Bankwest Future of Business: Focus on Real Estate 2018
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Bankwest Future of Business: Focus on Real Estate 2018
Contents
Key insights 4
Industry overview 5
What’s driving industry
growth? 6
Spotlight on Australia 7
Spotlight on Western
Australia 8
What does the future hold? 9
What challenges does the
industry face? 10
Where do the opportunities
lie? 11
Forecasted industry growth 12
3
Key insights
Foreword
Understanding factors impacting your industry, Following colossal growth rates on the east
and how other businesses in your industry are coast in recent years, revenue nationally is
performing, can be a great gauge for how your projected to stagnate in coming years as
business is tracking. house prices begin to normalise. Falling prices
are expected to curb property operator and
The Bankwest Future of Business: Focus on real-estate agent revenue, particularly in the
Real Estate Agents Report is designed to give eastern states.
you a snapshot of the current and expected
future state of your industry, which could help In Perth, however, house prices have been
you plan and spark ideas. The report covers on a downwards trajectory since mid 2015
Australia’s real estate agents, summarising suggesting there is more upside potential.
trends based on statistics from IBIS World, The median house price fell to $512,000 in
the Australian Bureau of Statistics and other September 2017, down from $550,000 in
reputable sources. September 2014, with average selling days
increasing to 70 from 47 during this period2.
There is notable variation in vacancy rates and
housing affordability across the nation. Low Bankwest’s 2017 Financial Indicator Series First
vacancy rates on the east coast and increasing Time Buyers Report found Western Australia’s
housing costs have resulted in strong industry first time buyers are injecting life into the
profits across real estate services. Sydney and state’s property market, fuelled by the drop in
Melbourne recorded the strongest upswing in house prices. There are more first time buyers
dwelling prices at 74.2% and 49.7% respectively as a proportion of total buyers in WA than
in the five years to June 20171. In Perth, anywhere else in the country. WA first time
however, housing prices rose by just 3.7% buyers made 21.7% of all purchases in the year
over the five-year period, while vacancy rates to June 2017 – the highest proportion in the
remain at high levels of 6.9% in the 12 months country.
to September 2017, highlighting the gap in
housing affordability between the east and Vying for attention in a growing industry,
west coast. marketing is becoming a larger portion of real
estate service costs as companies focus on
building brand awareness.
1 ABS 6416.0
2 REIWA
4
Industry overview Sector
Real estate services, which includes both residential and commercial real estate agents and covers
valuing, purchasing, selling (by auction or private treaty), managing or renting real estate, accounts breakdown
for $14.4 billion in total industry revenue. Commercial real estate agents account for just $1.7
billion of total revenue as of 2017. Annual growth, however, for commercial real estate agents is Commercial real
expected to exceed overall industry growth for real estate services in the five years to 2018. 1,957
estate agents
16 16
Real estate services 38,439
12 12
Billions ($)
Real estate
8 % 8 services
Commercial real
4 4
estate agents Primary activities
0 0
Revenue Profit Annual growth 2012-17 Broking service (real estate)
Source: IBIS 2017
Real estate agency service
Real estate services employment, seasonally adjusted, 2007-2017 Real estate auctioning service
130,000 Real estate management service
125,000
Real estate rental agency service
120,000
115,000 Time share apartment management
110,000 service
105,000
Valuing service (real estate)
100,000
95,000 Source: IBIS 2017
90,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: ABS 6291.0.55.001
Growth in Australia’s residential and commercial property stock, as well as rising property prices
are driving increased employment within the sector. Total employment in the real estate services
sector rose by 7.8% in the five years to August 2017 to 125,100.
5
What’s driving industry growth?
