Australia's Housing Slump Ripples Through Property-Linked Businesses

Australia's housing slowdown is inflicting collateral damage far beyond real estate agents and mortgage lenders, as a sharp drop in home sales drains revenue from an ecosystem of businesses that depend on properties changing hands.

A 15% decline in housing turnover since June, compared with a year earlier, is stripping an estimated A$355 million to A$710 million a month from the property-adjacent economy, according to an analysis of spending triggered when Australians buy, sell and move home. Even allowing for seasonal swings, turnover remains 10.5% below its five-year average, data from property consultant Cotality showed. That shortfall translates into A$2.8 billion to A$5.6 billion less annual spending flowing to furniture retailers, tradespeople, conveyancers and other services.

The damage stems less from falling prices than from a collapse in transactions. Home prices are down less than 4% from their March peak and remain above year-ago levels, but far fewer homes are changing hands. Sales volumes, which had risen in March, fell 11% in May and 20% in July, according to Cotality.

"It's the most severe drop we've seen since the very start of COVID," said Russell Cohen, CEO of conveyancing technology platform PEXA, which gets paid when a property sale settles. After growing Australian sales 8% in the year to June, volumes dived 15% in July and stayed there through August, he said.

The slowdown is also hurting corporate earnings. Homewares chain Harvey Norman said franchise profit in its June half fell 15%, reversing growth of 14% in the previous six months, citing reduced appetite for home-related purchases and renovation activity.

For many businesses, the downturn is forcing painful choices. At The Moving Box Company, which supplies new and used freight cartons, four factory-floor workers have left since April after having their hours reduced. Headcount has fallen to nine from 13, leaving managers to take on packing and delivery work themselves. General manager James Wotherspoon said sales were down 19% since June year-on-year. "If we can't give them the hours, I totally respect the fact that they've got to find work elsewhere to survive," he said.

Sydney property stylist Joanne Cauchi, who a year ago was turning away work and overseeing installations almost daily, now handles as few as three jobs a week with her team of three stylists and two removalists. "Usually springtime, and this time of year in particular, is ridiculously busy," she said. "It is very quiet."

For conveyancers and selling agents, the downturn has coincided with anti-money laundering rules introduced in July that require greater customer due diligence, adding compliance costs just as revenue falls. "We're definitely seeing more conversations being had from smaller operators about merging or selling, some retiring out of the industry entirely," said David Winning, founder of Your Move Conveyancing and a director of the Australian Institute of Conveyancers NSW Division.

The Real Estate Institute of Victoria said 350 of its 6,600 agent members planned to cancel their membership, with more than half leaving the profession altogether. "We could expect to see a very significant exodus of sales agents," said Jacob Caine, president of the Real Estate Institute of Australia.

Buyers' agent Zoran Solano said he was ending his office lease and would work remotely after revenue halved since May. "Everyone is being affected," he said. "It's much more widespread than I think people realise."

The pressure follows three interest rate increases since February and government moves to trim capital gains tax breaks for existing-home sellers and tighten negative-gearing rules for landlords. A spokesperson for Treasurer Jim Chalmers did not respond to a request for comment.

James Graham, a University of Sydney senior lecturer who studies housing economics, described the methodology behind the estimates as reasonable but noted it excluded the "wealth effect", where falling home values weigh on spending by denting confidence. "All of the real estate sectors are going to have less income coming in," he said.