South African Estate Agents Feel the Pinch

Troubled Times for Estate Agents

An article published on the IOL website draws attention to the plight being suffered by real estate agents across South Africa. Hard times in the property industry have literally decimated the numbers of estate agents around the country, especially those who jumped on the bandwagon to make some money during the property boom.

The current economic slowdown has been punctuated by spiraling interest rates and rising food and fuel prices, but to make matters worse, the tougher credit laws have reduced sales by up to 30%. This has caused many struggling estate agents to cut their losses and leave the industry.

Concerns about the property industry were raised at the Nedbank Property Association Awards held in Cape Town last week, where many estate agents complained that the National Credit Act was killing the market, particularly for properties priced in the range of R250 000 to R1 million.

Many potential buyers have been refused loans by banks because of poor credit records and stricter lending criteria. There has been a call for the government to step in and provide previously disadvantaged buyers with collateral, deposits and subsidies to remove the risks to banks.

Currently, banks reject around 15 to 60 percent of bond applications in the range of a quarter of a million and a million rand. However, there are some players in the industry who believe that there are plans in the pipeline to amend the National Credit Act so that housing and car loans receive different treatment.

Tony Bailey, director of Platinum Property Trends, said that he had it on good authority that the government was taking another look at the act. “There are pending changes because the government had good intentions but did not realize the gravity of the act’s implications”.

Bailey went on to describe the many estate agents who have left the industry because of the slower economy as “chickens that entered the market for easy pickings”. He called their entry into the market a “feeding frenzy”.

In order to survive the current downcycle, many estate agencies had made a move to sell property overseas, in response to the heightened demand by the more affluent South Africans looking to buy property overseas for investment purposes.

Jeanne van Jaarsveldt, marketing and finance director of RE/MAX Southern Africa, said that while there had been a 7 percent drop in the number of real estate agents since the beginning of the year, about 311 new agents had joined the group. Two offices have been sold and would soon be re-opening. An investment of R9 million has been invested on brand positioning, with a focus on increased advertisement.

According to van Jaarsveldt, a lot of the agents who have pulled out of the industry should not have been there in the first place. Also, “a lot of agents are moving from smaller brands to the bigger ones”.

Andrew Golding, director of Pam Golding Properties, said that in today’s rapidly changing climate, a different kind of expertise is called for than that required during the boom years. The unprecedented growth over the last five years had upped the ranks of estate agents in South Africa by at least 40 percent.

However, now that the selling pattern has changed, so have the methods of selling altered and the survival of estate agents in the current market will depend on their ability to focus more precisely on training and skills.

The information in this article is courtesy of Melanie Peters (“Hard times for estate agents”, Cape Argus, 26 July 2008).

Visit www.sahometraders.co.za if you would like to buy or sell property in South Africa.