Real Estate Agents Falling Like Flies!

As my stay in Germany comes to a close my thoughts turn again to real estate and what is happening back home. As I was surfing the net I came across a story by the Real Estate Institute of Australia president David Airey, which stated that 10,000 out of 60,000 sales representatives have left the industry in the past 12 months.

With sales volumes down between 30 and 40% since 2009 real estate agents and salespeople are experiencing lean times. Depending on whose figures you accept between 80 and 90% of salespeople drop out of the industry within 2 years of starting. You’d think with those statistics people would be deterred from entering an industry which initially promises 7 days a week work for no great reward.

The Paretto Principle comes into play again which says that 20% of salespeople are doing 80% of the business. So as the cake continues to shrink it is little wonder that so many are leaving the industry. After all we all need to eat.

But a downturn in the housing market doesn’t only hurt real estate agents. There many people who rely on property transactions to earn an income, such as settlement agents, mortgage brokers, solicitors and removalists to name but a few.

This could involve many thousands of people directly and indirectly. This is one reason why governments try to prop up the housing market with various grants and tax concessions. No government wants to preside over higher unemployment due to a collapse in the housing market. However, all they are doing is delaying the inevitable, the market will have its way one way or the other.

There is also such a thing as the wealth effect …

I am sure you, like most people, feel wealthier when house prices are going up. That being the case we are more confident to spend, spend, spend even if we are using our house as an ATM.

In the United States, and I would suggest the same applies in Australia, consumer spending accounts for 70% of economic production. It is easy to see how a downturn in consumer confidence and hence spending leads to a slowing economy and higher unemployment.

Having said that, economic upturns and downturns are part of the cyclical nature of things. Downturns provide opportunities to buy, whereas booms provide opportunities to cash in, if only we were so disciplined.

It just depends on how we see things. Glass half full or half empty. As Shakespeare said “for there is nothing either good or 
bad, but thinking makes it so.”

I’m interested in your thoughts so have your say….

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