Kiegan Chia was just a real estate agent not too long ago (albeit a top producer) – until one day, he decided to do something to simplify the paperwork for his clients. He set up a DIY property portal, DirectHome, which allows both tenants/buyers and landlords/sellers to deal direct with each other including completing the paperwork. In other words, no human intermediary i.e. agent required. Although earning the ire of his fellow agents, the portal became a hit within months, portending possibly the increasing irrelevance of most agents in Singapore.
Asian Property Review caught up with him for a chat.
Text by Jan Yong
1. Why did you decide to set up DirectHome, an online portal that facilitates do-it-yourself property transactions at flat rates of SGD800 for sellers and SGD80 for landlords?
KC: It all started from my renting a room near my old workplace right after my graduation. The daily travelling on my motorbike from my father’s house in the north of Singapore to Changi was no joke especially when it was raining. Hence, I rented a room which was just a 3-minute ride from my office. To get the simple rental transaction done, I had to pay the part-time agent a commission of SGD500. That experience etched in my mind that things could be cheaper and simpler – that’s the inspiration behind DirectHome.
After I worked a few years in the corporate world, I made the switch to becoming a real estate agent myself. During those days, it was very much like a cowboy industry – your upline or your supervising manager could not give you answers to your questions on many occasions – worse, sometimes we were given misguided answers.
So, being meticulous and tenacious, I read a lot from multiple sources (newspapers, reports, HDB, URA and whatever training books from agencies) and did countless trial analyses, calculations and time-line planning. I also attended numerous courses that charged thousands of dollars per course. I was also very pro-active during those early years as an agent. As a result, I gained a deep understanding of the industry and a wealth of knowledge in property transaction. And being hard-working, I was a top producer at the agencies that I joined.
A big bulk of the courses and training lessons were on the sales part of the business e.g. how to source for buyers/ sellers/landlords/tenants and how to close the deals. In a full cycle of a property deal, 80-90% of the time was consumed on finding the clients, engaging them and conducting viewings.
The paperwork for the transaction itself is easy to do. Moreover, the conveyancing law firm that you will need to engage eventually, completes the transaction for you.
With the advancement in technology and with a view to giving absolute value to consumers, DirectHome was set up as an online platform or portal for sellers and landlords to list their properties directly. It provides stepby- step process flow instructions to transact successfully with the buyers and tenants.
2. Does the portal breach any of the estate agent rules in Singapore?
KC: During the entire process of the transaction from start to end, the home owners and home seekers are linked up directly via DirectHome platform and do their negotiations with one another. Hence, DirectHome does not fall within estate agency work. In addition, the Estate Agents Act does not apply to anything done directly between the seller and buyer, and landlord and tenant. Therefore, DirectHome has no issue with its operation and compliance.
3. Why do you think the real estate agent profession is dying in Singapore? Are there ways to revive it, to make it more relevant in Singapore?
KC: The advancement of the IT infrastructure in Singapore, especially as we push forward for a Smart Nation vision, coupled with the ready acceptance of its people in using technology in improving one’s lifestyle, may sound the death knell in the decades-old traditional model of the property industry. People are searching for and embracing value-based services. However, there is tremendous disparity in the amount of work done and the huge commission agents earn for most transactions. As DirectHome transparentises and streamlines the process flows, more and more people realise that property is not that hard to sell, that at times, it sells itself; and that preparing the paperwork thereafter is not rocket science.
4. How is the response to your portal so far?
KC: It has been quite stellar and beyond my expectation. With very limited marketing, DirectHome has hundreds of listings and thousands of registered users in just a couple of months. We thought that the price range of properties listed in DirectHome would be between SGD3 mil and SGD3.5 mil, but we have several listings over SGD5 mil and even one landed property listed at SGD8 mil.
5. When do you expect to break even on your investment in the portal?
KC: We have just started our funding round recently and have secured 50% of this round, leaving SGD250K to go. In H2 2017, we would breakeven from our initial investment and funding round, turn cash-flow positive and generate profit.
6. Are there plans to expand the portal’s reach to other countries? If so, what challenges do you foresee?
KC: Let us be laser-focused on Singapore first.
