China real estate agencies pivot to high-margin government service agency business

Real estate agencies in China are shifting their business models toward government service agency work, such as property transfers, mortgage pre-approvals, and household registration verification. This transition is driven by declining profit margins in traditional secondary housing brokerage services, caused by commission price caps and the rise of independent online transaction platforms.

Major agencies like Beike and 5iHouse have seen brokerage profit margins decline, leading them to embrace high-margin value-added services. These agency services maintain stable gross profit margins between 45% and 52%, significantly higher than the sub-16% margins seen in traditional brokerage. These services are characterized by low marginal costs and high resistance to real estate market cycles.

In regions like Guangdong, regulatory reforms have streamlined property processes, encouraging more transparent service offerings. While large chain agencies typically offer transparent pricing—ranging from 300 to 1,000 yuan for various services—smaller, non-chain agencies have been accused of exploiting information asymmetries to sell overpriced or mandatory service packages.