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Agencies Grow on the Back of a Strong Market Cycle, Macquarie

Macquarie Business Banking’s 2014 Real Estate Benchmarking Report (the report) reveals a strong market cycle has led to increased revenue and profit growth for Residential Real Estate Agencies, with more than three quarters (79 per cent) of agencies’ gross revenues increasing over the last 12 months (up from 47 per cent in 2012), while 68 per cent of agencies are more profitable.

The biennial report, based on responses from 460 real estate agencies nationally, is the fourth from Macquarie in the past eight years and identifies the key drivers of business performance, maps financial standards and provides a comprehensive view of industry trends.

Almost half of agencies (47 per cent) said profits increased due to revenue growth and less than one in three attributed higher profits to improved efficiency (31 per cent). While profit has increased in line with revenue, profit margins have remained stable, suggesting an increase in costs.

Daniel Evans, Head of Residential Real Estate, Macquarie Business Banking, said that as agencies continue to grow, it is important that they look at business efficiency and productivity to help limit their exposure to risk, if the market was to turn.

“To build success that is sustainable, agencies must develop a strong value proposition, an exceptional workplace culture and efficient processes,” Mr Evans said.

Despite strong property sales, the research indicates that property management is more important than ever, now accounting for 44 per cent of overall agency revenue.

“Property management is growing in importance every year, with the report showing the number of properties under management has soared from a national average of 375 per agency in 2009 to 508 in 2014. Additionally, the value agencies attribute to their rent rolls has also increased, with perceived valuations up from an average of three times recurring commissions in 2012, to 3.04 times this year.

“It remains a key driver for agencies’ overall performance, with agents highlighting they are equally likely to attribute increased revenue to a lift in property management income (75 per cent) as to a rise in sales revenue (77 per cent).”

To outperform in the current competitive environment and create a high performing culture, Mr Evans said agencies should look at ways to improve productivity and staff engagement levels.

“Staff numbers have increased nationally to capitalise on the market boom, however there is intense competition for skilled people and it has been clear over the years that many agencies also need to focus on developing their existing team.

“Agencies are increasingly looking to nurture and reward talented staff. This year the main area agencies looked at to improve people management were setting KPIs and conducting regular staff reviews (52 per cent).

“Agencies will look to maintain momentum and take advantage of the strong market over the next 12 months by focusing on sales, business development and marketing (65 per cent), followed by staff management (60 per cent) and training and skills development (49 per cent),” Mr Evans concluded.

For more information please visit http://www.macquarie.com.au/mgl/au/business/tools-and-insights/industry-benchmarking/residential-real-estate.

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