Property managers struggle as costs rise
By Hu Min |
April 28, 2012, Saturday
|
Print Edition
Print Edition
With Shanghai's minimum wage raised to 1,450 yuan (US$230) a month from 1,280 yuan since April 1, property management companies in Minhang have already felt the pinch as the 13 percent pay hike took effect.
"Labor costs are increasing year by year," said Yang Zhixiong, manager of Xinming Property Management Co Ltd, which manages 10 residential communities in the Jiangchuan area. "We're running a deficit, and it is hard for the company to survive. We've actually thought about getting out of the residential community market."
The problem for property managers is that they can't raise fees arbitrarily even if their costs go up. The government and property owners themselves have a voice in what fees are charged.
Zhongyuan Property Service Co Ltd manages the first phase of 1,125 households at Mingducheng, a residential complex where many South Korean and Japanese expatriates live. Ninety-six security guards are employed there. All of them receive the minimum wage.
"We haven't increased property management fees, which are 3.8 yuan per square meter a month, for years," said a Zhongyuan staff member surnamed Shen. "The increase in the minimum wage puts great pressure on us because the property management market is labor intensive and we do not want to lower service standards."
Bad news
William Coon, an American who has been living at the second phase of Mingducheng for four years, pays about 592.8 yuan a month in fees for property management and 300 yuan a month for parking space.
"The good news is that property fees haven't increased," he said. "The bad news is that they are high, about equal to the fees that I would pay in a major American city."
Still, Coon is happy with what he gets for his money. "We have a beautiful park, and I realize that the gardeners and maintenance cost money," he said." Every building has a person on duty for nine hours a day to help us with any problems or visitors."
In 1997, the city allowed property management fees to fluctuate within a certain range. In 2005, the city started implementing charges based on types of housing.
But any adjustment of property management fees requires a majority vote by property owners in the complex. That makes it hard to raise fees.
Among the 911 residential communities in Minhang, most of their property managers are operating in the red, said the deputy director of the property management division of the Minhang District Housing Security and Management Bureau.
A small number of smaller management companies, faced with deficits, have simply pulled the plug abruptly, leaving some complexes to cope with uncollected rubbish, machinery breakdowns and untended gardens. Other management firms have simply lowered standards to make ends meet, enraging property owners, some of whom protest by not paying fees.
Li Yao, director of the real estate management office in Jiangchuan area, said some property management companies are cutting staff numbers to survive.
The hodge-podge of management fees levied against different types of housing can cause trouble in communities with a housing mix. People get angry if they are paying more than the person a few buildings away.
In 2008, Minhang launched a program offering fee assistance in instances of older homes that were sold to workers by employers at a nominal price - a practice no longer in existence.
Because the property management fees for these houses are set by government authorities and are as low as 4.5 yuan per household a month, the Minhang government stepped in to offer subsidies if property management companies handling these houses meet certain criterion.
To relieve the pressure on property management companies, Minhang raised the number of complexes in the subsidy program to 243 complexes from 47 in 2008 at a cost of about 35 million yuan a year.
Chill on cash flow
Zhou Chunjian is the property management manager in charge of the Gumei No.7 residential community, which has 1,080 households. Each of the householders has been paying 20 yuan in management fees since 1997, or a total of 21,600 yuan a month.
After paying the salaries of 34 security guards and cleaners, the company finds itself about 20,000 yuan in the red every month. That loss is offset by a government subsidy of 0.3 yuan per square meter. Still, the increase in the minimum wage has put a chill on cash flow.
"The wages of our security guards and cleaners have tripled since 1997," Zhou complained.
Some deputies of the district's advisory Committee of the Chinese People's Political Consultative Conference have called on the government to raise the subsidy.
The Minhang District Housing Security and Management Bureau said financial support from the government is one part of the equation, but the whole system needs an overhaul.
Property managers and property owners are being encouraged to establish a reasonable price structure according to market conditions.
There is at least one successful case.
The Chengshi Huayuan residential complex on Qixin Road, operated by Vanke Co Ltd, sought a fee increase of 0.78 yuan per square meter a month to 2.7 yuan, and 92 percent households voted to accept the first price rise in almost 12 years.
