Just over one in five agencies did not make money in the most recent financial year, yet many that did turn a profit had robust property management businesses, a new report has found.
Macquarie Relationship Banking’s 2012 Residential Real Estate Benchmarking Report, released last week, revealed a number of key trends from across the industry. Based on responses from 416 agencies nationally, this is the third such industry survey released by Macquarie Relationship Banking, following reports in 2007 and 2009.
In the latest report property management continues to grow in importance, with revenue from the rent roll now accounting for 42 per cent of total revenue (up from 36 per cent in 2009) and the average rent roll size increasing from 375 in 2009 to 436 in 2012.
“Property management revenue has increased from previous surveys, and the outlook from agencies indicates this trend will continue in the future,” the report said.
“Results have also shown a strong correlation between profitability in agencies and properties under management, with larger portfolios seen as profitability increases.”
More than a fifth (22 per cent) of all agencies did not make a profit in the financial year, although 58 per cent achieved a return above 10 per cent, and one in ten of total agencies achieved a return of more than 30 per cent.
Almost a third of all agencies (31 per cent) are considering selling all or part of their agency in the next three years with the clear preference of those considering selling being a staged, internal sell-down and exit (38 per cent).
Yet of those considering a sale, only 52 per cent have a succession plan in place.
The report found that, in the past year, the average agency completed 106 property sales charging an average commission of 2.6 per cent.
“The number of sales has fallen from an average of 126 in 2009 and 151 in 2007, reflective of lower turnover in the market,” the report said. “Agents have mostly held or improved on commission rates, a positive outcome particularly given tight economic conditions.”
“Also impacted by weaker economic factors and property markets, the national average for days-on-market was 74 days, up from 67 in 2009.”
The report found the average top salesperson within offices generated $250,000 in gross sales commissions for the business, down from $323,000 in 2009. While the average business gives away 43 per cent of gross sales commission to the sales agent.
“Looking at property managers, those with greater than three years experience had an average salary of $58,068 and those with less experience an average salary of $45,182,” the report said.
More than 60 per cent of business owners thought their sales business had a market value, while the average rent roll valuation multiple held steady from previous years, at 2.9 times recurring property management commissions.
Looking ahead, the report found that sales, business development and marketing were ranked highest (63 per cent) in a list of factors for business focus in the coming 12 months, followed by cashflow management (51 per cent) and monitoring plans and performance (48 per cent).
“Almost half (49 per cent) of agencies feel the residential housing market will remain stable,” the report added.