Tougher market set to test Australia’s real estate workforce

A softer property market is beginning to place greater pressure on Australia’s real estate workforce, with industry leaders warning reduced transaction volumes could force some agents from the sector while placing renewed emphasis on prospecting, negotiation and vendor management.

Australia’s changing property market is beginning to reshape the operating environment for real estate agents, with lower transaction volumes and more cautious buyers creating conditions markedly different to those seen through much of the recent property boom.

Industry leaders believe the adjustment could ultimately lead to a contraction in the number of agents operating across the country, particularly if subdued transaction levels persist.

Real Estate Institute of Australia chief executive Jacob Caine has suggested the industry could potentially see a significant reduction in agent numbers under prolonged weaker conditions, noting previous property downturns have historically resulted in some practitioners leaving the sector.

The shift comes after several years in which exceptionally strong buyer demand, rapid price growth and relatively short selling campaigns supported transaction activity across large parts of the country.

As those conditions moderate, the fundamentals of agency are once again becoming increasingly important.

A different operating environment

For many agents, the most immediate challenge is not simply falling property prices.

It is reduced transaction volume.

Fewer properties changing hands means increased competition for listings, greater pressure on agency revenue and a heightened need for agents to generate business rather than rely on broader market momentum.

That environment is expected to place greater emphasis on prospecting, database management, buyer engagement, vendor communication and negotiation.

Ray White managing director Dan White has indicated that more difficult markets can also create opportunities for experienced agents and businesses to increase market share.

Strong operators can often become more valuable in slower conditions, particularly when vendors require greater guidance around pricing, campaign strategy and buyer expectations.

The difference between managing a transaction and creating one can become considerably more apparent when competition between buyers begins to ease.

Transaction volumes under pressure

Early signs of that adjustment are already emerging.

REA Group senior economist Anne Flaherty has pointed to softer property price conditions across a number of Australian capital cities, while major agency groups are also reporting changes in transaction activity.

Ray White has recorded a decline in the value of unconditional sales in recent months as broader market conditions have softened.

Reduced sales volumes create an obvious commercial challenge for the agency sector.

Commission-based businesses remain highly sensitive to transaction activity, meaning a prolonged reduction in property turnover can place pressure on both individual agents and agency profitability.

For businesses carrying substantial fixed costs, the impact can be particularly pronounced.

Skills returning to the forefront

One consequence of the changing market may be a renewed focus on traditional real estate skills.

During periods of strong buyer competition, urgency is often created naturally.

Multiple offers, rapidly changing prices and strong auction competition can accelerate decision-making and shorten the gap between listing and sale.

Slower markets require a different approach.

Agents must understand buyer objections, manage vendor expectations and create a pathway towards agreement when the two parties may begin the negotiation considerably further apart.

Negotiation, in particular, is expected to become increasingly important.

Agents who entered the industry during the strongest years of the recent property cycle may now encounter market conditions they have not previously experienced.

For agency leaders, that places additional importance on training, coaching and performance management.

Pressure extends beyond selling agents

The adjustment is not limited to traditional residential sales.

Australia’s buyers’ agent sector expanded significantly during the pandemic property cycle as investors and owner-occupiers sought professional assistance navigating highly competitive markets.

Changing investor activity and softer market conditions are now creating different challenges for that part of the industry as well.

Real Estate Buyers Agents Association of Australia president Zoran Solano has noted increasing competition within the sector as buyer activity adjusts.

Businesses that grew rapidly during particularly active market conditions may now need to reconsider their positioning, lead generation strategies and client mix.

A test of business fundamentals

A contraction in agent numbers would inevitably affect parts of the industry, but a more difficult market does not necessarily represent a negative environment for every business.

Historically, changing markets have created opportunities for established operators with strong systems, experienced teams and disciplined prospecting practices to consolidate market share.

The same applies at an individual agent level.

When property is selling quickly and competition is intense, the difference between individual agents can be difficult for consumers to identify.

When conditions become more challenging, experience in pricing, communication, negotiation and campaign management can carry considerably greater weight.

For Australian real estate, the next phase of the property cycle may therefore be as much a test of capability as it is a test of market conditions.

The agents and businesses best positioned to navigate that environment are likely to be those that can generate opportunities, manage expectations and deliver results when the market itself is no longer doing as much of the work.

Source note: Industry figures, market data and comments referenced in this article were sourced from reporting by The Australian. Analysis, context and editorial interpretation by Real Estate Today Australia.