Last year, the project ran a deficit of 2.37 million yuan. The property manager calculated that the 0.78 yuan per square meter increase would be needed to make ends meet. After three meetings, property owners were persuaded of the logic behind the fee increase and agreed to pay more in exchange for standards of service not dropping.
"Labor costs are increasing year by year," said Yang Zhixiong, manager of Xinming Property Management Co Ltd, which manages 10 residential communities in the Jiangchuan area. "We're running a deficit, and it is hard for the company to survive. We've actually thought about getting out of the residential community market."
The problem for property managers is that they can't raise fees arbitrarily even if their costs go up. The government and property owners themselves have a voice in what fees are charged.
Zhongyuan Property Service Co Ltd manages the first phase of 1,125 households at Mingducheng, a residential complex where many South Korean and Japanese expatriates live. Ninety-six security guards are employed there. All of them receive the minimum wage.
"We haven't increased property management fees, which are 3.8 yuan per square meter a month, for years," said a Zhongyuan staff member surnamed Shen. "The increase in the minimum wage puts great pressure on us because the property management market is labor intensive and we do not want to lower service standards."
Bad news
William Coon, an American who has been living at the second phase of Mingducheng for four years, pays about 592.8 yuan a month in fees for property management and 300 yuan a month for parking space.
"The good news is that property fees haven't increased," he said. "The bad news is that they are high, about equal to the fees that I would pay in a major American city."
Still, Coon is happy with what he gets for his money. "We have a beautiful park, and I realize that the gardeners and maintenance cost money," he said." Every building has a person on duty for nine hours a day to help us with any problems or visitors."
In 1997, the city allowed property management fees to fluctuate within a certain range. In 2005, the city started implementing charges based on types of housing.
But any adjustment of property management fees requires a majority vote by property owners in the complex. That makes it hard to raise fees.
Among the 911 residential communities in Minhang, most of their property managers are operating in the red, said the deputy director of the property management division of the Minhang District Housing Security and Management Bureau.
A small number of smaller management companies, faced with deficits, have simply pulled the plug abruptly, leaving some complexes to cope with uncollected rubbish, machinery breakdowns and untended gardens. Other management firms have simply lowered standards to make ends meet, enraging property owners, some of whom protest by not paying fees.
Li Yao, director of the real estate management office in Jiangchuan area, said some property management companies are cutting staff numbers to survive.
The hodge-podge of management fees levied against different types of housing can cause trouble in communities with a housing mix. People get angry if they are paying more than the person a few buildings away.
In 2008, Minhang launched a program offering fee assistance in instances of older homes that were sold to workers by employers at a nominal price - a practice no longer in existence.
Because the property management fees for these houses are set by government authorities and are as low as 4.5 yuan per household a month, the Minhang government stepped in to offer subsidies if property management companies handling these houses meet certain criterion.
To relieve the pressure on property management companies, Minhang raised the number of complexes in the subsidy program to 243 complexes from 47 in 2008 at a cost of about 35 million yuan a year.
Chill on cash flow
Zhou Chunjian is the property management manager in charge of the Gumei No.7 residential community, which has 1,080 households. Each of the householders has been paying 20 yuan in management fees since 1997, or a total of 21,600 yuan a month.
After paying the salaries of 34 security guards and cleaners, the company finds itself about 20,000 yuan in the red every month. That loss is offset by a government subsidy of 0.3 yuan per square meter. Still, the increase in the minimum wage has put a chill on cash flow.
"The wages of our security guards and cleaners have tripled since 1997," Zhou complained.
Some deputies of the district's advisory Committee of the Chinese People's Political Consultative Conference have called on the government to raise the subsidy.
The Minhang District Housing Security and Management Bureau said financial support from the government is one part of the equation, but the whole system needs an overhaul.
Property managers and property owners are being encouraged to establish a reasonable price structure according to market conditions.
There is at least one successful case.
The Chengshi Huayuan residential complex on Qixin Road, operated by Vanke Co Ltd, sought a fee increase of 0.78 yuan per square meter a month to 2.7 yuan, and 92 percent households voted to accept the first price rise in almost 12 years.
Last year, the project ran a deficit of 2.37 million yuan. The property manager calculated that the 0.78 yuan per square meter increase would be needed to make ends meet. After three meetings, property owners were persuaded of the logic behind the fee increase and agreed to pay more in exchange for standards of service not dropping.
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