(Shanghai Daily)
Updated: 2008-01-22 13:53

At present, about 90 percent of second-hand property deals are sealed through property brokerage firms and buyers will suffer losses if the agencies collapsed or executives of the firms with access to the bank accounts disappeared with clients' money.

"The reason why some small-sized property agencies could be really dangerous for customers is that the entry barrier for such business is very low, requiring only a registered capital of 30,000 yuan, and they usually conduct their businesses without proper checks and discipline," Wei explained. "Whenever a loss is incurred, it is almost impossible for clients to retrieve their money."

Yin Kunhua, a professor at the Shanghai University of Finance and Economics who has been monitoring the industry for decades, also said bluntly that the small-sized and unprofessional real estate agencies have already become a problem for the industry.

"As far as I know, most of the city's large-sized and government-backed property brokerages have been implementing rather strict policies to ensure the safety of clients' money," Yin told Shanghai Daily in a phone interview. "Fortunately, the local government will start to demand full implementation of such policies across the city, as early as the first quarter of this year."

According to Yin, such third-party bank accounts have been on trial a long time ago in a limited number of agencies in Xuhui District.

Real estate brokerages have been increasing their presence very quickly during the past few years amid the country's property boom, which has then led to hidden risks as some of the expansions were abnormally fast.

In the most recent case of Chuanghui, the company opened more than 250 branches in Shanghai alone since its entry into the local market in the second half of 2007.

"That is really an amazing speed and I could hardly imagine how it managed to find so many branch offices across the city in such a short time," said Remy Chan with real estate services provider Jones Lang LaSalle.

Lin Fenghui, chairman of Chuanghui, admitted the company's expansion has been too rapid in recent years and it is suffering from cash flow problems.

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