Hong Kong’s cooling measures force real estate agents out of jobs

HONG KONG — Ms Chu Kin Lan has already closed six out of 11 offices of her Hong Kong real estate agency, whose Chinese name translates as Precious Prosperity, and let go of half of her 70 employees amid the city’s toughest curbs on home buying in its history. But the worst pain may be still to come.

As many as 10,000 real estate agents are forecast to lose their jobs, according to Centaline Property Agency, as the government presses ahead with measures to rein in housing prices that have more than doubled since 2009 and hit a record high in March.

Because of the cooling measures, home transactions fell to 27,714 in the first half of the year, the lowest since data were first available in 1996, according to the city’s Land Registry.

“The smaller brokerages are the ones taking the bigger hits,” said Centaline Chairman Sherman Lai. “They pay high rents themselves and face falling transactions.”

“We’re getting killed by the government here,” said Ms Chu, who has operated her Bo Fung Property Agency Group in the Causeway Bay district since 1984. “This is by far the worst I’ve experienced. Almost every agency I know is losing money and closing shops.”

The government has raised the minimum mortgage downpayment six times since 2010 and imposed taxes, including a doubling of the stamp duty on deals of more than HK$2 million (S$320,000) in February, plus an extra 15 per cent levy on non-resident buyers.

Prices have only come down about 3 per cent since March and the city remains one of the world’s costliest places to buy a home, according to property broker Savills.

Home transactions in Hong Kong will probably drop about a third from last year to as low as 52,000 this year, the fewest since 1996, property broker Knight Frank said. The number may fall to 45,000 next year.

“The worst is yet to come,” said Ms Angela Wong, an Executive Director at Hong Kong-listed Midland Holdings. “The pressure on brokers won’t go away as long as deal numbers stay at such low levels. It’s clear the government will impose more measures whenever they see things pick up slightly.”

Government officials, including Chief Executive Leung Chun Ying and central bank head Norman Chan, have repeatedly said the measures would stay in place until a steady supply of new housing is available to home buyers. Mr Leung has said he will try to boost supply by accelerating land sales and the approval process for new home sales.

“The government is getting stuck in the middle,” said Professor Eddie Hui from the Real Estate and Construction Department at Hong Kong Polytechnic University. “They understand what the agents are going through but, on the other hand, if they don’t go hard with the measures, the bubble will burst at some point and the property market will be in for a hard landing.”

Industry lobby groups, including the Hong Kong Real Estate Agencies General Association, of which Ms Chu is the Chairman, have staged street protests and pleaded with lawmakers to pressure the government into withdrawing some of the curbs.

The association, which represents more than 1,400 brokerages, estimates that about 15 per cent of the agents have left the industry this year.

Centaline, the city’s largest closely held real estate agency, has about 300 branches and 4,000 staff.

Together with Midland — which had more than 300 branches and 9,576 employees as of June — the two brokers account for about two-thirds of the city’s total transactions, according to their estimates.

A slowing market could provide opportunities for the two big players to snap up smaller competitors, said Midland’s Ms Wong.

The city’s last property downturn lasted six years from the onset of the 1998 Asian financial crisis to the 2003 Severe Acute Respiratory Syndrome period, when home prices fell by almost two-thirds.

Midland bought Hong Kong Property Services Agency in 2000, increasing its branch network by 17 per cent. The next year, Centaline bought Ricacorp Properties, then the city’s third-biggest realtor, for an undisclosed amount.

“It’s a very dynamic industry,” said Prof Hui. “I won’t be surprised if many brokers and agents choose to leave the industry. But they’ll come back once the market picks up.” BLOOMBERG