In WA, subdued property Lower Reserve Bank of Australia interest rates for housing finance have improved mortgage
affordability for Australian buyers and led to increased demand for real estate services. The lending
prices have reduced the rate for a standard owner occupier loan was 5.2% as at December 2017, lower than the 6.6%
number of enterprises over 10-year average, making buying a property more attractive despite rising prices in many states.
the past 5 years, likely due
to less demand for real RBA lending rate, 2012-2017
estate services following
the end of the mining 8.00
construction boom. 7.50
7.00
6.50
Percent (%)
6.00
5.50
5.00
4.50
4.00
2012 2013 2014 2015 2016 2017
Source: RBA 2017
Housing
House purchases Rising house prices
nationally have across Australia have
increased across contributed to growing
new and established industry revenue, driven
dwellings, fuelling the by higher commission
market for real estate income, and created
services larger profit margins in
the industry
6
Spotlight on Australia
Real estate services sector prices have been increasing in the last four years due to strong house
price growth across Australia’s east coast. With house price growth forecast to slow, the industry
is expected to increase its focus on marketing and market research to establish reputation and
brand credibility in the market.
Rising prices (PPI) across real estate services, 2012-2017*
135.0
130.0
125.0
120.0
115.0
110.0
105.0
100.0
95.0
90.0
2012 2013 2014 2015 2016 2017
*PPI is calculated on an index reference period of June 2012 = 100
Source: ABS 6427.0
The real estate services industry
is forecast to allocate 16.8% of
industry revenue to marketing
Drivers of real estate services prices in the five years to June 2017 include:
and market research in the year
to June 2018.
45.9% 58.2%
increase in Australian
increase in Australian housing finance
capital city house prices commitments
7
Spotlight on Western Australia
Despite Western Australia’s relatively affordable housing market, local real estate agents were
impacted in the year to September 2017 by a decline in housing commitments. This was driven
by a 12.2% fall in the number of purchases of established dwellings to 51,956, while purchases of
new dwellings increased modestly by 1.4% to 2,821.
WA Australia
11.0% decline in housing
commitments
VS decline in housing
commitments 1.6%
Data 12 months to September 2017
Median rents in Perth for houses declined in the 12 months to September 2017.
House rent prices Unit rent prices
2016- $380 2016- $350
2017- $350 2017- $325
Data 12 months to September 2017
There are some signs that the Perth office market is stabilising.
It takes on average 70 days to
sell a property in Perth, the
Office vacancy rates declined from Premium office vacancy rates highest recorded in four years.
22.5% to 21.1% in the first six within the CBD are lower than
REIWA, September 2017
months of 2017 lower grade offices
8
What does the future hold? Looking ahead...
Establishments and enterprises are expected to contract slightly in the year to June 2018, largely
due to projected declining revenues as state markets adjust to changing buyer conditions. House Decreasing prime vacancy rate
prices in Australia are projected to remain stagnant, which will likely cap revenue growth in the
sector.
Evidence of base rental rates
WA first home buyers take advantage of cooling property prices stabilising
16,400
Incentives set to ease at the top
16,200 end of the market, leading to an
increase in effective rents
16,000
15,800
15,600
15,400
15,200
15,000
14,800
Oct Jan Apr Jul Oct
2016 2017 2017 2017 2017
Number of WA first home buyers
Source: ABS 5609
The restrictions put in place by the Australian Prudential Regulation Authority (APRA) are likely to
subdue investor demand on the east coast more than the west coast. Demand for WA housing is
expected to steadily improve, driven by first home buyers.
In the year to November 2017, the number of first home buyers eager to jump onto the property
ladder grew by 4.9% while the number of non first home buyers simultaneously dropped 15.0%
implying first home buyers are taking advantage of the more subdued property prices.
9
What challenges does the
industry face?
There is a historically low number of first time buyers nationally in the market, with millennials
opting to rent or live at home rather than purchase a house or unit.
Number of first time buyers in Australia, 2007-2017
200,000
180,000
160,000
140,000
120,000
100,000
80,000
60,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Technology to disrupt the industry
Online technology will continue to disrupt the real estate industry, with more online offerings
increasing information available for customers, streamlining the property purchasing process and
improving access to customers.
The rise of co-working spaces in the commercial sector will create challenges
for existing suppliers of small commercial lots.
10Where do the opportunities lie? Ageing
WA is well positioned to capitalise on opportunities for real estate sales in the next five years. population
Serviced apartments in the aged care sector
may create a role for real estate services to
enter the market.
