Agents dropping out as market turns

Real estate veteran John McGrath, who from today will step away from his role as CEO of the real estate network, says agent numbers are contracting across the industry as real estate professionals face ongoing pressures in tougher market conditions.

McGrath yesterday released its full-year results, and announced Mr McGrath would cease his CEO duties "to focus on brand, growth and innovation". Cameron Judson, who was appointed joint CEO in July 2016 will assume full-time CEO responsibilities. 

The network's results showed strong metrics across its real estate business – with agent numbers growing by 77 to 642 over the 12 months to 30 June and 20 new offices opening – however, Mr McGrath said the industry is facing ongoing challenges as residential markets continue to cool.

“We are definitely seeing a contraction in agent numbers across the whole industry. If the best agents are finding it tough, then the newbies are finding it very tough,” Mr McGrath said.

“We are seeing a bit of a dropout, probably more from our competitors. We train for these sorts of conditions. We are well positioned because we have an average tenure of nine years for our top 50 agents. In some ways we will be better positioned than our competitors because of the experience of our team, but there has certainly been a bit of a shakedown of the industry because of the trading conditions over the last six months.”

The industry is also experiencing pressure on commission rates, admitted Mr McGrath, though he remained confident that a recent listings surge and strong auction activity could signal a return to normal operating conditions.

“If we were to see a structural change and the numbers we have seen over the last six months were to remain, that would definitely have a detrimental impact on our average fee,” he said.

“But if we do normalise, as we think we will, I think we will see a return to the levels we have experienced not just last year but over the last 25 years. We have seen a very minor drop-off in the average commission rate, which isn’t surprising given that a third of the listings basically disappeared.”

Aside from the contraction in the market, the real estate industry pioneer said McGrath Limited is in “a great shape” to continue to grow over the medium term.

“We are seeing very recently a significant uptick in listing inquiry. We think it will be a more positive spring than it was an autumn.”

In a trading update the group noted that its market share by sales value had grown over the year to 3.4 per cent, slightly behind LJ Hooker at 4.8 per cent.

Speaking at a press conference yesterday, Mr McGrath highlighted the success of the group’s agents, 30 of whom were named in REB’s Top 100 Agents ranking earlier this year.

“Real Estate Business, which is really the industry benchmark that tracks these numbers, produce an annual survey of the top 100 agents and we are delighted and proud that 30 per cent of that particular group work within the McGrath network,” he said.

“We are even prouder still that when REB released a subset of that, which was the top 50 female agents in Australia, about 26 per cent of those are working for our brand. We think we are very well positioned both in terms of our existing footprint of offices and a strong pipeline of new offices and new agents to join the business.”

Mr McGrath told REB that having a strong brand and leadership team will be critical for new agents navigating “choppy” market conditions.

“If you have been through cycles such as this as a brand and leadership team, I think that helps. People look to leadership to understand what to experience next. We can say, hand on heart, that there will be a cycle, and this one may go for three months, six months or 12 months but the market will return,” he said.

“You have to know the basics and you have to nail the things that are critical, which are prospecting, listing and creating raving fans for the future. They are the important things.

“Some new people in the industry will remain in the industry and continue to do very well. But if you are not organised or highly professional or being coached and mentored by a management team with experience, these will be tough times. It might continue to be a little bit choppy.”