When times were good, all one needed to become an estate agent was a ‘rust bucket’ and a cell-phone.
Upmarket agents had vehicles with four doors. It was the only industry where, with little education and a wide circle of acquaintances, one could earn a five-figure income. In a booming property market selling real estate was ideal for bored housewives, otherwise known as the ‘handbag brigade’. The economic downturn has caused trouble in paradise and, by the looks of things, has changed the industry forever.
Agents are becoming rarer than wealthy hedge fund managers and many are leaving the industry at an astonishing rate.
Where have they gone and what are they doing? No one really seems to know. However, one thing is evident – the number of agents has dropped significantly over the past two years. According to the Estate Agency Affairs Board (EAAB), agents who have left the industry number in the region of 42 000.
This is not necessarily a bad thing. The industry attracts a lot of excess baggage when times are good. When things get tough, however, they leave. This is confirmed by Dr Andrew Golding, CEO of Pam Golding Properties who said, “It is not uncommon in our industry, with traditionally such a low barrier to entry, for there to be a significant reduction in the number of agents when the market slumps. But what I have experienced with this downturn is unprecedented.” Cheri Eilertson from Platinum Planet, well known for her real estate motivational seminars, maintains that agents who are still in the industry are those for whom real estate is a profession and not a get-rich- quick scheme.
“Good agents understand that our industry is cyclical and they take the good with the bad. Fly-by-night agents exploit the boom times and run as soon as times get tough. This was highlighted recently at a seminar in Durban, where most of the 240 agents in the room had been in the industry for 10 years or more and have the skills to weather the current economic storm.”
She may have a point. The inflated number of agents has to have had an impact on those who have always considered selling real estate a long-term career. The drop in the number of active agents must, to a large extent, come as a relief to dedicated property professionals who are there for the long haul.
According to Dr Willie Marais, national president of the Institute of Estate Agents, there were approximately 80 000 estate agents in South Africa in 2007.This figure dropped to around 38 000 in 2009. This comes as no surprise, he said, as the industry has often seen the number of estate agents increase and decrease as a result of the ebb and flow of the property market which occurs every eight to 10 years. However, according to Dr Marais, new factors are at play, which make it unlikely that the industry will see a fundamental increase in the number of agents when the current cycle changes.
“New legislation governing training is further likely to convince older agents to retire rather than conform to the prescribed qualifications. Equally, it may reduce the number of new entrants to the market.”
Dr Marais maintains that this will make it far more difficult for property groups to recruit and retain top performers.
There can be little doubt that the larger property groups are aware of the challenges they face in the future and are trying to hold on to the agents they currently employ.
Pat Acutt, chairman of the Acutts group, said that his company is well aware of the danger of losing good agents and has launched an initiative aimed at keeping their agents working.
“The loss of agents has had a significant impact. In an effort to combat this, we are currently rolling out a programme suggesting that agents in certain areas work from home under the Acutts banner,” he said. “These agents all have a good reputation and are well known in the areas in which they work. They will have the full support of the group and once the economic climate improves, these agents will be encouraged to open offices.
The downturn, while affecting agents as individuals, has also affected the number of estate agencies. During the boom, agencies were popping up like mushrooms. In some areas it seemed as though every second shop in the high street sold houses. This picture has changed. In many cases, independent agencies have found the rollercoaster ride of property too tough to handle. Some have closed their doors while others, especially those which have built a solid market share in their areas, have been snapped up by the larger groups.
“Traditionally, we grow our market share during difficult times,” says Dr Golding. Smaller real estate operators simply do not have the economic reserves and infrastructure to cope with current conditions and as a result may drop out of the market.” The Pam Golding group has absorbed a number of agencies in South Africa and has expanded its Mauritian and Mozambique offices.
Harcourts Africa is also expanding its franchise base and, apart from taking over the Homenet brand, has added 18 new offices to its portfolio since the introduction of the brand to South Africa at the start of the year.
Does this mean that independent agencies are a thing of the past? According to Dr Marais, while training and economic factors will certainly make life more difficult for independent offices, he doesn’t foresee their disappearance.
He pointed out that when the economy improves, top agents’ income will escalate and many may prefer to strike out on their own. In fact, he added, it wasn’t too unrealistic to speculate that the majority of agents will still work for smaller independent agencies.