The business and professional services industry plays a vital role in Hong Kong’s economy as the city is a leading global business hub. As Hong Kong’s economy has been increasingly integrating with the mainland after the territory returned to the motherland in 1997, the local professional services sector has been capitalizing on the open market policies to gain a strong foothold on the mainland market.
Since the city’s handover about 15 years ago, China’s economic status has been tremendously elevated as evidenced by its accession to the World Trade Organization (WTO) in 2001. As a WTO member, mainland economic integration with Hong Kong has conferred substantial benefits to the city’s economy.
The signing of the Closer Economic Partnership Arrangement (CEPA) between Hong Kong and the mainland in 2003 was another economic booster as well.
CEPA, a bilateral free trade pact gives Hong Kong enterprises first-mover advantage before the nation gradually opens the domestic market to foreign businesses under its commitments to the WTO when it joined it in 2001.
The central government provides more preferential policies to Hong Kong under the CEPA than to other WTO members.
These first-mover advantages have helped many business and professional services firms - including real estate agents such as Centaline Property Ltd and 21 Holdings Ltd - to lay down strong foundations on the mainland.
The CEPA allows Hong Kong real estate agents to operate wholly-owned branches on the mainland without any operational restrictions.
Centaline Property, one of the city’s major real estate agents, has greatly benefited from preferential treatments accorded by CEPA.
Centaline first established its mainland business footprint in 1992, 10 years before the CEPA was signed in 2003. And its pace of expansion was a bit slow before 2003 as it had only 200 business branches on the mainland, employing 2,000 real estate agents.
However, with the accession of China into the WTO and the subsequent signing of the CEPA, Centaline has expanded it’s mainland branch network to 1,500 scattered across 30 provinces and employs nearly 30,000 real estate agents.
The group is optimistic about its future expansion on the mainland. “More participation in global economic organizations such as the WTO will spur trade and investment flows between China and the world. In due course, that eventually will enhance housing demand for mainland properties,” Sherman Lai, chairman of Centaline, told China Daily.
Against the CEPA backdrop, Lai expects Centaline’s mainland business to contribute more to the group’s turnover in the near future.
“In 2010, the mainland property transaction business contributed HK$4.1 billion to the group’s total turnover of HK$8.7 billion. I expect the share of mainland business over the group’s total turnover will rise in the future,” he said.
This optimism was echoed by Yale Yeung, director of Kingstar Strategic, a wholly owned subsidiary of 21 Holdings Ltd which focuses on the real estate transaction business on the mainland.
“I think the central government has already opened a good platform for Hong Kong property agencies by allowing them to open their wholly-owned subsidiaries on the mainland through CEPA. It also permits Hong Kong property agent license owners to get a China property agent licence through passing the licence examination. All these measures will allow Hong Kong real estate agents to join the mainland property agent business more easily,” Yeung told China Daily.
The recent mutual recognition of professional qualifications for the real estate industry will provide a favorable backdrop for the business interactions between local and mainland real estate agents, Yeung said.
The mutual recognition of professional qualifications for the real estate industry is a natural extension of the CEPA. The Estate Agents Authority of Hong Kong and the China Institute of Real Estate Appraisers and Agents on the mainland agreed in November 2010 that the professional qualifications of both the mainland and local real estate agents will be mutually recognized. This creates a win-win scenario wherein the business potential for both side’s real estate practitioners will be vastly expanded.
Looking ahead, Yeung said that Kingstar Strategic will focus on developing the secondary home market in those mainland second or third-tiered cities as this new market segment is predicted to blossom in the future.
“With the advent of urbanization, more residential buildings will be built. Over time, this helps herald the rise of a robust secondary home market on the mainland. For those second or third-tiered mainland cities, their economic potential should also not be neglected as they offer vast business potential,” Yeung reckoned.
“Once the fully-fledged mainland secondary housing market has taken shape, demand for property agents’ services will grow tremendously. We have developed our professional services niche through strong organization power and marketing techniques that can be differentiated from the local players”, Yeung said.
The real estate broker sector is one of the components of Hong Kong’s business and professional services exports. Export of such services increased by 3.6 percent in real terms in the first quarter of 2012 over a year earlier, compared with a 5.3 percent increase in the fourth quarter of 2011, according to the Hong Kong government statistics. In 2011, service export registered a 14.6 percent jump versus a 23.1 percent hike in 2010.