Dreary house price growth hits real estate agents

Another year of lacklustre house price growth has provided 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 Herschel Jawitz, chief executive of Jawitz Properties.

“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.”

Jawitz said that if property prices only went up by 2% or 3% 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.

Jawitz 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 bigger brands should be better off by the end of the year,” he said.

The decline in the number of estate agents supported this view with the fall off in agents coming mostly from the smaller agencies that had not been able to sustain themselves in a challenging market. The number of estate agents had decreased by 60% since the height of the boom in 2006/7 to about 25 000.

According to Jawitz, most of the bigger national franchised brands or the larger 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. — I-Net Bridge

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