(Yicai Global) May 9 – China's Ministry of Housing and Urban-Rural Development and the State Administration for Market Regulation have jointly released a guideline aimed at standardizing real estate brokerage industry yesterday. This reflects a thoughtful approach from the Chinese government, which has prudently avoided imposing a blanket solution on the multifaceted real estate brokerage sector.

The guidance emphasizes the protection of the legitimate rights and interests of transaction parties and proposes a reasonable determination of brokerage service fees. Instead of directly regulating fees, the policy encourages negotiations between transaction parties based on factors such as service content, quality, and market supply-demand dynamics. 

Ms. Guo Yi, Chief Analyst at real estate consultancy United Harvest, commented on the market-oriented approach, stating that it demonstrates the government's strategic thinking in handling the complex real estate brokerage industry. By returning pricing power to the market and encouraging tiered pricing based on property transaction prices, the policy allows transaction parties to choose services based on their needs. This, in turn, promotes high-quality and distinctive brokerage services from larger agencies, fostering healthy development and bottom-line management.

Mr. Yan Yuejin, Research Director with E-House (China), shared his insights on the future of the industry and beyond. He believes that bilateral fees – where both buyer and seller assume costs – may become a solution to balancing service quality and service income for professionals. This has the potential to not only reshape the industry landscape, but also to inspire innovation in customer service and pricing strategies across other sectors in the long run.

Furthermore, Mr. Yan highlighted how the policy can inspire brokerage companies to optimize their businesses, upgrade, and achieve high-quality development, particularly in exploring new services. It opens up opportunities for these companies to differentiate themselves from competitors, attract more clients, and ultimately, secure a stronger position in the market.

The timing of this policy release is also favorable for the market, as it could be part of a series of measures aimed at restoring consumer confidence. By fostering a more transparent and competitive environment, the government is empowering consumers to make more informed decisions, which in turn strengthens the overall health of the real estate market.

The Chinese real estate brokerage industry is currently undergoing a significant transformation. Industry insiders point out that the primary issue facing the brokerage sector goes beyond fee rates; another key aspect is the fee structure. Unlike in developed countries where sellers pay the majority of the commission fees, buyers in China bear almost all the costs for the transaction. The Chinese government's recent guideline endorses bilateral fee arrangements and separate charges for derived services, which can alleviate the financial burden on buyers and promote standardization within the industry. By addressing these concerns with innovative fee models, the guidance is expected to bring a shift to the industry while promoting transparency, competition, and a customer-centric approach, ultimately fostering a more robust and dynamic industry moving forward.