Real estate agents are starting to feel the brunt of falling house prices and fewer sales, with some leaving the industry or picking up second jobs to supplement their often dwindling or non-existent real estate incomes.
Professionals McDowell Real Estate managing director Steve Lovegrove, who has offices in the Bay of Plenty and Waikato, said the market had “turned upside down” not only for buyers and sellers, but also for real estate agents.
Last year agents were fighting over each other and “throwing everything they could almost to the point of doing it for nothing” to get a listing, because they knew the property would sell within four to six weeks, he said.
But that model of under-cutting no longer worked, and agents who continued to play that game ran the risk of being left with big marketing bills to pay.
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“The average real estate sales person earns a reasonable to modest income - not all real estate agents are making lots and lots of money - so when they start dismantling their profitability of margins in the sale, matters get worse,” Lovegrove said.
“Sales people are making less per sale and the sales volume has significantly dropped so we are facing the perfect storm in terms of people probably having to get out of the business and out of the industry.”
Lovegrove said it was “going to get very, very tough for some people”. Just this week he had one agent leave to return to his previous industry because he could see there was no income in sight in the new year for him, but the lack of money coming in is also on other agents’ minds too, he said.
Sales figures recently published by Auckland’s largest agency show the change in real estate fortunes.
Barfoot & Thompson recorded 700 sales last month, and while that was an improvement on October's sales figure, it was still 482 fewer sales - and 482 fewer pay cheques - than in November 2021. The agency failed to see the traditional spring lift, with month-end stock for the agency in November hitting a high of 5052 (up 28.5% on November last year), which speaks to the glut of properties still on the market and yielding agents very little in the way of income.
Nick Kochhar, business owner of Harcourts Mt Roskill, in Auckland, said about three of his agents had taken full-time jobs in other industries in order to pay their mortgages and were now doing real estate part-time. “They are still working with the buyers in the evening to get things rolling,” he said.
Sales were still happening, he said, with his office selling six properties in the last week, but it was a lot harder to get deals over the line. “It’s hard out there, but those vendors that are realistic they are still selling.”
Kochhar said agents needed to be really motivated in this market and work with both the buyer and seller.
He also encouraged his agents to be active and to reach out to those in their database. “If you can do transactions in this market ... in an easy market everyone can do it.”
Harcourts Glenfield agent David Ding, who started in real estate as the effects of the GFC were making themselves felt, said agents had to have a financial cushion to tide them through the tough times.
Harcourts agent David Ding: “I'm Asian, it's in my blood to save for a rainy day.” Photo / Fiona Goodall
“I don't pay too much attention to the competition, but there will be some agents leaving next year. It's been a slow-cooker effect, rather than a microwave effect, and those without a profile or a database could be in trouble,” he said.
“I'm Asian, it's in my blood to save for a rainy day, but some people's shopping habits there's lots of money for the ego bags, the clothes, the expensive car - you have to focus and plan for a rainy day, as well as a sunny day.
“There's a saying 'in the right wind, even a pig can fly'. Anyone could sell last year, this year you have to have systems and processes,” he said.
And a signed sales and purchase agreement was not a guarantee of a sale in this market as contracts can still fall over in the 10 days between conditional and unconditional or even fail to settle once buyers have gone unconditional, Ding said.
Lodge managing director Jeremy O’Rourke said his agents were feeling a bit optimistic after seeing investors and first-home buyers return to the market last month, but some agents’ futures might depend on the state of the market early next year.
If the traditional February and March lift did not come, “I think there might be some casualties”, he said.
O’Rourke said about three agents had left so far this year, but it was hard to know whether they were leaving because of the downturn or if they had decided it just isn’t the right career for them.
“Many of them have been through these types of slow-downs so in the good times they bank a little and they know that they’ve actually got to get through short periods of time where the market does actually go a little bit cold.”
