Industry Report Real Estate Services in Australia - Whiteark
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Industry Report
Real Estate Services
in Australia
WHITEARK.COM.AU
Industry Update
Real Estate Services in Australia
WHITEARK.COM.AU
The Real Estate Services industry is forecast to expand over the
next five years by 2.4% to $29.7B.
Industry operators primarily appraise, purchase, sell (by
auction or private treaty), manage or rent residential property,
commercial property, or a combination of the two.
INDUSTRY OVERVIEW
SEGMENTATI ON OF PRODUCTS AND SERVI CES SHARE OF I NDUSTRY REVENUE
Property sales | increased as a share of industry revenue over the last 5 years due to
increased investor demand and falling interest rates.
Property management | declined in share of revenue due a fall in the number of
69% properties sold for investment purposes and growth in other segments.
Property lending | Increased demand for rental properties has led to this segment
increasing as a share of revenue. Demand for residential rental property has increased
due to rising housing prices. Furthermore, numerous owners of commercial properties
have adopted sale and leaseback schemes to gain access to more income in the short
term.
15%
Other including property valuations, fiduciary and escrow consulting, consultancy fees,
7% and reimbursement from property owners | growth in other segments and increasing
competition from online services have caused this segment to decline as a share of
9% revenue.
EXTERNAL FACTORS
Number of Mortgage Residential Consumer Residential
housing transfers affordability housing loan rates sentiment index housing prices
SUPPLY CHAIN
REAL ESTATE SERVICES IN AUSTRALIA
SUPPLIERS BUYERS
1st Tier 1st Tier
• Specialised Design Services in Australia • Office Property Operators in Australia
• Wired Telecommunications Network Operation in • Retail Property Operators in Australia
Australia • Industrial and Other Property Operators in
• Wireless Telecommunications Carriers in Australia Australia
2nd Tier • Residential Property Operators in Australia
• Computer System Design Services in Australia • Finance in Australia
• Computer and Computer Peripheral Wholesaling in 2nd Tier
Australia • Consumers in Australia
• Computer and Electronic Equipment Repair in Australia
Source: IBISWorld | Real Estate Services in Australia July 2019
Industry profitability has fallen over the past five
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years, due to intense industry competition and an
increasingly saturated market.
DEMAND DETERMINANTS
Demand is mainly influenced by the level and value of property sales and leasing activity. Factors
influencing the number of property transactions include property values and yields, interest rates,
economic growth, business profitability, household incomes, household wealth, taxation regulations,
growth and ageing of the population, rising employment and the number of people per household.
Demand for residential real estate services is also affected by the frequency with which people move
homes and the extent to which people invest in rental housing property assets.
Residential property revenue is positively affected by population growth, new home construction, low
interest rates, the availability of flexible mortgage products and the volume of the total stock of housing.
Revenue also increases when housing prices rise at a relatively fast rate, as growing household wealth
drives consumers to either relocate to areas with superior facilities or invest in residential property.
Furthermore, workforce growth and increased retiree mobility have boosted housing sales activity.
COMPETITIVE LANDSCAPE AND OPERATING CONDITIONS
STRUCTURE OVERVIEW
POSITIVE IMPACT MIXED IMPACT NEGATIVE IMPACT
Technological Change Low Revenue Volatility Medium Industry Assistance Low, Steady
Capital Intensity Low Life Cycle Mature Competition High, Increasing
Concentration Low Barriers to Entry Medium Regulation/Policy High
Industry Globalisation High
KEY SUCCESS FACTORS
Given the high level of competition, real estate agents that use an aggressive marketing
approach can benefit from referrals and an extensive client base.
Ability to effectively communicate and negotiate. Operators that effectively manage their
properties and tenants can maintain client loyalty, and build a long-term leasing revenue stream.
Having contacts within key markets will enable real estate agencies to generate more business
and provide more detailed services to customers.
Industry operators that conduct property/market research activities can strengthen their sales
revenue and property management activities.
Customers tend to prefer operators located close to the markets that they serve. Sellers often
seek agents with a knowledge of local properties comparable to their own.
Access to highly skilled workforce. Operators need to offer competitive commission structures to
attract and retain skilled sales staff.
Source: IBISWorld | Real Estate Services in Australia July 2019Property listing websites are gradually changing the
landscape within the Real Estate Services Industry.
COMPETITIVE LANDSCAPE AND OPERATING CONDITIONS
INTERNAL COMPETITION EXTERNAL COMPETITION
Firms need to focus on factors such as developing a Arises when a vendor finds a buyer for the property
referral base, managing clients, office fit-out, without the services of real estate agents. This trend
selecting sales staff, training, and monitoring and has increased due to online listing websites
motivating staff. (Gumtree) where vendors are able to advertise
Real estate agents also use effective properties without paying commissions to real estate
advertising/promotion approaches to gain a agents, minimising selling costs.
competitive advantage.
POTENTIAL DISRUPTIVE INNOVATION
FACTOR LEVEL DISRUPTION
Rate of innovation Medium Potential Adding new patent technologies is in line
with the average across all industries.
Innovation concentration Very High Very Likely However, concentration of technologies is
Ease of entry Very High Very Likely high which creates potential for innovation
outside the focus of industry leaders to gain
Rate of entry Very High Very Likely traction.
