HK agencies see potential in mainland amid gloom

It was the worst of times and the best of times for Hong Kong property agencies after the mainland government introduced measures aimed at cooling the overheated property market.

For property agencies in Beijing, Guangzhou and Shanghai, it was the worst of times as a dramatic fall-off in transactions in the secondary market led to the closure of many branch offices.

Beijing's Golden Keys House, one of the largest property agencies in the country, has closed more than 40 branches in the past two months, according to mainland newspapers.

Another large agency, Shenzhen-based Chuanghui Real Estate Consultancy, has reportedly closed 1,800 outlets in Shenzhen, Guangzhou, Foshan, Zhongshan and Dongguan since October last year.

However, Hong Kong property agencies say this was a good time to expand their presence on the mainland.

Raymond Kwok Ying-lung, an executive director of Midland Realty's China unit, said the company was set to expand in Beijing, Shenzhen, Chengdu and Chongqing this year.

Mr Kwok said the outlook for the mainland market remained positive, and he expected transactions to rebound in the second half of the year.

"Many property agencies will be eliminated in the market. But for us that is the best of times to expand," he said.

In the wake of the cooling measures, many property owners had become willing to offer longer rent-free periods as an enticement to fill space left vacant by the exodus of property agencies, he added.

Owners also accepted annual rental in two instalments, rather than one upfront payment.

"It was difficult for us to find a shop in a prime location when the market was booming," Mr Kwok said. "Now it's getting easier."

Midland Realty has about 200 branches on the mainland. The agency entered the market in Beijing in September last year and has opened 26 branches in the city so far. It plans to open 34 more branches in the city this year.

Rival Centaline (China) also plans to expand its branch networks in Beijing, Zhuhai and Dongguan this year, but will postpone decisions until the market outlook is clearer.

Lai Kwok-keung, a director and general manager of Centaline (China) Property Consultants, said mainland property transactions had stabilised after their recent falls, but the immediate outlook for the market was uncertain.

"We will wait and see until March. In the meantime, we will be cautious on expansion in the next few months," Mr Lai said.

But whatever the next few weeks may show, the firm has no plans to open shops in Shenzhen and Guangzhou where it already has about 380 branches.

However, in Zhuhai, where it has 10 branches, it plans to open another 10 outlets this year.

Mr Lai said the number of transactions in the secondary markets in major mainland cities last month was down 40 per cent on deals done in July last year, when transactions peaked.

To offset lower earnings from secondary market sales, the company planned to diversify into land sales and development consultancy, he said.