SUNDAY STAR TIMES - Slowdown will thin estate agency ranks. The real estate industry is battening down after a slide in house sales in July. Martin Dunn, the managing director of Auckland apartment specialists City Sales, said he had already put a plan in place to cut $20,000 a month from his firm’s overhead expenses and had a contingency plan to cut another $40,000 a month if the market got any worse. REINZ figures show the number of homes sold dropped to 6660 in July from 7474 in June. That was well below the normal level of sales for the time of year, with 7761 homes selling in July last year and 8135 in July 2005. Dunn said the recent collapses of several finance companies and ongoing sharemarket volatility were adding to uncertainties in the property market. He believed most real estate companies would move quickly to adjust to a tougher market if it headed into a sustained downturn. “The agencies are pretty good at battening down the hatches because we go through these cycles all the time. But you need to be agile to survive.’’ Harcourts chief executive Bryan Thomson said smaller, independent firms probably would be worst affected. “There’s a saying in yachting that you find out who the best yachtsmen are when the wind’s not blowing and in any industry, when trading conditions get a bit tougher, that’s when good people come to the fore. Certainly the environment at the moment is a bit different. “I think the big companies who have been investing in their people and services will survive and continue to do well. Where the pressure will come on is around the fringes.”

Layne Harwood, chief executive of Christchurch-based real estate company Simes, said he believed the market was simply returning to more normal levels of trading after a five-year high. This may be a problem for newer players who had operated only during buoyant times and had no experience of quieter trading conditions, he said. However, it would probably be individual salespeople rather than the companies they worked for that would be most affected by a sustained downturn in sales.

The accompanying table shows the number of residential sales in July for the past three years and their combined value. It estimates the amount of agent’s commission paid on the average sale price and this has been multiplied by the number of sales to estimate the total amount of commission revenue the industry earned each month. This shows that while there was a sharp decline in the number of sales in July this year, the total amount of commission earned by the industry had remained remarkably flat, at just under $l00m a month. This was because the commission lost from fewer sales was largely offset by rising prices, which had pushed up the average commission. Real estate commissions are shared between the salespeople who handle a sale and the agencies they work for. Because the overall amount of commission paid has remained flat year on year, the agencies’ share has probably also stayed about the same level or declined only slightly. However, the decline in the number of sales meant fewer salespeople were getting paid. According to Thomson, this will force some salespeople out of the industry. “What happens when volume drops is that salespeople who are playing around the edges don’t get anything. But the ones who are career realtors, who are doing a good job, actually get more. That’s because the people looking at selling, know they need to deal with the best people and the best companies, whereas when the market is very active, they may just list their property with friends or relatives (who are real estate agents) because they know it will sell anyway. “But when it gets a bit tougher they all congregate around the best people.” Thomson believes September will be the crunch month and is hopeful that sales levels will pick up this month. “We’ve seen all this negative rhetoric from the government and Reserve Bank and multiple rises in mortgage rates and we’ve had horrible weather. So people have held back from making selling decisions. “We’ve been going through a transition period but I think we’ll see more listings this month as we always do in spring and that will drive more volume. But at what level? September will tell the story,” he said.