“As the number of property sales within the real estate industry reduces due to higher interest rates and slowing market conditions, we will see an increase in the number of agencies that will either look to close their doors completely or look to merge with other larger agencies," says Chris Goodway, a business consultant from The Rent Roll Broker. “This year (2008) the industry has been suffering from falling sales volume, flattening prices and historically higher interest rates. So for many agents, operating costs are up, while commission revenue is down.”
In South Australia we believe that up to 10% - 15% of real estate agents will either close or change ownership within the next 12 months. Nationally we have seen a 20% increase in the number of agencies up for sale this year from July, most of which were retiree or succession sales. Those agencies that have used the previous strong market conditions to develop their businesses and establish a firm financial foundation are now in a position to take advantage of this market. The Rent Roll portfolio which provides the agent with continuous cash flow each month has now, more than ever, become an important and integral part of the agencies business. Agencies operating extensive property management divisions -- rather than just relying on sales revenue -- and those who have taken time to develop this part of their business find that even though times will be tough, they can restructure and survive. Some will even be able to show good solid growth in this time through mergers and acquisition of other agencies and rent roll portfolios. We have a large number of these established agencies on our books looking for this type of opportunity right now.
In post World War II Australia, a traditional real estate agency was strongly property management based with only a small sales division. Since the 1970s this has reversed as sales became the primary income producer of an agency. However, the foundation that the rent roll portfolio provides to an agency will be clearly seen in these tough times, and I believe we will once again see the rent roll portfolio become far a more prominent component of the traditional real estate agency office.