I’ve had a few people ask me why I believe that this to be the case.
I’ve had a few cheeky e-mails suggesting that the world may be better off with fewer real estate agents in it and I’ll make no comment about that statement. 😊
According to the last Census, there were 16,573 real estate agents in the state of Queensland, and would you believe, 9,199 businesses registered that offer some sort of real estate services.
We know that some people may hold a real estate sales certificate and ‘park’ it somewhere just in case they do decide to re-enter the industry at some point so it should be noted that there will be a small percentage of these agents that are quite inactive.
So why do I anticipate a decline in the number of agents?
I believe there are two significant factors that will lead to such a reduction this year…
Firstly…the economy and the market conditions.
According to the latest data released by the Australian Bureau of Statistics, the average real estate in Australia earns $45,990 per year and makes approximately 9 sales per year.
This number would be slightly influenced by the inactive agents although the anticipation is that this number would not be significantly different if we took the inactive agents out of the numbers.
When you consider that an agent may have car payments, phone costs, referral fees and gifts, personal marketing expenditure etc., then is easy to see that many agents do not make as much money as you would be led to believe.
It is true that some of these costs would have already been legitimate tax deductions that were already accounted in their taxable income figures, but I can assure you that the ATO scrutinises real estate agent expenses quite closely so some of these expenses would not be claimable.
One of the more foolish things that I believe an agent can do is to go out and purchase a luxury European car that is intended to portray a certain level of ‘success’ but in my experience, I’ve noticed that agents that drive an expensive car can be perceived in a different way to what they would they would like.
The truth is that many of these agents are just struggling to make their monthly payments anyway.
So, if the average number of sales is low (often due to the fact that there are so many agents employed in the industry), how will this change in 2019?
In a market that is tightening and where the average number of days a property is on the market before it is sold is increasing, it will likely become harder to attract the right buyer and negotiate the sale.
There will be more competition and properties coming onto the market that are listed for a matter of days and sold with multiple offers will likely become fewer as the year progresses.
In this instance, an increasing number of sellers will become stressed (both financially and simply with an inability to move on with their plans) and sometimes, the agent can become the recipient of their frustrations.
In truth, it is easy to blame the agent and whilst at times, the sellers’ frustrations may be justified at other times, the agent may be doing all they can do to attract a sale, but the market may not be ready to pay the amount that the sellers are seeking.
Keep in mind that the market is competitive, and many agents are still caught in the trap of over-appraising properties just to get the business and lowering their fees in order to compete.
So if the average sale is harder to make (many taking a lot more hours to perform before the agent gets paid), the agent may be handling more listings (and working longer hours) to make less money and finding that there’s an increased level of pressure from their sellers, many will just get to a point where they will have enough and decide that a salaried position with defined hours and less stress is a more attractive way to live.
Also keep in mind that even when sales are made, the banks are making things tougher and more and more deals are falling over on finance as well as buyers affording the luxury of being pickier about building and pest issues…and don’t forget about the fact that valuers will be more conservative in a tightening market and some sales will not proceed due to this as well.
This all may sound a little pessimistic and I don’t believe for one moment that our market in South-East Queensland is about to change much at all but keep in mind that I’m talking about the bottom 20% of agents that are already struggling and only small changes in market conditions may affect their decision to continue with a career in real estate sales.
Experienced agents have been through this sort of market before and know exactly how to operate in a market where prices are stagnating and perhaps in some cases, going backwards a little.
Next week, I’ll share with you the second (and more pronounced) reason why many agents will (even against their own will) be forced out of the industry within the next 90 days…and this might really surprise you!
Until next week, Happy Listing & Happy Selling!