Developers offer higher commissions to spur property sales

At EL Development's La Fiesta, commissions of up to 3 per cent are on offer. New launches typically offer agents sales commissions of only 1 per cent.
At EL Development's La Fiesta, commissions of up to 3 per cent are on offer. New launches typically offer agents sales commissions of only 1 per cent.ST FILE PHOTO

Slowing sales have prompted developers to dangle sharply higher commissions to spur agents into moving more units at property launches.

The step is in response to the slide in buying, thanks to several rounds of cooling measures and new mortgage rules that hit in June. Industry experts said the carrot of higher earnings will encourage more aggressive marketing and co-broking with other agents.

Normally, new launches offer agents sales commissions of 1 per cent. But at EL Development's La Fiesta, commissions of up to 3 per cent are on offer. These commissions may be shared among co- broking agents in differing proportions, depending on the marketing agency's sales strategy.

The Straits Times understands that commissions of 3 per cent have also been pitched at agents marketing Santarli Realty's Sant Ritz and Fragrance and World Class Land's Urban Vista.

Agents have also been offering to co-broke deals with others. Commissions of 1.25 per cent for both agents have been offered for sales at UOL Group's Thomson Three, while commissions of 1.5 per cent to 2 per cent have been offered to co-broking agents at Kensington Square.

This is well up on the 0.5 per cent commissions previously offered to each agent when co-broking deals occur. This means that each co-broking agent would previously have been entitled to a commission of about $5,000 for selling a $1 million property. Now they stand to get more, for example, $15,000 if the share works out to 1.5 per cent.

The net sum the agent takes home is lower as agency fees usually have to be deducted.

Commissions for upcoming new development Liv on Wilkie are at 2 per cent, agents said.

EL Development managing director Lim Yew Soon said agents have had to spend more time and money looking for potential clients since the various cooling measures and the total debt servicing ratio were implemented. "We have increased sales commissions to make up for the additional effort that agents have to put in to close the deal," he added.

Extra effort could involve higher advertising fees and phone bills and costs incurred while looking for foreign buyers, noted consultancy Chris International's director Chris Koh. He said developers usually pay only 1 per cent commission for sales at new launches because they "believe that there will be a constant stream of buyers visiting the showflat during the initial weeks of launching".

But when developers sense a slower pace of sales, they might first sweeten the deal for buyers by giving discounts, said Century 21 chief executive Ku Swee Yong. "The second step is to increase incentives for agents."

There were 1,246 new units sold last month, the Urban Redevelopment Authority said, 65 per cent up from the August figure.

Marketing agent Grace Lee, in her 50s, said agents are more dependent now on co-broking to clinch deals, as the number of walk-in buyers has dipped. "Higher commissions mean that agents have more cash to go about doing promotions. But to me, it's very hard to sell units with a big quantum in this market. So... higher commissions or not, we still have to put in extra effort to ensure a consistent income."

ocheryl@sph.com.sg