The government is sending a clear signal that in the long haul, stringent entry requirements are needed to be a property agent. This will raise the image and professionalism of the industry.
- Tan Tee Khoon, chief executive of Singapore Accredited Estate Agencies
As real estate prices started to increase from 2009, there were growing criticisms over a lack of affordable housing in Singapore. The clamour for more affordable housing led to the government taking action to cool the market. However, competition for deals grew fiercer as the transaction volume dropped and the ethical practices in the real estate industry continued to be a cause for concern in 2014.
The numerous transactions in the multibillion-dollar Singapore property sector had sustained thousands of real estate agencies and tens of thousands of agents who worked on commissions. Most ordinary Singaporeans used agents to help them in property transactions.
Specialised agents, who understood the nuances of different localities and the characteristics of individual units, were duty-bound to act professionally to help clients get the best deal possible. However, not all agents were perceived by clients to perform their fiduciary duties diligently. Some clients felt that agents were getting away with unscrupulous behaviour, such as misrepresenting information and using pressure tactics.
Ethics are especially important in the real estate industry as a house would likely be the largest single investment for consumers. The lack of stringent regulation over the conduct of housing agents led to growing complaints to the Consumers Association of Singapore (CASE), a Non-Governmental Organisation that promoted fair trade practices across all industries.
However, CASE had neither the specific expertise nor the regulatory power to deal with complicated real estate disputes. In 2010, the Ministry for National Development (MND) set up the Council for Estate Agencies (CEA) to monitor industry practice and enhance the ethical climate. Then Minister for National Development, Mah Bow Tan, spoke to the local media in 2010 of the need for structural change,
Whilst the majority of estate [agencies and agents] are providing professional services, a few black sheep have seriously tarnished the image of the industry, undermined consumer confidence, and hurt the interest of consumers that they are supposed to represent. The purpose of the new regulatory framework is not just to safeguard consumers against errant agents, but also to preserve the integrity of the industry.
In addition to the regulatory changes, government measures undertaken to cool the market had exacerbated the competition amongst agents to close deals. After the government imposed restrictions on consumers, the entire housing market stalled. Many housing agents were affected as transaction flow slowed to a trickle. The increased competition for the few remaining deals led to more complaints, and shifted the focus to ethical issues in real estate deals.
The industry was afflicted by people posing as property agents to make a quick profit. Some agents felt they had no incentive to offer good service as their commission was based on the transaction price and not service quality. They might also fail to convey acceptable offers to their client when negotiating or refuse to a co-broking arrangement with a buying agent.
The CEA would help by instituting proper industry qualifications for agents and offer training programmes to refresh them on ethical behaviour. Consumers would be provided with an ethics reporting mechanism that would investigate complaints of unprofessionalism and conflicts of interest. The CEA hoped that engaging both real estate companies and consumers would create a more ethical environment.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
Do you know more about this story? Contact us anonymously through this link.
The Centre for Management Practice is a leading university think-tank at Singapore Management University. The Centre identifies, captures, and disseminates new knowledge based on emerging trends, best practices, and cutting-edge business models operating in Asia's fast-changing and dynamic markets. This is accomplished through academic consulting; as well as the development and publication of case studies, journal articles, and other periodical content.