Exclusive: Will Blockchain Make HK Property Agents Unemployed?By May 24, 2019 4 Min Read
Exclusive Interview with Alex Shih: Part 1
Centaline Group is the largest property agency in Hong Kong. In April 2019, Centaline Group announced the collaboration with Microsoft Hong Kong and TFI Blockchain to unveil the first blockchain platform for second-hand property sale and purchase in Hong Kong. However, does it mean every pain points in the HK real estate market can be addressed by blockchain? Meanwhile, the advent of blockchain raised the common fear for HK property agents: Will they become unemployed because of blockchain?
We have the pleasure to speak with Alex Shih, Vice Chairman at Centaline Group to evaluate the effectiveness of blockchain in HK real estate market. Alex also examines the impact of blockchain in title transformation and the revenue model for property agencies in the long run.
When did you first hear about blockchain? Can you share with us your first experience in purchasing cryptocurrencies?
I first heard about blockchain in a news article in 2016. I paid very little attention to it and I didn’t believe that our industry will be using this technology by then. I have never purchased any cryptocurrencies.
Alex Shih has never purchased any cryptocurrencies.
Image credit: Bloomberg photo by H.C. Kwok
Do you think blockchain is the one-for-all solution to current pain points in the Hong Kong real estate market? If not, what problems cannot be solved by blockchain?
In my own opinion, blockchain is only a technology that helps solving different trust issues in a property transaction. The trust problem is the major source for transaction costs. One of the reasons of the existence of property agencies is to reduce the transaction costs during property acquisition. Without the blockchain technology, a branded agency firm will be useful in acting as an authority and providing trust between different parties during the property transaction. The authority power nowadays is mostly created and maintained by advertisements, compensation policies, company’s internal regulations and monitoring units.
I believe that blockchain technology is a much cheaper and sustainable way to create the authoritative power. At the moment, what blockchain can bring to the real estate industry is increasing internal efficiency and improving customers experience. I do not think the whole transaction including the change in property right can be done through blockchain itself. Therefore, I believe blockchain can ease the procedure of completing the transaction and thus reduce the operating cost of property agencies. Nevertheless, acting as an authority unit is only one part of the agency firm’s value. The more important part is to match between buyers and sellers and close the deal. These are the parts that blockchain technology might not be able to solve.
Centaline Group, Microsoft HK and TFI Blockchain Technology Limited collaborate to launch blockchain platform for Hong Kong secondary real estate market.
Image Credit: Centaline Group
What is the influence on agents or their revenue models in general with property blockchain in the long run?
As suggested above, with the help of blockchain, agents no longer need to spend time on the procedure of deal completion. They can focus on the matching and negotiation process. Theoretically, it is possible that commission rate can be lowered due to the increase in cost efficiency; however, I do not think it will affect much. This is because although the procedure of property transaction is complicated, it is not the major difficulty. The reason that a real estate broker can receive several % of commission is because he/she can close the deal. In the long run, as blockchain technology is more common and more well-developed blockchain platforms are available, there will be a higher % of direct deals. However, deals through a middle agent will remain the mainstream.
Alex Shih mentioned deals completed by agents remain the mainstream of property transactions in future.
Image credit: Apple Daily
Do you have any plan to property data sharing incentive that agent puts useful data into property blockchain and get some tokens in return?
I do not think agents nowadays are getting rewards from selling data. We share a lot of data to the public through the internet for free. We receive commission at the end not because of providing critical data for the transaction, but by providing services in order to complete the transaction. This can best align the interests between the agent and the two parties. If an agent is charging for whatever they did or data they shared, I believe it is not healthy for the industry and it may actually increase the total cost per done deal.
Is it a challenge for real estate agency like yours if property developers would like to control the whole cycle of a new apartment and store the title transformation and related transaction data on blockchain and sell it directly to clients?
I personally do not think any private company can complete the title transformation part. It has to at least cooperate with the government as it is the government’s responsibility to keep the record of the ownerships of properties. Without the acceptance from the government, title transformation proved from a third party has no meaning at all. However, even that developers can control the whole cycle in a blockchain platform, real estate agency will still find its position. Developers can always sell the apartment to clients directly even without the help of blockchain. But they decide to use the service from real estate agents because it is easier for them to find the customers.
Part 2 of the interview is coming up, stay tuned!