Virtual Real Estate:Mortgaged Future

by+Xiao+Bian

Throughout 2014， bad news for Chinas property brokerages kept coming. In March 2014， iwjw.com， a new venture created by internet veterans， appeared in Shanghai. Soon， the internet property brokerage， without any brick-and-mortar stores， raced to Beijing. Focusing on home leasing， the company cut standard commissions in half， which jolted the market of traditional brokerages. Just when the industry thought it had seen the worst of it， more kept coming this year. In March 2015， HomeLink， one of the largest brokerages in Beijing， announced the launching of its internet real estate brokerage， Zufangzi.com. The new company went even further， cutting the pre- vious commission to zero in Beijing. Soon， its advertisement appeared on 36 trains of the Beijing subway and 400 bus stops.

Actually， more than 10 years ago， the internet began to permeate the industry and quite a few online real estate portals， such as SouFun Holdings Ltd. and Anjuke Inc.， witnessed gradual growth. In 2010， SouFun Holdings Ltd. went public on the New York Stock Exchange. This time， it seems the new revolution led by internet and mobile internet enterprises is even more radical. For traditional brick-and-mortar property brokerages， while they are still suffering from the shocks of property e-commerce websites， new blows are already coming from mobile internet.

Ferocious Development

In the eyes of the new wave of crusaders in the industry， traditional brokerages operate too many stores， overstaff， spend too much on advertisements and charge big fees. Compared to traditional brokerages， internet brokerages skip stores and cut staff， and poach brokers by promising to greatly raise their base salary.

In Chinas megalopolises such as Beijing， Shanghai， and Guangzhou， compared to pre-owned home sale market， the property rental industry is far less profitable. However， in any big cities in China or even in the world， especially in megalopolises， living is the first problem facing newcomers. Thus， in these cities， both great demand for home rentals and a large number of customers exist.

Take HomeLink for example. Its exploration of leasing transactions started in 2010. In 2011， the company established Ziroom， a house assets management company. The company signs long-term contracts with property owners， provides internet， moving and cleaning services， and charges 10 percent of rental fee every year as commission. In 2014， the mobile internet rose sharply， and O2O （Online to Offline） business model for real estate boomed. That March， iwjw.com emerged， scrambling for brokers， tenants and house owners. In just six months， of every 100 houses rented to sole tenants， 29 used iwjw.com. With such a large market share， iwjw.com ranks first in terms of property rented to sole tenants in Shanghai.

Business in the Red

In Chinas traditional property leasing market， commission differs in various cities. Brokerages in Beijing usually charge one-month rental from tenants as commission. Brokerages in Shanghai charge 30 to 50 percent of one-month rental from both tenants and owners. Brokerages in Guangzhou usually charge fee equivalent to half a months rent from tenants. Online brokerages cannot make money without receiving commissions. While iwjw.com cuts the commission in half， Zufangzi.com no longer charges commission from tenants， but only five days rent from owners. In Beijing， thats only 500 to 600 yuan， based on the citys average monthly rental of 4，000 yuan.

Although the businesses often operate at a huge loss， pioneers believe that they still must persevere. “It is an opportunity，”opines Guan Shuwei， who has been working for HomeLink for 13 years. He believes that Zufangzi.com doesnt make money now. However， from the perspective of“internet+”， although investment in internet brokerages has been big early on， abundant opportunities will surely emerge later.

The present goal of Zufangzi.com is to provide better customer experience and devour a larger market share. It believes that if it occupies enough of the market， it can expand into many fields in the future， such as moving services， internet， financial services， and maintenance. It also aims to provide more creative services to home owners， such as management of trust assets， collecting rental through convenient payment terms， and annual service packages for owners. “The internet is best at creating new business modes，” says Wei Qiang， marketing manager of Zufangzi.com.“We cant wait around because the internet era is here. We need the chance to make mistakes. Even we are not making money now， we should do this. What if we succeed in the future？”

Power of Internet+

In the era of internet+， the internet is changing many traditional trades in China very quickly. Dated working modes have been altered， and customers are given more choices that would have been hard to imagine only a few years ago. On iwjw.coms app， tenants can choose a specific area and a residential community. Appointments to look at houses are made online and these appointments are sent to brokers. Appointments， visits， customer service reviews and satisfaction surveys are all performed by computers. Internet brokerages pay closer attention to customer experience. Zufangzi.com changes the traditional assessment method based only on the total sum of transactions and carries out an assessment based on the number of transactions completed. Ratings from customers are added into the assessment. Credit ratings of brokers are displayed online， and customers can choose their own brokers. After a certain deal is made， earning of the broker is largely based on the rating from his or her customers.

Of course， in China today， many more internet brokerages have emerged than just iwjw.com and Zufangzi.com. Many such as yijia.com， woniuzufang.com， and youplus.cc have carved out their own place in the market， with precisely targeted groups. For example， yijia.com is a home leasing and management service platform， focusing on providing home owners services such as interior decoration and maintenance along with leasing. Houses on woniuzufang.com are mostly apartments. While about 60 percent of houses waiting to be rented in the United States are apartments， the figure is far less in China， indicating a huge market in the future. And youplus.cc focuses on longterm apartment leasing.

Xu Qing， associate professor at Beijing Normal University， believes that the O2O mode is an irresistible trend for real estate brokerages. In the future， while physical and virtual brokerages will co-exist at the same time， they will provide more detailed and complete information and use diverse methods to exhibit information. And time spent searching for information will be greatly reduced.

However， although they have shown competitive power， Chinas internet property brokerages still have a long way to go. “Since internet and mobile internet are changing traditional trades dramatically， we need to make more breakthroughs in management，” says Li Yongjin， founder and CEO of iwjw.com. “We need greater efforts to make transactions smoother and eliminate problems， and think with the internet mindset.”