18/03/2009 - 22:00

Agents rationalise in regional approach

18/03/2009 - 22:00

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TWO real estate agency acquisitions in recent weeks could be a sign of increased activity in the sector, as business looks to rationalise their operations and gain economies of scale during the down cycle.

TWO real estate agency acquisitions in recent weeks could be a sign of increased activity in the sector, as business looks to rationalise their operations and gain economies of scale during the down cycle.

In the South West region, Acton South West has bought Jennings Hopkins Realty.

Acton's Dunsborough office, as well as Jennings Hopkins' Vasse and Dunsborough offices, will be centralised under one roof at the Naturaliste Terrace Dunsborough office.

Jennings Hopkins specialises in properties located in Dunsborough, Yallingup, Eagle Bay, and Abbey, offering services in both the long and short-term rental market.

Director Brian Moulton said the merged business would have one of the largest property management portfolios in Busselton and Dunsborough.

The acquisition follows the launch of Acton South West late last year after a merger with the former LJ Hooker offices in Busselton and Dunsborough, of which Mr Moulton was principal.

Once the two businesses merge, Acton South West will have 17 staff in its Dunsborough office, 17 staff in its Busselton office and four staff in its Margaret River office.

The business covers a range of property from residential to rural, commercial and business plus vineyards and development project management.

Mr Moulton believes acquisition activity is inevitable in the current economic climate.

"It had to happen, the cake has gotten a lot smaller with the downturn and there's not the business transacting," Mr Moulton told WA Business News.

In addition to mergers, the number of sales people leaving the industry was rising, with estimates the sector could lose 20-25 per cent of its salespeople compared to 18 months ago.

Mr Moulton believes the good operators will survive the tough times, while some of the newer entrants to the market may struggle.

"The people who came in for the short term three or four years ago, some are not good operators, and they'll find these times tough," he said.

Figures released by RP Data this week show house values in the South West have trended in line with the Perth metro market, with values growing very strongly between 2003 and the end of 2006 but falling by 9.2 per cent over the 2008 calendar year.

The median house value in the region is now $345,000, which is about $130,000 lower than Perth metro values.

Meanwhile, further north, Ascot-based City Life Residential is believed to be talking to Ray White in Exmouth about the possibility of buying the north-west agency.

City Life is currently the sales agent for lots in the new marina village project in Exmouth.

The Exmouth Marina Village, located on the east coast of the Exmouth Peninsula, will comprise a mix of canal lots and dry lots, waterfront homes and a mixed-use residential development.

Peter Sim, owner of Agency Crossmatch, a business broker servicing the real estate industry, said current market conditions were likely to give rise to more acquisition activity.

"There's certainly always activity between businesses in any market, but at the moment there's a bit more because in a downturn market people are always looking to move forward in the best, most profitable way, and by combining entities often the sum total is greater than its parts," he said.

"We are seeing some of the younger guys coming through to take advantage of the circumstances."

He added that while some agencies were struggling, others, particularly those that service the lower end of the market between $400,000 and $600,000, were performing very well.

In December, Sydney-based Teys completed its acquisition of the strata management business of Jones Ballard, with the business re-branded Teys Strata Como.

Real Estate Institute of WA president Rob Druitt said agents were rationalising their businesses, with economies of scale more important than ever before.

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