While the Shanghai government's move of launching an online system for second hand house transactions is set to improve market transparency, some real estate service firms have expressed concerns over possible leaks of inventory information, the most valuable asset for their business.

 

The local government said last month that it will establish an online system for preowned house transactions to regulate the growing market by improving information transparency.

 

The online platform will cover the whole process of housing transactions - involving property inventory records, sale prices and contract signings, the government said. It plans to consolidate and publicize all the data on an official Website, which is set to be operational early next year.

 

The local government, which started last year to publicize new-house supply and sales information online by collecting information from developers, has been unable so far to compile the fragmented information from the second-hand market.

 

A significant number of home sellers and buyers clinched deals without using brokers, which makes it more difficult for the government to collect information.

 

But industry insiders said it may be hard to consolidate all the inventory, which is the total number of second hand houses available for sale on the market, into the system as no real estate firm is willing to do that.

 

"It's a little bit idealistic for the government to put all the inventory information online. No other country seems to adopt the same practice in my view," said an industry insider who preferred not to be named.

 

"Collecting property inventory information is a significant part of brokerage firms' operational overheads," said Wang Lei, senior manager of transaction management of Midland China, one of the city's largest realtors which has 32 outlets across the city.

 

The amount and quality of inventory information distinguishes large real estate agencies and small players. The more outlets and headcount a real estate service firm has, the more quality information it is able to obtain.

 

"I used to try the service from a small agent but finally found out all the information it provided in the advertisement leaflet were just falsified leads to attract potential buyers. They then gave me some inventory information I don't want," said Wang Liling, a 28-year-old buyer who is looking for suitable apartment.

 

Major realtors such as Centaline China, Coldwell Banker and Century 21 have expressed concerns to the government at a preparatory meeting for the new system organized by the government before the National Day holiday, according to an official with one of the firms who attended the meeting.

 

Fang Lei, a spokeswoman with the Shanghai House and Land Resources Administration Bureau, declined to comment on the issue.

 

But the real estate firms probably don't have to worry too much as unlike the transaction sector, the government has not set out the technical details as to how to collate the inventory information, some analysts said.

 

On the transaction side, the new system will require all deals involving second hand houses to leave a record online before it is finalized at local transaction centers.

 

Only qualified real estate agents can print the contract from the Internet with an authorized username and password and process the transaction. The transaction center would not accept any hand written contract when the new system becomes officially operational.

 

In other words, the name of the owner of a second hand house in the register system can't change if the information is not inputted online.

 

"The system's main objective is to allow the government to have more information on the secondary market before it maps out land and tax policies in the future," municipal government spokeswoman Jiao Yang said last month when announcing the new platform.

 

As the city's new house supply has started to slow after years of a construction boom, the market size for second hand houses is estimated to be almost the same as that of new houses, which is too big for the government to overlook.

 

Besides the online system, other new regulations may include a required guarantee fund for real estate agents which could function as either compensation or penalty fund when agents are found guilty of illegal deals, Wang with Midland said.

 

"The move will raise the threshold for real estate agents and phase out a large number of small players," he said. "The industry will see more consolidation and acquisitions in the near future."

 

A few overseas funds have been pioneers in China's real estate services sector, banking on the huge potential from this underdeveloped market.

 

The transaction ratio between new apartments and second-hand houses in the local market is 1:1 while the figure in the United States is 1:9 and 2:8 in Hong Kong.

 

(Shanghai Daily October 10, 2006)