Market concentration Medium Potential
PROPERTY LI STI NG WEBSI TES ARE CHANGI NG THE LANDSCAPE…
Driven locally by activities undertaken by domain.com.au and realestate.com.au, which have a dominant
market share within the real estate advertising marketplace. Property listing websites have national and even
international reaches, significantly increasing exposure to potential purchasers. Furthermore, specialist listing
websites such as myfun.com are being established, and offer Australian property for sale to overseas markets.
These websites have been gradually adding new features over the past five years. As a result, these websites
are increasingly able to provide the specialist advice regarding valuations and neighborhood amenities that
were previously sought from real estate agents.
Virtual tours offer the ability to view a property for sale or for lease remotely. Virtual tours can streamline
inspection processes, decreasing the labour requirements for industry operators. In the future, VR headsets are
expected to be an increasingly common way to present virtual tours. Household and commercial VR headset
technology is increasing in popularity and can provide another way for real estate agencies to market
properties for sale.
Source: IBISWorld | Real Estate Services in Australia July 2019A booming residential property market has
supported operators in the Real Estate Services
industry over the past five years.
CURRENT PERFORMANCE 2015 - 2020
REVENUE PROFIT PROFIT MARGIN
$23.6B 5.4B 20.4%
ANNUAL GROWTH 2015-2020 ANNUAL GROWTH 2015-2020 ANNUAL GROWTH 2015-2020
+1.2% -3.0% -4.8pp
BUSINESSES EMPLOYMENT WAGES
40K 137K $8.2B
ANNUAL GROWTH 2015-2020 ANNUAL GROWTH 2015-2020 ANNUAL GROWTH 2015-2020
+1.2% +2.5% +0.9%
REVENUE TRENDS 2015-2020 Revenue $B Revenue Growth %
9.2%
7.1%
5.0% 28.5
27.9
26.8
26.1 26.3
-2.2%
24.9 -4.0% -1.7%
2015 2016 2017 2018 2019 2020
Industry revenue has grown over the five years 2015-2020 to 1.2%, mostly driven by government initiatives,
low interest rates and strong demand for properties.
Over the last couple of years, the residential property market has slowed mostly due to government
restrictions on foreign investments, declining property prices and disruption from COVID-19. Falls in Sydney
and Melbourne markets have reduced average housing prices nationally, with stagnant/declining prices
reducing the supply of residential properties. Investor-led purchases and baby boomers increasingly
downsizing to smaller properties have benefited property sales and property management segments.
Activity in the commercial real estate market has been subdued, although activity has been more positive
in Sydney and Melbourne. Most demand growth for commercial property has occurred in the office
property segment as the Australian economy shifted from a manufacturing-base to a service-base.
IIndustry operators that focus on office property management have benefited, as most new service-based
businesses rent or lease their office space. The retail and industrial property markets have both grown
modestly. Retailers' performances have been constrained by negative consumer sentiment and growing
competition from online retailers. Australia's shift from manufacturing has negatively affected the industrial
property market with falling manufacturer numbers constraining growth in demand for industrial property.
Despite strong growth in the residential property market boosting demand for industry services, fierce
competition among industry operators and intensifying competition from online services has reduced
industry profit margins.
The digitisation of real estate services is anticipated to challenge traditional operators.
Source: IBISWorld | Real Estate Services in Australia July 2019Online property portals, such as realestate.com.au
and Domain.com.au, are anticipated to increase their
market share over the next five years.
OUTLOOK 2020 - 2025
REVENUE FORECAST 2020-2025 Revenue $B Revenue Growth %
CAGR
3.2% +2.4%
2.8% 2.7%
1.5% 1.9%
26.3 -1.7% 27.2 27.6 28.1 28.9 29.7
2020 2021 2022 2023 2024 2025
OVERVIEW
Residential housing prices are expected to rise, driving an increase in the number of housing transfers.
However, forecast increases in loan rates and growing competition from digital competitors are
anticipated to constrain revenue growth.
Strong consumer demand and higher sales prices will boost operators' commissions, although this increase
will likely be offset by increased investment in technology to enhance their operations. Online listings are
anticipated to increasingly compete with the industry's services, as they allow vendors to bypass real estate
agents.
The commercial property market is anticipated to strengthen. Demand for office space is projected to
increase as Australia continues to transition to a service-based economy. In addition, demand for industrial
real estate is anticipated to grow marginally. Demand for retail space affiliated with food consumption,
such as restaurants, cafes and bars, is likely to remain higher than demand in the wider retail property
market.
Technological advancements are likely to increase the popularity of virtual property tours. Operators are
also anticipated to adopt new application processes that incorporate customers' smartphones and
dedicate more of their marketing budget to online initiatives.
External competition trends that have developed over the past five years, primarily relating to the
digitisation of real estate services, are expected to continue. Several real estate advertising websites have
caused controversy by using their increasing market power to raise advertising costs, using their data for
free property valuations and approaching vendors directly to upsell advertisements. Some property
operators have responded by withholding price advertisements from their websites, which has affected
property valuation data. The industry's new operating environment will require firms to reassess their
business models to ensure they retain a significant role in selling and managing property.
Employment is forecast to rise over the next five years, with many operators responding to rising
competition by employing additional staff with greater expertise and technical knowledge to retain or win
customers.
Source: IBISWorld | Real Estate Services in Australia July 2019Not your average consulting firm, we think and act a little
differently; bridging the gaps within organisations.
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