Brokerage industry will shift focus to property management
The brokerage industry in Dubai will shift its focus from real estate sales to property management and running owners' associations in 2010, say agents.
"Although brokerage is an important element of what we do, property management is our core business," said Asteco CEO Elaine Jones. "Managing homeowners' associations will become increasingly important. Our transactional business will focus on the projects that we manage."
Emirates Business held a round-table with Jones, Peter Penhall, CEO of Gowealthy.com, Mohanad Alwadiya, Managing Director of Harbor Real Estate, and Billy Rautenbach, Director of Operations at Better Homes.
They said their companies would be looking towards hiring brokerage professionals this year and the crisis had presented them with an opportunity to hire good talent at a lower cost.
What changes are you making at your brokerage firms in 2010?
Jones: Although brokerage is an important element of what we do, property management is our core business. Management of homeowner associations will become increasingly important. Our transactional business will focus on the projects that we manage.
Penhall: We will ensure 2010 remains a growth year for us owing to our revamped web portal and our presence in international markets.
Alwadiya: In 2010, we will continue to focus on developing and deploying good service levels. Revenue maximisation management programmes will be a key focus area. We will also expand our geographic coverage in order to reach private and institutional lucrative pockets regionally and internationally. From an internal point of view, our board approved our 2010 internal training and career development programme which was initially launched in the second half of 2009 and left a big impact on our customer and employee satisfaction and retention ratings. We also hope to introduce new relevant and innovative services that will complement our one-stop real estate service provider proposition.
Rautenbach: In 2010, we will deliver better customer care. We have our own CRM system and we will be investing time and money to improving this.
Are you revisiting any of your earlier sales policies?
Jones: We have always engaged in a high level of due diligence on behalf of the buyer but have decided that we need now to outsource this to companies that specialise in certain types of legal and conveyancy work.
Penhall: Anyone who does not revisit their policies and strategies in a constantly changing market will soon find themselves becoming uncompetitive. This is a regular focus of ours. It ensures we remain ahead of the game and open new expansionary markets for the brand.
Alwadiya: In 2010, we will optimise our proprietary sales polices and systems to ensure they continue to provide a competitive edge to Harbor and its clients. Successful representation of owners or landlords requires a very systematic and disciplined approach. In 2009, we developed a proprietary conversion management process to give us the best chance of selling and/or leasing real estate.
Rautenbach: We revise our policies on a regular basis. In 2010, we will be redoing all our contracts to ensure all new regulations are included to ensure client protection. All our agents will specialise in areas and product type. This will ensure our clients get the best possible information about the property they are leasing or purchasing.
Have you dropped your commission rates in the last year? And how have your commission earnings been affected by the economic conditions of the past year?
Jones: We have not had to reduce our commission rates though for some clients we are paying higher fees to incentivise the staff engaged in the project's sales and leasing and to prioritise that project. For leasing, we charge five per cent commission per transaction and for sales it is two per cent. These are the typical commission charges and do not reflect special individual agreements.
Penhall: As with any correction in the markets, variables have changed. There is a strong movement within the more established brokerage brands to ensure our efforts in this very demanding market are adequately rewarded and hence there is upward pressure on commissions in general. As market forces demand, we are quite prepared to work with the buyer and seller in establishing the right price for the right property, but we do expect to be paid reasonably for our efforts in facilitating the deal.
In keeping with the negative trend of the real estate market, commissions across the board have suffered substantial reduction. Our earnings are directly associated with total value of concluded transactions. We have, however, worked aggressively in the market to adapt to the demand drivers and have sustained an above average share of transactional deal-flow. In addition, we have also focused on providing our client base with an extended property letting service.
Alwadiya: We have not lowered our commission rates. Our standard rates for rentals remain five per cent of the total annual rental contract. When it comes to sales transactions, our rates vary according to the asset type, for example, we charge one per cent to two per cent of the selling price on ready properties and up to five per cent on properties that are still under construction. We offer special discounts to long-term corporate and institutional clients.
Our sales revenues have dropped by 42 per cent in 2009 compared to 2008. However, our sales revenues have increased by 68 per cent in the second half of 2009 compared to the first half.
We have managed to optimise our revenue streams by introducing new services that include consultancy, research and leasing services and not to forget consolidation transactions. In addition, we have benefited a lot from the fact that developers and sellers started providing very handsome compensation fees in return for sales results. For example, we earned four per cent on a bulk sales deal in September 2009 that involved selling 41 units in an off-plan project in Dubai.
Rautenbach: We have not dropped or lowered our services and therefore we felt no need to lower our commission rates. In fact, we offer more now than we did before. Our commission earnings fell in line with the decline in prices and rentals.
Have you cut salaries because of the downturn and if so by how much? And have any cuts been applied across the board?
Jones: Generally speaking, there have not been any reductions in salary levels within Asteco.
