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Despite announcing 12 new offices across Raine & Horne’s network in October, executive chairman Angus Raine says the first half of 2017 will be rough for most real estate businesses.
Mr Raine says he is confident of a stronger market towards the end of 2017, but a “critical” shortage of listings will see many in the industry facing a challenging initial six months.
Some agencies will be forced to reduce costs, forcing “amazing” talent leave the industry.
The biggest disrupter the industry faces is the drive to reduce margins, an effect of the heavy discounting of commissions, Mr Raine said.
“[In addition] many businesses and salespeople are willing to pay referral fees to lead generators, when the cost of a sale is continuing to increase and business owners are facing the challenge of ‘sign-on fees’ for key staff and some salespeople commanding higher commissions,” he said.
“If the trend continues, many businesses will not be able to achieve reasonable returns, thus resulting in some being forced to merge or sell.”
Additional factors contributing to the chronic stock shortage include “varying economic conditions, record-low interest rates and a high cost of sale, including legal and government charges”.
“Many who may be looking to downsize are faced with the dilemma of paying more for a townhouse or unit, where in the past they had the ability of selling the family home and having the luxury of putting some money aside for a comfortable retirement,” Mr Raine said.
“The shortage of listings is compounding the issue, with many concerned there won’t be a suitable property to buy. Owners are therefore delaying a listing until market levels improve.”
Mr Raine said the Raine & Horne group can take advantage of the eventual change in the market as it will be able to absorb any short-term downturn.
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