The temperature of the real estate market is even colder. On December 28, the 2011 Annual Report of Family Property Chain's second-hand housing disclosed that among 60,000 second-hand housing brokerage stores, the total losses are expected to reach 30 billion yuan, with an average annual loss per store of $50,000. According to media reports in Shanghai, there are nearly four major and medium-sized brokerage institutions that have closed their stores. In Shenzhen, Zhongyuan disclosed that the number of real estate agency shops decreased from 8,000 in early 2011 to about 5,000 by early November, with a third of the original intermediary stores shutting down. The dramatic shrinkage in second-hand housing turnover has forced second-hand housing intermediary companies in Beijing, Guangzhou, and Shenzhen to cut costs and expand into new businesses. Selling new homes, expanding commercial real estate co-investment, and immigration services have become new sources of income for real estate companies. Some intermediary companies in Beijing have even jointly purchased land to develop new home projects. To save on shop rental, some intermediaries have chosen to close stores and transfer operations to offices or online platforms like SouFun and Sina Locke.
A manager responsibility system has been selected where poorly performing intermediary stores are closed, which remains the main way for second-hand housing intermediary companies to survive. However, closing stores does not mean the termination of costs. Du C, director of the Shanghai Branch of China Index Research Institute, suggests increasing the quality of staff training and retaining capable personnel as a reserve force for the recovery of secondary trading. With the Spring Festival approaching, the future of the second-hand housing market remains uncertain. According to official statistics from the Beijing Municipal Commission of Housing and Urban-Rural Development, the 2011 resale housing turnover in Beijing fell by 38.2% compared to 2010 and dropped by 54.5% compared to 2009. The bleak transactions in second-hand housing also led to devastation in the real estate agent market. Transformation and survival strategies, such as expanding new home agency business, have become necessary for some companies. Strong enterprises have taken advantage of market downturns to implement counter-cyclical reverse expansion, while some intermediaries have ventured into the field of new home development.
In Beijing, data shows that in 2011, 121,512 sets of resale residential properties were transacted, a decrease of 38.2% compared to 2010 and a drop of 54.5% compared to 2009. The Central Economic Work Conference last December set the tone for the 2012 real estate regulation: the regulation of real estate will not relax. Under continuous regulation, the second-hand housing transactions continue to decline compared to the same period last year. Data shows that two days before New Year’s Day 2012, Beijing’s resale residential network signed only 12 sets out of 76 sets, a drop of about 84%. This reflects the overall real estate market following the low levels of transactions in 2011 and no sign of warming up. The New Year started with cold air blowing in the property market transactions, setting the tone and attitude for the current property market turnover. It is expected that before the Spring Festival, except for individual marketing efforts, transactions will be maintained at a trough state, possibly presaging the 2012 property market.
In response to the severe situation, some real estate agencies are trying various ways to survive. In Beijing, intermediary industry companies like Xin statue real estate have quietly implemented store closure plans since February last year. By January 3 this year, Xin respect for real estate has closed 204 stores, amounting to 68% of its stores. Other companies like Beijing Central Plains Real Estate and Century 21 Real Estate have also implemented store closure plans in Beijing. Shutting stores to downsize and reduce expenditures is a conventional way to endure the winter. Transformation and survival, including expanding into new home sales and commercial real estate intermediary services, have become common strategies.
Some well-funded companies seize the opportunity to implement contrarian expansion, such as a chain of family property extending its regional distribution from four cities (Beijing, Dalian, Tianjin, Nanjing) to 15 cities. Similarly, after acquiring Beijing ancient company, 21st Century Real Estate can directly enter the commercial real estate development and related intermediary services industry. Last year, Qingtian Real Estate Brokerage and Lin Xinwu Commonwealth won a land project in Fangshan, involving new home development.
In Guangzhou, Centaline has abandoned residential transfer business and sought higher commission income through commercial real estate projects. Huang Tao, general manager of the project, revealed that Guangzhou's strategy is to maintain the status quo, stop opening new stores, but not lay off employees or shut down existing stores. Although the industry-wide downturn has begun, local intermediaries have already transitioned to higher commission income through commercial real estate. Compared with Shenzhen, where 60 stores have been closed saving the company at least $9 million monthly, Guangzhou appears to have a greater contrast. The massive shutdown of commercial projects in Shenzhen contrasts with Guangzhou's minimal movement.
Industry experts point out that the high percentage of investment demand in commercial projects has helped real estate agents deal with the current downturn. Cost savings for the company could reach 900 million yuan, but this is still a small number in the long run. Considering the current output according to the 2.5% commission rate, at least three single turnovers of more than 2 million yuan business would only result in 2500 single transactions, yet thousands of intermediary stores suffer. Store closures mainly consider three factors: whether there is a loss, whether the region has larger space for development, and corporate-level policies. Investors concentrated area stores may choose to shut down.
In conclusion, entering the commercial real estate market has become an industry trend, but developers rushing in en masse may lead to over-exploitation and market problems. Li Xiaoping, president of Excellence Group, expressed caution about the commercial real estate boom and warned about the risks of overdevelopment.