The online home transaction service launched in Shanghai and Hangzhou, Zhejiang province, will push property agencies to innovate in their services and businesses to avoid customer defections, experts said.

The official website of the Shanghai Real Estate Trading Center announced on Oct 26 it would start a home trading service requiring no involvement from a property agent. The center, which processes transactions in the city, is operated by the municipal government.

Known as hand-in-hand, the service allows a residential property owner and a homebuyer to reach their deal without a property agency, which means there are no brokerage fees for the two parties if the deal is inked online via the new system, according to the announcement.

"The adoption of such new measures would reduce transaction costs for both house owners and homebuyers and speed up the procedure," said Liu Hang, senior analyst of the Shanghai division of the China Index Academy. The academy is one of the nation's largest independent real estate research institutions.

The new arrangement has created a controversy over the role of local government and whether there is an effort to replace property agencies.

Liu said the creation of such platforms for existing homes is an attempt to help those buying and selling used homes conduct business via a trading platform efficiently, while ensuring that capital used for home purchases is monitored and managed safely by professional organizations.

A similar platform enabling homeowners to sell homes directly online was launched by Hangzhou's real estate and housing management bureau in August.

The platform allows home information to be published by property owners, and it provides a brand new channel for publicizing, searching and matching properties in a more efficient and safe way, officials said.

About 85 percent of China's pre-owned homes are traded via property agencies. In the case of the remaining 15 percent, with no platform or agencies to support and guide those involved, there can be a great deal of risk during the transaction procedure, said Yan Yuejin, director of the Shanghai-based E-House China Research and Development Institution.

Yan added that the creation of direct home sales platforms taps into the demand for support and diversifies choices for property owners and buyers.

The market practice of charging 1 to 2 percent of the transaction price regardless of the value of the housing and the service provided no longer fits the nation's real estate market, said Chen Sheng, president of the China Real Estate Data Academy.

In the future, property agencies should be more professional, and brokerage fees should be charged in accordance with the specialized services offered. It is inappropriate to charge the same percentage fee for basic services as for tailor-made services, Chen added.

The new procedures, however, would not replace property agents over the short term, but would encourage property agencies to upgrade their service and eliminate illegal or irregular approaches in second-hand home trading, as well as further promote the principle that houses are for living in, not for speculation, said Gao Yuansheng, executive vice-president at the Zhejiang branch of the China Index Academy.

With the pilot real estate tax to be levied in selected regions in the coming five years and the nation's advancement in property taxation legislation and reform, property agencies should actively innovate in their services and business to tap into new developments in the real estate market, Yan said.