There are currently thousands of real estate agency operating in Ho Chi Minh City. Amongst them, many small and rather young firms are striving to become primary distributors that can directly sign contracts with property developers or to even become developers themselves. Minh Anh looks into the issue.
While teeming with competition, the market does not prevent deft brokerage firms from rising
Pursuing big dreams
Established in 2015, Asian Holding Real Estate JSC is trying to fulfill its dream to become a property developer. To make this come true, according to general director Nguyen Van Hau, it has considered several alternatives over the years. In particular, in September 2017, Asian Holding has entered into a co-operation with a number of real estate trading floors to form a chain of property trading platforms.
“Being a newly established real estate agency, we were considered as only an F2 (real estate agencies who buy products from F1 agencies and resell them for a commission) or F3 (those who buy products from F2 traders) agency. Nevertheless, once we got linked with other property trading floors, we have gained the strength to be qualified as F1 real estate agencies, enabling us to seek out a large number of properties directly from developers to sell. This is the first goal of any real estate agency and we have succeeded,” said Hau, adding that the next step will be to become a project developer.
Yet being a project developer requires sound financial backup and experience, and new players to the game like Hau’s company are nowhere close to these requirements. According to Hau, his first step towards this new goal was to invest in small projects and then gradually move up the ladder with bigger ones.
Similar to Hau’s situation, Rio Land Real Estate Investment JSC, also founded in 2015, has grown from a small real estate agency to a property developer over the course of two years. A representative of Rio Land said that given some 20 years of experience in the sector beforehand, launching a real estate brokerage house was just the beginning of a journey to become a project developer later on.
After the first year of struggling to find property supplies and going through the motions of reaching out to property project developers for a small number of unit to trade, in 2016, Rio Land gained its status as an F1 property trader and could distribute large property projects. Last year, it has officially launched its first project on a piece of land incorporating some 100 land plots in District 9.
These aspirations are not unique to these two businesses—they are shared by all newcomers to the market. Nguyen Van Dung was a former property broker who, after a few years of working for a real estate agency, opened his own business last year: a real estate trading floor with 10 employees called Phuong Nam Real Estate Company. His products are bought from the F1 trading floors, with a focus on land plots.
“The most difficult aspect for a new business is the competition. It comes down to how we can sell the most products to promote ourselves and rise in the market hierarchy. This requires clearly outlined target customers and business orientation in line with the products available from different projects, which, at the end of the day, will decide how a product is marketed and sold. Some projects can be really hard to sell and mortgage brokers will quit eventually, leaving business owners like myself in trouble to find new staff,” Dung commented.
Dung went on to say that his very dream is to upgrade his company’s status from a low-tier trading floor (F2 or F3) to a high-tier one (F1) that is linked to other trading floors and boasts a variety of products beyond the land plots being offered on his trading platform at the moment. This will ensure a sustainable development for his business even in fierce competition.
A thorny dream
According to Nguyen Nam Hien, general director of Hung Thinh Land, the hardest issue that a newly established real estate brokerage house has to overcome to become a big shark in the market is to set up a good operating system as fast as possible. As there are too many real estate agencies in Ho Chi Minh City, the competition is high. If they do not figure out a way to operate faster than others, they will be out of the game.
In addition, real estate agencies have to take into account cash flow matters, as they often need large cash flows to operate, yet commissions are not always paid immediately after a successfully sold property or sealed contract.
The next issue is to retain salespeople or brokers. As there are too many real estate agencies at the moment, good mortgage brokers are in the crosshairs of competition all the time. Real estate businesses will need to apply a satisfying commission policy or remuneration package to keep their staff.
Above all, to compete with one another, real estate agencies must also find products that suit their business orientation and can sell themselves in the market. Business owners thus need to constantly maintain good relations with project developers to get good products for sale.
“Finally, the owners must have a cold head and a strong mind to be able to participate and grow in the industry, as intense competition arrives from everywhere, including competing in commission and cutting the price of properties, ending up in lower profit to get more clients,” said Hien.
Meanwhile, the dream of becoming a project developer will require other facets. Apart from the obvious finances needed, it also takes a lot of legal work. To get the legal work done for a project, it requires the businesses to have rapport with the local authorities, competence, and also a well-hatched plan. There have been a number of businesses like Kim Phat Real Estate Company or Alibaba Real Estate JSC, which were accused of dishonest and illegal business conduct.
Brokers act as an intermediary between developers and buyers and therefore play a vital role in the real estate market. Many brokerage houses have matured over time to become renounced brands in the market, such as Dat Xanh Real Estate Service & Construction Corporation, Hung Thinh Corporation, CEN Group or Kim Oanh Real Estate JSC. It is worthwhile to note that the market will get rid of those who do not have a specific direction of growth or conduct bad business.
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