely competitive market for property commissions, which is teetering on fever pitch as the sector gains momentum. At least 30 people have been arrested over the past few days for alleged bribery in property transactions from at least one property agency. According to the Independent Commission Against Corruption (ICAC), the case involved illegal kickbacks in a number of property deals. The arrests come against a backdrop of intense competition for clients in a property market traditionally prone to violent swings in fortune. At the moment, the market is on the up, and agents are piling in to tap the boom. Likewise, banks have declared a virtual war for mortgages, with the main players fighting over themselves to offer waivers to potential clients. Both HSBC and Bank of China (Hong Kong) have aggressively been tweaking actual mortgage rates to lure business. Although the mortgage rate at both banks stands at 5.25 per cent, or prime minus 2.75 per cent, the actual rate after factoring in waivers is lower. Demand for home loans has recently increased sharply as marketing of new residential projects has lifted volume transactions in the primary housing market. One of the property agents raided last week was Centaline, which has a market share of about 30 per cent in the secondary market. Hong Kong has about 20,000 registered agents, of which about 15,000 are currently active. 'Are they all competitive? Anecdotal evidence suggests an upward shift in the property market is, however, under way. 'We expect transaction volume to increase over the next few months,' Mr Poon says. In the first five months of 2006, the volume of mass residential purchases was down 37 per cent from the same period the previous year, and the value of property sales has been flagging. With interest rates steady, a rush of new properties is expected to come online before the end of the year to tap improved confidence. In the wake of this turnaround, cut-throat agency tactics are likely to escalate. Fee competition is already intense, and as Maggie Brooke, a director at Professional Property Services, explains, the market already lends itself to shady practices with its 'one agent' system, where both parties to a transaction can be served by one agent. 'It opens it up to temptation, and a lot of these agents are junior anyway, earning just a commission,' she notes. The arrests also come at a time when Hong Kong's property market is coming under attack for its liberal approach to flat descriptions and the dubious release of key transaction data. Legislative controls have been touted for residential property sales after a string of controversies over the sale of unfinished flats. For example, in August, a large developer was accused of suspect sales methods when one of its agents demanded that potential buyers pay HK$50,000 (S$10,000) to see the price list of a block of flats. |
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