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Moving the industry forward

CEA’s Executive Director, Lee Kwong Weng, has been at the helm for slightly over a year. CEAnergy caught up with him and here are the highlights from our chat.

Mr Lee said that the real estate agency industry has to transform from a sales-centric to customer-centric one.

Could you sum up in three words how the past year has been for you as CEA’s Executive Director.

Concerned – because the industry is operating in a very different environment today than when CEA was first set up.

Stimulating – because we need to explore practical yet innovative solutions with the industry to navigate this new terrain given the legacy industry structure.

Appreciative – because we have learnt from and leaned on the feedback and support of our many valuable partners and stakeholders.

You have certainly jolted us with the first word. What are you concerned with?

I am concerned. I would even say anxious. My worry is that the industry may not be moving fast enough to reinvent itself and raise its level of professionalism.

Technological disruption is a foregone conclusion.

Over the last year or so, half a dozen DIY portals for property transactions have sprouted. Fixed fees business models are being tested. At a broader level, the Government’s Smart Nation initiatives will over time reduce information asymmetry and streamline property-related transaction processes further. A new generation of IT-savvy Singaporeans who grew up shopping online instead of from shopping malls will only add to the trend of DIY property transactions.

In the HDB resale market, the percentage of DIY transactions has grown very quickly - from 2010 to 2015, it has more than doubled from 11 per cent to 24 per cent today. CEA’s 2015 Public Perception Survey also showed that 31 per cent of consumers are undecided on whether they will engage a property agent for their next transaction. This is up from 24 per cent in 2012.

Meanwhile, CEA continues to receive complaints from consumers on unprofessional practices of property agents. We even receive complaints from property agents against one another on issues such as not honouring the sharing of commissions.

All these mean that the industry needs to transform fast or risk becoming irrelevant. It must move from being sales-centric to being customer-centric.

Is it all doom and gloom for the industry then?

Fortunately, no. Now that I have gotten your attention, let me touch on the positives.

First, even as the DIY trend grows – and some may see this as “eating” into property agents’ turf - I believe there will still be a demand for property agents.

The cyclical property market notwithstanding, the government’s long-term physical development plans for Singapore are exciting. And along with it, there will be opportunities for estate agency work.

Consumers who are hard pressed for time, those who are involved with big ticket transactions, and those who prefer “a personal touch” will still want the services and advice of a professional property agent.

However, we can expect that coming generations of consumers will be better educated (and more demanding). It is natural that they will have higher expectations of property agents.

Industry practitioners must continue to upgrade their skills to remain relevant and become more professional (Photo: Real Centre Network Pte Ltd)

The industry must therefore identify and equip agents with the required new skill sets and updated knowledge for them to remain relevant.

Second, I am glad to note that the industry is responding to the environmental challenges in some ways.

When I visited Huttons, their CEO and KEO shared with me their strong value-driven culture to build a high performing and resilient team. Earlier this year, OrangeTee took the first bold step locally to introduce online consumer ratings of their property agents to engender trust and increase transparency. A good number of real estate agencies have leveraged IT to provide mobile operational support to their agents. These are good efforts at making fundamental changes, beyond the traditional agent motivation for short-term gains.

The industry also came together to form the Singapore Estate Agents Association (SEAA) this year. The SEAA is unique in that it represents small and large estate agencies, international property consultants, and individual property agents. This is an indication that the industry is serious in taking a holistic, all-stakeholder approach to get itself better prepared for the future.

Third, we see promising trends. Complaints against the industry have dropped from more than 1,600 when we were first established to around 800 in 2016. I hope that the numbers will continue their downward trend.

A couple of years ago, we started to feature compliments that property agents received from their clients in CEAnergy. These agents have gone beyond their business obligations and demonstrated a high level of professionalism or service. I look forward to seeing more such positive examples.

To stay ahead, the one important question that the industry must always ask itself is this: Are we raising our level of professionalism, and more importantly, are we transforming fast enough?

What are some of the challenges to ensuring that the industry remains relevant?

It will not be easy to overcome the inertia to change.

The business structure of the real estate agency industry is unique and entrenched. The industry is highly competitive. The industry commission structure is short-term focused. The 30,000-odd property agents are essentially contractors, not employees of the 1,400 property agencies. A significant number of these agents are disproportionately clustered within the larger agencies.

And the industry profile is far from homogenous.

