Monday, October 27, 2008

Real Estate Industry braces for downturn

Globe and Mail October 27, 2008

Tough times lie ahead for Canada's residential real estate market next year, with a brighter picture for 2010, industry officials predicted Monday.

A crowd of more than 1,000 real estate agents and brokers gathered at the Toronto Real Estate Board's (TREB) annual general meeting Monday for a pep talk aimed at worried salespeople, many of whom have yet to live through a downturn.

As things get rocky, agents will drop out, brokerages consolidate and cut costs, and everyone will have to make better use of technology, a panel of eight Canadian real estate company representatives said at the event.

Serious agents who stick out the downturn will have the opportunity to shine, they added, although their optimism appeared lost on some participants.

"They're basically saying that next year is a write-off," one audience member said to colleagues at her table.

The downturn may have a silver lining, causing the industry to "raise the bar" on customer service, said panelist Michael Polzler, regional director at Re/Max.

"There are far too many agents out there who don't specialize, who do just two or three deals a year. Would you use a part-time lawyer or a part-time dentist? We need to raise the bar," Mr. Polzler said.

The average number of housing units sold per agent each year in Canada is just 5.7, reflecting the number of part-timers in the industry, said Phil Soper, chief executive officer of Royal LePage Real Estate Services Inc.

There were 95,000 real estate agents in Canada last year, up from 77,000 in 1987, Mr. Soper said. During that time annual industry revenue rose from $30-billion to $160-billion, he added.

In a downturn, part-timers unwilling to pay fees to brokerages and industry associations are usually first to head for the exits, panelists said.

However, not all of them will be reflected in the numbers when it does happen, since many will "park" their licenses with a broker for a relatively small fee, then come back in a few years when things pick up, said Andrew Cimerman, chief executive officer of HomeLife RealtyServices Inc.

As the real estate pie shrinks over the next year, agents and brokers must listen to customers and become consultants rather than marketers,said panelists Gary Hockey, president of Coldwell Banker Canada, and Kimberly Fleming, regional director at Prudential Real Estate Affiliates.

The meeting came on the heels of a mid-month report from TREB showing sales for the first half of October in the greater Toronto area plummeting 21 per cent from a year ago, and the average resale homeprice dropping by 15 per cent.

Sales and prices in other markets across the country, including Vancouver and Calgary, have also slumped. Depending on the region, the downturns have been blamed on lack of affordability, the economy and taxes.

The negative effect of a land transfer tax, which came into effect in February, will be reflected in Toronto's sales numbers for October,which are due out next week, said TREB spokesman Von Palmer.

In Vancouver, agents with more experience are being asked to mentor those who haven't gone through a downturn before, said Dave Watt, president of the Real Estate Board of Greater Vancouver, in a telephone interview.

"We're also telling our members ... we're well funded. Our biggest concern is that for the 90 per cent of our members that will remain in the business ... all of our services and the products they rely on ....will not be pulled back," Mr. Watt said.

Some other words of advice from the panel included "not reading the papers or watching television," with media headlines being blamed for some of the fear hanging over the housing market.

"This is not the time to panic with the rest of the population," said Stephen Wong, chairman of Living Realty Inc.

Salespeople were also told to "flock to quality" in tough times, and to deal only with qualified buyers whose financing is in place and with sellers who are willing to list their properties appropriately.

In addition to preparing their clients for lower sale prices and longer listing times, real estate agents must also change their own views about how much money they will make next year, the panelists added.

Agents have to stop marketing themselves and become consultants armed with useful data for their clients, Ms. Fleming said.

The U.S. now has sales teams which includes specialists in areas including technology, contracts and client meetings, and Canada may soon follow suit, Ms. Fleming added.

The real estate industry has been slow to adopt new technologies, and use of social networking web sites such as Facebook could help agents appeal to first-time buyers, she added.

The industry is scrambling to adapt to a market that has changed more quickly in the past six weeks than he's ever seen before, said Howard Drukarsh, vice-president at Right at Home Realty Inc.

"It's almost like someone put the pause button on, and realtors and consumers are all asking 'What's next?,'" he said, before offering some encouraging words to the crowd.

"This is a great time to build market share because people will be dropping out," Mr. Drukarsh said.

1 comment:

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