Penhall: Most agents in Dubai are rewarded on a variable basis, ie commission only. Therefore, it is not a question of how much we have cut on salaries but rather a factor linked to the number and value of transactions. I am sure we are not alone. But our top performers are still achieving regular and rewarding transactions as a result of having developed good supportive client relations with their active investors.
Alwadiya: We haven't cut salaries. However, we have restructured our compensation schemes to link them to performance. In some cases, some consultants were given the choice to convert their compensation from basic salary plus commission to commission-only plans that involve higher percentages from the revenues they generate. This approach provided more room for the top performers to shine and increase their earnings.
Rautenbach: We have cut salaries across all levels from CEOs to cleaners, though by a small percentage.
Which new regulations would you like the Real Estate Regulatory Agency (Rera) to enforce with respect to the brokerage industry?
Jones: While not specifically brokerage, the implementation of the strata law with regards to protection of buyers and collection of service charges is vital to inspire confidence in the market, which will encourage people to invest in property here.
Penhall: At present Rera's actions are seen by many investors to be developer focused. We would like to see Rera take a more equitable approach to the brokerage industry as a whole and provide investors with the same support as afforded to developers.
Alwadiya: Rera has come a long way in terms of regulating the real estate industry and the brokerage profession. Its efforts to protect rights, lift standards of professionalism and establish a transparent, credible and functional framework are to be applauded. The new broker classification initiative launched by Rera in September 2009 was a step on the right direction, but before it is implemented there is a lot of work to be done to ensure the previous efforts introduced under by-law No 85 of 2006 are fully understood and put into practice after ensuring its validity for the new era t the market has entered.
Rautenbach: We would like the new special transaction register to be up and running on Rera's web-based system and contracts and forms to be available for us to download and use.
Are you hiring any brokers for your firm? Is good talent still available in the market?
Jones: We are always interested in engaging professional, ethical and knowledgeable talent. Quality is always in demand.
Penhall: We are currently expanding our sales team, both in numbers and in overall skill levels.
Alwadiya: We are constantly looking out for professional and passionate real estate consultants who can fit in with the culture of Harbor and its customer-centric approach. As our geographic and service expansion plans for 2010 start materialising, we will be identifying new candidates who can join our network. The global crisis presented us with an opportunity to attract and hire very capable talent that was very expensive and unattainable in the last two years during the boom.
Rautenbach: Yes, we are continuing to hire new brokers as we continue to grow our client base. There are very few good calibre agents available in the market and we hope those who are there will join us.
Are you seeing more comprehensive sales contracts nowadays?
Jones: Off-plan sales are not significant, most buyers are securing ready properties for which full payment is made and the title deed provided.
Penhall: This is an area that is and should continue to be a Rera responsibility. There should be a degree of uniformity throughout the market, which would give a further boost to investor confidence levels that have been hit particularly hard during the global financial crisis.
Alwadiya: Sales contracts have become a very hot topic during the past 12 to 14 months as most buyers who bought before 2009 learnt that their contracts were favouring the developers' interests. Therefore, more emphasis has been put by all stakeholders on developing a more balanced and realistic sales contract template that protects the interests of both parties and follows the legal framework and regulations that were introduced by Rera. We have heard that Rera is actively working on an investor protection law and a unified sales contract template that will be introduced this year. This would be a very positive and proactive step that would boost the confidence levels of investors and pave the way to a more mature and regulated marketplace.
Rautenbach: In 2010, we will be redoing all our contracts to ensure all new regulations are included to ensure client protection. We hope these contracts will cover and protect as much as possible.
Are you seeing any new trends in the Dubai realty sector?
Jones: In 2010, there will be two key elements to stimulate investor confidence – the implementation of legislation to provide total transparency and security and the availability of finance at affordable rates to investors and end-users.
Penhall: The real estate investment market is not a short-term play. A wise investor will utilise the services of a professional brokerage and do their own assessments and enter the market with a medium to long-term view. Real estate will always remain a primary contributor of wealth building over such a period. What we are finding at present is that the market is a little fickle in that the slightest positive news brings about an immediate reaction from sellers to increase prices, whereby widening the gap between the expectations of buyers and sellers and further negatively effecting the market. Only when both buyers and sellers have a similar medium-term view will you have a sustainably successful investment market.
Alwadiya: In 2009, many of us witnessed a whole series of economic events that many people would not expect to see in a lifetime. Needless to say we all hope it never occurs again. The UAE property market has been impacted by the effects of the global recession, which has been manifested in a wide range of industry and consumer trends that emerged during the past 12 to 14 months. We believe the market is currently going through a phase of positive stabilisation. The long-anticipated recovery cannot be confirmed yet despite indications during the third quarter of 2009 that suggested the market had bottomed. But early signs of recovery will be evident in the next few quarters. Overall the UAE property market will become stronger, wiser, more regulated and mature because of the events that took place from the beginning of the global economic crisis.
Rautenbach: We saw a trend of stability and confidence returning towards the end of the third quarter and the beginning of the fourth quarter last year. We are confident that the trend will be re-established in the first and second quarter of 2010.
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