Real Estate Agents in Australia March 2012â€ƒâ€‚ 5
Key External Drivers continued
Residential property yields Investors compare investment returns and risks between asset classes and therefore if yields in one asset class (e.g. property) move against another class (e.g. shares) this may see a redirection of investment between asset classes.
Competition from direct private property sales Rising demand for direct sales or leasing (i.e. without an agent) creates competition and can adversely affect revenue and sales activity in the Real Estate Agents industry.
Over the five years through 2011-12, IBISWorld estimates that revenue for the Real Estate Agents industry decreased by 1.1% per annum, from $9.55 billion to $9.02 billion. This decline can largely be attributed to the effects of the global financial crisis, which led to a reduction in the demand for real estate, particularly in the residential sector. The industry is expected to meander somewhat in 2011-12 with a growth rate of 0.9%. A short recovery will be impeded by increasing consumer caution and inflation despite a strong economy. Profit levels have suffered as well, since property prices have failed to fall in line with consumer sentiment and has thus led to reducing industry profit margins on sales in order to make properties more appealing. The global financial crisis directly affected the Real Estate Agents industry. In 2007-08 and 2008-09, the industry experienced a sharp decline in demand for residential and commercial property due to deteriorating economic conditions, rising debt levels and reduced access to finance. These conditions stifled property
investment and agency sales volumes, thereby affecting industry revenue. A drop in the number of people obtaining financing to purchase homes also affected the industry. Finance commitments for buying houses decreased by about 17% between 2007 and 2008. In 2009-10, the Real Estate Agents industry began to stabilise after improvements to a range of economic and financial conditions. The industry has since experienced a return in demand for residential and commercial properties from investors, commercial businesses and home owners. This strengthened investment levels, sales and leasing volumes across the majority of real estate segments. This industry returned to growth in 2010-11 as emerging signs of weakness in the residential property market were offset by better conditions in the office and industrial property markets. However, consumer sentiment has lowered in the midst of international economic uncertainty, reducing interest in property purchases.
Greater pressure for agents
As interest wanes in property, agents are having to pull out all the stops to attract potential buyer interest. Most notable is the fact that vendors have succeeded in pressuring vendors to reduce their commissions, and as a result are reducing the profitability of the industry as a whole. Furthermore, the industry has been undergoing a bit of a shakeout of employees. Since most real estate agents in the industry over the past five years
were in the industry for less than five years, their lack of experience in a more competitive and sales-resistant market, only more experienced and thus better employees have stuck around. Over the past five years, employee numbers have decreased at an average rate of 1.4%, or just over 5,000 people. Competition for these skilled agents has also emerged between agencies, as agencies with greater support services look more enticing but