In reaction to the news that the number of agents has dropped from about 80 000 in 2007 to about 38 000 currently, Dr Willie Marais, national president of the Institute of Estate Agents (IEASA), says it is unlikely that the number will materially increase in future, even when the economic climate improves.

“We have often seen the number of estate agents decrease and then increase as a result of the ebb and flow in the property market that occurs every eight to 10 years,” he says.

“However, there are other factors at play at the moment which make it unlikely that we will see a fundamental increase in agent numbers when the current cycle moves upwards again.

“Legislation governing credit extension and lending institutions’ caution in approving loans – which has been very evident in the past 18 months – will keep a damper on property transactions, forcing more agents out of the industry, simply because of profitability, or rather lack thereof.

“New legislation governing training in the estate agency industry is further likely to convince older agents to retire rather than acquire the prescribed qualifications, which are costly and time consuming. Equally, it might reduce the number of new entrants to the market.

“The cost of agent registration may also rise dramatically since the income base of the Estate Agency Affairs Board has shrunk by more than 50%, and this will place a further financial burden on agents. These factors make it unlikely that the number of registered agents will in future rise much above 40 000.”

Marais adds that it will become more challenging for large property groups to recruit and retain top performers, and that investment in training new agents will have to escalate.

“In terms of the new training requirements, an entrant will not add much to an agency’s bottom line in the first year. Training costs and competitive remuneration for top performers will put extra pressure on profit margins. Agencies will thus have to pay careful attention to margins and cost structures.”

This will also make it difficult for small independent offices to train new recruits. However, in contrast to many commentators in the industry, Marais does not foresee the disappearance of independent agencies. “Top agents’ income potential will escalate and many may prefer to strike out on their own in niche markets,” he said. “It is not too unrealistic to speculate that the majority of agents will still work for smaller independent agencies.”

The implication for consumers is that they can expect highly professional services since only the best agents will survive. “A possible downside is that consumers may have to wait longer to obtain services because there will simply be fewer agents around,” Marais says.

The trend is unlikely to have a major impact on the Institute of Estate Agents, he adds. “Although the potential membership base has shrunk dramatically, we expect that more of the remaining agents in the industry will become members in future – precisely because in a tough environment they may feel a greater need for a professional body representing their interests.”

This article by: www.ieasa.co.za