Real estate agents feel the squeeze
Category Commission
Another year of lacklustre house price growth provides the backdrop for a gradually tougher climate for the real estate industry.
"As with 2011, property prices are just holding their own which impacts on agents' commissions," according to Dennis Williams, owner of Dennis Williams Realtors.
"Unlike other industries where professional fees are charged, our commission doesn't go up with inflation each year. The only ways our earnings increase is if property prices increase, or we sell more properties."
Williams said that if property prices only went up by two or three percent in 2012 then, in real terms, commission earnings would decline.
"Added to this, costs are increasing by at least 10%, and the equation becomes interesting. Normally, if you are sacrificing margins you can try to make up the numbers with higher volumes but the numbers of sales for the most part are going to be flat year on year and in some areas may even decline."
Essentially, fewer sales, flat prices, and homes taking longer to sell equated to estate agencies spending more money with less return.
Williams said that because of these factors, 2012 would be another very competitive year for the industry, as growth would have to include taking market share from competitors.
"The smaller brands should be better off by the end of the year, with lower overheads and costs." he said.
The number of estate agents had decreased by 60% since the height of the boom in 2006/7 to about 25,000.
According to Williams, most of the smaller brands in the metro areas had fared significantly better in this period and while absolute market sales might not have been increasing, relative market share would have grown.
Key success factors for 2012 would be similar to many industries - meeting clients' service expectations, employing technology as a critical enabler and most importantly, upholding the integrity of the brand and the people that represented it. This being easier to achieve with the smaller brands, where a more personalised service was more likely.