Wealth in the cohort of Australians
Relatively affordable High incomes Strong first home approaching retirement creates a
housing market buyer market substantial opportunity to sell smaller
apartments for low need aged care
customers.
Australia Western Australia
House price growth (2012-17) 45.9% 3.7%
Household income (weekly) $1,438 $1,643
Average number of first home buyers (2016-2017) 89,326 15,256
Source: ABS 6523, ABS 6146, ABS 5609
Evolution of technology
Real estate agents will have to improve their understanding of smart houses as buyers
increasingly seek properties with the latest available technology.
Real estate services companies will need to:
Clearly articulate value Seek to exploit opportunities in Transition into build to rent
the ‘build-to-rent’ sector services to help buyers manage
rental investment portfolios
11Forecasted industry growth
Australia’s growing population, an increasing trend toward medium density housing and forecast
improvements in wage growth will underpin growth in real estate services revenue in the five years
to June 2022. Uncertainty around the future performance of Australia’s retail industry is likely to
drive consolidation in commercial real estate, with more than one third of commercial real estate
businesses expected to exit the sector. However, moderate growth is forecast for this part of the
sector as efficient businesses take up greater market share.
Industry growth Projected growth
2017-2022
Real estate services 4.5%
Commercial real estate agents 4.9%
Establishments Projected growth
2017-2022
Real estate services 4.2%
Commercial real estate agents -37.0%
Employees Projected growth
2017-2022
Real estate services 7.2%
Commercial real estate agents -9.0%
Source for all tables: IBIS 2017
WA is well positioned to capitalise on opportunities for real estate sales in the next five years.
Relatively affordable Strong first home
High incomes
housing market buyer market
1213
Sources
Australian Bureau of Statistics 6416.0 (June 2017), Property Council of Australia, National Market Office
Residential Property Prices Indexes: Eight Captial Vacancy Rate Falling Says New Report, August 2017
Cities, Mar 2017, Table 9b, available at:
http://www.abs.gov.au/AUSSTATS/abs@.nsf/ Reserve Bank of Australia, Statistical Tables, 2018,
DetailsPage/6416.0Mar%202017 Indicator Lending Rates, available at:
https://www.rba.gov.au/statistics/tables/
Australian Bureau of Statistics 8155.0 (May 2017),
Australian Industry, 2015-16, Australian industry by Real Estate Institute of Western Australia, Perth
division, available at: Metro- Perth Market Snapshot, January 2018-01-24
http://www.abs.gov.au/AUSSTATS/abs@.nsf/
DetailsPage/8155.02015-16
Australian Bureau of Statistics 6427.0 (October
2017), Producer Price Index, Sep 2017, Tables 1,2,3,4
and 10, available at:
http://www.abs.gov.au/AUSSTATS/abs@.nsf/
DetailsPage/6427.0Sep%202017
Australian Bureau of Statistics 5609.0 (January 2018),
Housing finance Australia, November 2017, Table
9b, available at:
http://www.abs.gov.au/AUSSTATS/abs@.nsf/
DetailsPage/5609.0November%202017
Australian Bureau of Statistics 6523.0 (September
2017), Household Income and Wealth, 2015-
2016, Household Income and Income Distribution
Australia 2015-16, available at: http://www.abs.gov.
au/AUSSTATS/abs@.nsf/DetailsPage/6523.02015-16
Do, K. Real Estate Services in Australia, IBISWorld,
September 2017
Kellly, A. Commercial Real Estate Agents in Australia,
IBISWorld, March 2017
14At Bankwest, we know
that Business Banking
is about more than just
financial solutions.
We provide banking solutions to many of Australia’s leading
businesses, including those in real estate. Whether you
require straightforward banking or a more customised
solution, our team of experienced banking specialists can
help.
Speak to one of our Business Banking
Specialists today. Call us on 13 7000.
15The information contained in this report is of a general nature and is not intended to be nor should be considered as professional advice. You should not act on the basis of anything contained in this report without first obtaining specific professional advice. To the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL/Australian credit licence 234945, its related bodies corporate, employees and contractors accepts no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this report.
You can also read
