One in five Queensland and WA real estate offices made a loss in 2011: Macquarie Benchmarking Report

One in five estate agencies in Queensland and nearly the same proportion in the other mining boom state WA (18%) made a loss in 2011, according to the Macquarie 2012 Residential Real Estate Benchmarking report.

The proportion of loss-making estate agencies in these two states is higher than in any other mainland state according to the report, based on Macquarie’s survey of 416 agencies carried out in February.

The figures are before principles pay themselves a salary.

The president of the Real Estate Institute of Western Australia, David Airey, said he was not surprised by the finding saying that in 2011 his state experienced three quarters of declining house price following four quarters of decline from the previous year.

He says for WA estate agents the key issue has been the slump in turnover.

“Consumer confidence has been very low for the last couple of years resulting in very sluggish turnover, which at times has been 30% below normal expectations,” Airey says.

Just 71% of Queensland agencies made a profit – the lowest proportion of all states – compared with a national average of 77%.

WA agents performed better, with 78% reporting a profit.

Around 14% of NSW real estate agencies made a loss in 2011 -just below the national average of 15%.

Despite its lacklustre property market, Victoria had the smallest proportion of firms making a loss (6%), with 85% of Victorian real estate agents making a profit in 2011 – helped by a greater focus on property management than other states.

The report notes that Queensland and WA agencies far exceed the average in terms of loss-making agencies in the period.

“They are also the two states which faced arguably the toughest sales markets in the period, excepting some regional centres that benefited from resources sector strength,” says Macquarie.

Further evidence of the tough operating environment in Queensland and WA was evidenced by the number of agencies in these two state reporting declines in gross sales commissions and agency revenue figures.

• About 56% and 49% of Queensland and WA agencies respectively reported declines in gross sales commissions, against a national average of 46% .

• About 46% and 45% of Queensland and WA agencies respectively reported declines in agency revenue, against a national average of 40%.

The report attributed the high proportion of Queensland agencies making a loss to a “well-documented period of natural disasters (including the Brisbane floods) in early 2011, which had a direct impact on the sales market and agencies”.

In comparison, the report says although Victoria also experienced a high number of agencies recording declines in agency revenue and gross sales commissions (46% and 52% respectively), “what is known for certain is that agencies in Victoria have rent rolls that are 35% larger, by properties under management, than the national average”.

The report found that the industry has shifted to greater focus on property management with revenue from the rent roll now accounting for 42% of total revenue in 2011 compared to 36% in 2009 with the average rent roll size increasing from 375 properties in 2009 to 436 in 2012.

Nationally, 39% of agencies reported an overall increase in profit while 42% reported a decrease.

Nearly a quarter of agencies (22%) did not make a profit in the financial year, while 58% achieved a return above 10%.

The best-performing agencies (profit margins of greater than 30%) accounted for just 10% of total agencies that took part in the survey.