7. Do you have an exit strategy for the portal?
KC: We plan for an exit strategy to keep us focused on the deliverables and to be accountable to our investors. Our target: SGD77 mil valuation of the portal at end 2018.
8. Do you see other big players like iProperty and PropertyGuru doing the same?
KC: We are in totally different markets. These giants are generating their consistent revenue from annual subscriptions, publications and advertisements.
9. Which is your best real estate investment so far? Your worst?
KC: It is a 3-bedroom top-floor unit at The Pinnacle@ Duxton bought for SGD550,000 in 2010. At 49th level, with the world’s longest sky bridge of 800m above on the 50th level, the unit enjoys an unparalleled panoramic view of the Singapore business district skyline. We are renting it out at an annual yield of 8.5%. The price of the unit has almost doubled to SGD980,000 now. The potential capital appreciation is immense as it is within walking distance to the future Greater Southern Waterfront. With about 1,000 ha of land – that is 3 times the size of Marina Bay – up for development in the area, this extraordinary waterfront of the future is to be filled with new housing, commercial, as well as cultural and entertainment hub, cementing Singapore’s growing reputation as a world-class city for its people to live, work and play. I have no negative property asset so far.
10. What is currently in your property portfolio? Your immediate plans (up to end 2016) in terms of property investment (other than your portal)?
KC: I own three properties; two in Singapore and one overseas. I purchased a 1,011 sq ft top-floor unit at The Pinnacle@Duxton in 2010. Subsequently, in 2015, I bought a three-bedroom condominium unit in Simei for SGD920,000. The lease is 99 years and it’s a 1,130-sq ft unit. I also bought a 366 sq ft unit in The Proscenium at Rockwell, a freehold luxury condominium in Makati, the Philippines in 2015, to be completed in 2018. I chose the Philippines because its gross domestic product (GDP) growth rate is the third-fastest in Asia, after China and Vietnam, and Asia is the next high-growth region. So I would expect more expatriates to come to Asia to stay in the coming years. Besides, Makati is the central business district in Manila. The Proscenium is a gated community, which provides more security. That also helps if there is oversupply in the area, because people would pay a premium for security. Another thing to note when purchasing property overseas is fluctuation in the exchange rate. For the Philippines, because its GDP is growing so quickly, I expect even faster capital appreciation [hence, a stronger Philippine peso]. I am investing all my capital in DirectHome now as it has a large untapped market. As such, I will not be investing in property in the near future.
11. In your opinion, which are the top emerging property hotspots with the most potential in Asia?
KC: For property investment, you have to zoom in to the individual project basis to have the highest probable investment return. General country and city analyses will just give you an overall outlook. For instance, two condominiums in the same locality a street apart will give you varying returns.
12. What is your investing philosophy/strategy with regards to real estate?
KC: Look at the fundamentals of the real estate and analyse its value through time. Know your holding horizon and ensure that your risk is covered.
13. Do you believe real estate is the top investment asset class these days?
KC: I’m a property person while a friend of mine is inclined to stocks, so we would compare these two squarely. At the end of the day, it is what you are looking for. Real estate is relatively safe with a longer term horizon while stocks can give you huge and relatively fast returns with higher risk.
14. Why do you currently rent a property and not buy?
KC: I own and rent out 2 properties in Singapore while I rent another one for my family stay. I do this for 2 reasons: First, the rental yields that I get for both my 2 properties are way higher than the one I’m staying in if I were to buy it. In addition, the picturesque view that I’m enjoying now would be blocked by the gazetted future residential developments. Second, this is a personal requirement as we want to stay near to my mother-in-law who is helping to take care of my 2 lovely sons, aged 1 and 3.
15. Where do you see yourself in 10 years’ time?
KC: Still working very hard. I guess it’s just how living things are made up to be. Ants and bees work non-stop. I find stability and tranquillity, ironically, in the process of constant work and an active mind. Of course, I do enjoy my time with my family and the occasional holidays.
16. Where do you plan to retire one day? Any age or net worth target that you have in mind before you retire?
KC: In Singapore, where the Chinese proverb says it all, “麻雀虽小 五脏俱全”. It’s still too early to think about this.