Bear market to sink its claws into agents' jobs

• Chris Vedelago
• The Age
  
• July 14, 2008

REAL estate agents are seeing their income fall by as much as 20% as Melbourne's property market continues to soften.

More than six months of weakening sales levels and sliding property prices are reportedly starting to take a toll on agency revenues and salaries, which are heavily dependent on the 2% to 5% commissions made on sales.

Real Estate Institute of Victoria data shows the rate of sales by auctions is down by nearly 14% so far this year, with 1265 fewer properties changing hands than in the year ending the first week of July 2007.

The clearance rate, which averaged 83% to July last year, has fallen to just 66%, the lowest it has been since the weaker market of 2005.

The financial effects of the reduction in activity are being compounded by flattening or falling prices in many of the city's suburbs.

The REIV reported median house prices fell across the metro area by 8.4% in the March quarter, while RP Data has estimated they fell by up to 2% in the three months to May.

"The industry is probably seeing a 10% to 20% drop in revenues that is mirroring the fall in the number of transactions," said REIV chief executive Enzo Raimondo. "It will be felt in some areas and by some operators more than others."

Buyer's advocate Christopher Koren, of Morrell & Koren, told The Age that some big industry players were now budgeting to reduce turnover by 30 to 40%. "It's not going to be long before staff cuts happen," he said.

One agency director, who asked to have his name withheld, told The Age that agents who were not regularly making sales — and paying back their retainer — could expect to find themselves out of a job within months.

None of the agencies contacted by The Age has admitted cutting jobs yet for financial reasons, although all reported that expenses were being slashed and some were reviewing their commission structures.

Craig Stephens, director of Jas H. Stephens, said: "In a bear market, the top four agencies in a given area will do well, with the rest left to fight over the scraps."

With NATALIE CRAIG