Estate Agents earn less now than 15 years ago
Category Blog
The impact of a slow real estate market on estate agents has been considerable. Estate agents have had no earnings increases in 10 years. In fact, their earnings have diminished considerably in this time. Commission percentages in the early millennial years averaged 5.5% plus across the industry. They now average 5% or less. But it takes two to three times longer to sell a property than the just 35 to 48 days it took in 2001 to 2007 period.
Also, property prices have only appreciated at 4.8% per annum (less than inflation) from 2008 to 2018 i.e. flatlined! If prices don’t improve then estate agent earnings don’t either, & they haven’t! Today’s real estate industry is a far cry from the halcyon days that prevailed from the late 1990s to the early millennial period prior to the Zuma presidential reign.
The homes market flourished during that purple patch from 2000 to 2007. Real estate agents, well trained by big & well-established estate agencies, were earning commissions north of 5.5%. The tempo of the then homes market was reflected in the fact that the nationwide number of estate agents swelled from 25 000 to 80 000 – driven by the allure of a buoyant property market. Many of them were untrained. Properties were thus easier to sell during this period. New estate agents were therefore persuaded to lower their commission rates. And prices achieved rose by between 15% to 25% per annum during the buoyant period from 2001 to December 2007.
Burst bubble
The euphoria seemed long-lasting – until the bubble burst with the onslaught of the 2008 world financial crisis. South Africa did not escape the fall-out:
- Commission percentages were now lower at around 5 per cent
- It took nearly three times longer to sell a property
- Prices were down, and stayed down
- The volume of transactions halved initially.
In just one year (2008), our country’s real estate agent force fell from 80 000 to around 17 000 as market conditions deteriorated. Prices fell by 15 per cent, and volumes remained low. Home prices have continued to lag inflation – for the last 10 years. This all came together to create a far tougher operating environment for the core of professional agents who have ridden the storm. They are now earning decidedly less, in real terms, than they were 15 years ago. Furthermore, they have additional best-practice hurdles to jump these days.
Agencies from nowhere
Against this background, there is an increase in the anti-conventional-agent noise that is coming from the cut-rate, mostly online-driven, so-called real estate agencies that have emerged from nowhere recently.
They almost inevitably provide far less service than conventional, hands-on, agencies. Yet they seem naively to claim that, by eschewing, or excluding services and activities that normal real estate agencies provide, they produce a better result. The reality is that buying a home is not like buying groceries online. It is a process that should involve all our senses. It simply cannot be achieved off a laptop screen!
Author: Ronald Ennik