Property agents today come from different education backgrounds, from those with O levels or equivalent, to degree holders. The age profile of property agents spans those in their early 20s to those in their late 70s. A number of property agents are doing this job on a part-time basis. Property agent turnover is around 10 per cent. Many agents have been practising since pre-CEA days and are still getting used to CEA’s regulatory regime. I still get feedback that there are property agents who mistake CEA as their trade association.

So, when we talk about transforming the industry and enhancing professionalism, where and how to do we start? Who should do what? How can the industry move from being sales-centric to more customer-centric? How can the smaller property agencies upgrade themselves? How can the management layers of larger property agencies take on greater top-down accountability for the professionalism and behaviour of their property agents in order to be commensurate with the bottom up, up-line share of commission they enjoy?

I have many questions and it is not easy to find answers to these questions. This is mentally stimulating for my colleagues and myself.

How can CEA and the industry work together to help the industry move forward?

CEA’s primary responsibility as a regulator of the real estate agency industry is to look after consumers’ interests. CEA is obliged to continue to take errant property agents and agencies to task. But this is not something we enjoy doing. I hope to see less of such work in CEA.

To look after consumers’ interests more effectively, a more systemic, longer-term solution is to ensure property agents continue to upgrade their skills and enhance their level of professionalism, and for agencies to be more customer-centric. This is where the industry must take the lead. This is also where the industry must focus on to ensure its longer-term business sustainability, given the disruptive challenges I mentioned earlier. CEA will collaborate with and help the industry along.

How can we go about this?

Engaging the industry is key for CEA to have a good sense of the ground issues and to refine our policies and guidelines.

First, I am happy to note that CEA and the industry have a number of engagement platforms and there is a high level of trust in these engagements. There are industry representatives in the CEA Council and Committees. CEA periodically forms working groups and focus groups with the industry to study specific initiatives or get feedback on our policies. CEA also conducts regular dialogues with industry associations as well as with KEOs.

I have had the opportunity to work with many KEOs through these platforms. KEOs such as Mr Chris Koh (Chris International), Mr Eugene Lim (ERA Realty Network), Ms Edith Tay (PropertyBank), and Mr Seow Teak Hwa (Teakhwa Real Estate) just to name a few, have given candid feedback and suggestions. They have worked closely together with CEA to review some of our regulations and practices. I appreciate very much their earnestness and contributions.

Second, I hope to see more initiatives and suggestions from the industry to transform the sector. We would like to see agencies leveraging technology and innovation even more to enhance their business models and add value to their customers’ experiences. I also encourage the industry to take on greater accountability in the professional management of their work processes and agents. This will enhance consumer confidence and further raise the industry’s professional standing.

In the area of training, the standards of our Continuing Professional Development (CPD) courses can and must be raised. With feedback from the industry, CEA will introduce new courses on emerging topics of relevance to the industry. The delivery of CPD courses can also be improved.

I am very appreciative of the industry’s active participation and contributions. I look forward to more engagement and collaborations with the industry.

How has CEA itself changed over the years?

Even as CEA advocates the industry to transform, CEA itself is also undergoing transformation. We will ensure CEA is responsive to the changing needs of the industry and expectations of consumers.

CEA is a relatively new and small statutory board. It hit the ground running in 2010. CEA started to regulate the industry even as it was building up itself as an organisation. As with any start-ups, there are definitely pain points to address.

One example is the annual licensing and registration renewal exercise for agencies and agents. It is a taxing exercise that can be done more efficiently. CEA has hence embarked on a major business process re-engineering (BPR) exercise to identify and address kinks in the licensing processes. Among other improvements, we will put in place a more efficient and user-friendly IT system that will also be business-friendly for property agencies.

CEA will ensure it is responsive to the changing needs of the industry and expectations of consumers.

Some of these changes will take time. We anticipate that a new IT system can only be rolled out in about two years. I seek your understanding and patience and hope to count on your support to improve things together.

I would like to thank the many industry representatives who participated in the BPR exercise and gave very good suggestions on the areas for improvement.

CEA will also take a more balanced approach in its regulatory approach. There will be emerging compliance requirements such as anti-money laundering measures that the industry is obliged to comply with.

But where appropriate, we will manage compliance cost, in tandem with maturity of the industry.

For instance, in 2016, we did away with the regulatory requirement for the annual expiry date to be printed on the estate agent cards. The cards could be recycled, enabling the industry to reduce costs.

Going forward, I look forward to hearing from the industry and consumers on areas where CEA can do better.

I wish all of you good health and best wishes for the new year ahead.