Estate Agents run for cover

By Chris Nthite
Posted: Thu, 15 Dec 2005 17:00 | © Moneyweb Holdings Limited, 1997-2005

As home sales volumes continue to decline, estate agents are running for cover and trying to get under the wings of the big agencies, says Lew Geffen, chairman of Sotheby’s International Realty.

However, adds Geffen, vacancies in these companies are limited, and many agents who decided to “go it alone” during the boom will find themselves out in the cold next year.

He charges that it is most unlikely they will survive for long. “Research done by the Estate Agency Affairs Board at the height of the boom in 2004 showed that even then - when some 40 000 agents were on the register - more than 40% of agents were earning less than R10 000/month, and one fifth were earning less than R5000.”

Geffen adds: “Now they are being squeezed between fewer sales and even tougher competition for mandates, and not many independent agents and small agencies have a big enough ‘war chest’ to carry them through such a scenario.”

But Eskel Jawitz, chairman of Jawitz Properties, says size is not a factor because all players have to adapt to the changing market conditions. “The distinguishing factor is the ability of the agent to deliver superior service to his client,” says Jawitz.

“In fact,” adds Jawitz, “some small agencies are doing a better job than big and established agencies.

“It all depends on the quality of your work, training and your ethics.”

According to Geffen, sales volumes are down around the country owing to lack of affordability and buyer resistance. “And serious sellers are now acknowledging the shift by moderating their asking prices.”

The Absa House Price Index showed that house prices on average rose by 14,7% in November, down from 16,2% in October.

Jacques du Toit, Absa’s property economist, says this is the lowest year-on-year growth
since mid-2002 and brought the average house price in the middle segment of the market (R2,2m or less) to about R727 700 in November.

FNB’s quarterly report has revealed that it is taking about two months for 70% of properties to be sold and 48% of sellers are not realising their asking prices.

Geffen says this spells trouble for marginal agents unable to compete in terms of the increased market exposure or depth of service needed in this type of market.

He adds that a typical response is to try to gain mandates through heavy-commission discounting and when that fails, to shut up shop and high-tail it back to a big agency.

“But the major agencies are of course facing the same market conditions as the minors, so they are bound to be pretty choosey when it comes to taking on any more agents," says Geffen.

“In fact at the moment, they are just ‘cherry picking’ the very top individual performers from among the independents and leaving the rest to drop out of the industry.”

According to Geffen, the number of agent registrations are expected to fall from the record 65 000 recently announced by the board, to well below 45 000 next year.

Article by: Chris Nthite