Another sign of tight cashflow has emerged among China’s real estate developers as housing brokers have begun to complain about unpaid commissions.
According to a recent report in the South China Morning Post, large property agencies active in China’s residential market are saying that as many as 33 percent of all developers have delayed paying commissions as they struggle to stay afloat amid slower sales.
The SCMP story cited Fu Wai-chung, a director at agency Hopefluent, who commented, “A third of all developers that we’re helping sell projects have not paid us commission fees according to the payment schedule.” Hopefluent competitor Centaline China is also hurting, having said previously that developers owed it in excess of RMB 1 billion in unpaid commissions.
Commissions Delayed Since Last Year
Hopefluent indicated that commissions are being delayed by 90 to 120 days due to developers’ cashflow struggles, with companies in third and fourth-tier cities being hit the hardest.
DTZ was even more downbeat regarding its payment collection challenges. In the SCMP article, the agency’s head of residential for China, Alan Chiang Sheung-lai, said, “Some developers should have already paid us commissions for helping them market their new projects late last year,” Chiang said. “However, we haven’t received anything so far.”
Some brokerages even reported that developers were making payment in kind by offering unsold apartments from their inventories in lieu of cash.
Figures released on Friday by China’s National Bureau of Statistics show that home sales for May were down 11 percent compared to last year, despite recent attempts by the central bank to boost mortgage lending, and moves by some cities to loosen restrictions on home sales. Surveys by Soufun and E-house have also indicated slower sales, with Soufun’s China Index Academy reporting earlier this month that 62 percent of China’s cities recorded falling home prices during May.