Real Estate offices closing down in Sydney

Real estate offices and real estate agents will diminish by 20 percent-30 percent in the next year.

With property (for-sale) listings, so low and a phenomenon never experienced before in parts of Sydney; how can real estate agencies survive? 

For a large number of Real Estate Offices (REOs), sale of property commissions, makes up to 60 percent-80 percent of their revenue. Some rely purely on sales commission, to keep their doors open for business.

After recently, reading numerous articles and LinkedIn discussions about low property numbers that are on the market for sale I began to reflect on discussions I held as far back as 12-15 months ago with industry colleagues.

At the time I made the following prediction, and that it would eventuate by end of financial year 2016. 

• We will see at least 20 percent of REOs close down.
• These will be made up of REOs that rely on pure sales to keep their doors open.

One brand I have been particularly observant of is McGrath Real Estate. This brand even listed on the ASX and mostly due to its success accredited to: reported high sales figures. How will they cope in a changing landscape where sales become scarce?

The crux of the discussions with colleagues, were in relation to the shrinking property market, due to various market forces:

1)     Property-Marketing companies on the one hand ramping up sales of property; and

2)     The financial institutions on the other, also selling real estate.

Both sectors moving into the real estate sales due to high commissions, paid out directly by developers. I can say, even in the good times, the average real estate selling agent missed out on listings. Most listing of new developed property went, has gone to and is still going to property-marketers. The local Real Estate Agents miss out.

Property that is new to the market, where commissions can be inflated, became attractive for “direct sales campaigns” to unsuspected investors. In essence, the typical local real estate office has lost 30-40% of sales due to “marketeers and the financial sector invasion.”

Now, add to the invasion of our industry, the current low numbers in secondary stock sales as evidenced in article/photo below. Also as reported across the media and journals.

I refer to historical low number of sales listings in Sydney. 

These are established properties that have almost disappeared overnight. Parramatta alone has had an attrition of up to 47 percent less property on market. These figures were calculated across June-to-August. The number of agents has not changed however.

Parramatta, has 176 registered real estate offices according to the Yellow Pages. According to Domain, there are 172. Either way, it is a concern that should not be taken lightly. Specially when we can safely say that there are 2.5 selling real estate agents in each office.

A concerning trend also witnessed across the face of Sydney metropolitan area.

Some agents are commenting on a 30 percent drop in numbers across the Lower North Shore and other areas. These numbers are generated by comments on LinkedIn, made by agents that have worked in these areas for 10-20 years.  

Only last week, I sat with a colleague from Blackktown and she informed me and was troubled by the fact that her office only had two properties for sale. She doesn’t have a small operation, and runs a well-established brand.

In the same area, other brand-name agencies have reduced their local paper advertising from 3 pages down to half a page. They just don’t have any property listings for-sale in their books. What they do have is 5 selling agents in their office.

Notably, the above becomes the recipe or the ideal conditions for an attrition of selling agents and very tangibly, offices that only rely on sales to survive.

It will be a hard fall for many, and for others that place a lot of trust in property-sales-offices. Another call, another prediction; all in a day as I share my thoughts over a coffee with friends.  

Warning to the industry

Keep an eye on other Industry-Disruptors such as Purplebricks RE. Don’t underestimate what they are doing and focus on how you can best serve the diminishing clientele base you have. That is, if you want to survive the for-sale listing famine.

If you want to stand out from the many agencies in your patch; do something different. Offer a level of service that others will find hard to match. Again, only if you want to stay in the industry past EFY 2016 and not be a casualty of the changing face of real estate.

EDWIN ALMEIDA is licensee in charge of Just Think Real Estate.

He is also the creator of Oz Real Estate.TV and a presenter for propertyinvestingvault.com.