Fewer Australian real estate businesses over the 2012 financial year

 The ABS released their Counts of Australian Businesses data last week.  The data largely flew under the radar, but there are some interesting findings in the data that relate to the housing market and those people working within industries associated with housing either directly or indirectly.

As a stark reminder about the realities of starting a new business, the data shows that of the almost 300,000 new businesses that commenced during the 2008/9 financial year, only 51% were still operating in June 2012.  This is an interesting period to analyse due to the onset of the Global Financial Crisis and it is probably not a typical economic period given the severity of the global economic downturn.

At a high level, the study showed there were just over 2 million businesses actively trading in Australia as at June 2012.  Compared to a year prior there were about 9,000 more businesses active across the Australian business sector.  Unfortunately a large component of the uplift in the number of businesses were classified as being within an ‘unknown’ industry sector (consulting the technical notes on the release, these are businesses which are yet to be classified by the ATO but are actively trading).

Top ten and bottom ten industries for growth_decline

Even though there were roughly 9,000 more businesses across Australia over the year, 62 of the 85 industry groups (excluding the ‘unknown’ category) recorded a decline in business numbers over the financial year.  Clearly the 26,440 unclassified businesses would be distributed across the classified industry groups, so it is unlikely that the fall away in business numbers is as severe as some of the figures suggest.

The table below provides an overview of the largest industry sectors based on the number of active businesses at the end of the 2012 financial year.

Top twenty industries based on number of businesses

Construction services are by far the largest industry sector on this measure, representing 12.5% of all businesses.  The construction sector includes a wide range of business types, however ‘carpentry services’ were the most populous (44,870 businesses), followed by ‘electrical services’ (35,180) then ‘plumbing services’ (25,580).  Given the prominence of construction and property related businesses as displayed in the data, it is no surprise that the Reserve Bank is looking for home construction to pick up the slack from a slowdown in mining investment over the coming years.

The next largest industry sector was ‘Professional, Scientific and Technical Services’ representing 9.5% of all businesses followed by Property operators and real estate services which comprise 9.4%.

Looking specifically at the third largest business segment, ‘property operators and real estate services’, more than half of these businesses were in the non-residential sector (53%).  ‘Residential property operators’ comprised 29% of all businesses in this sector and ‘real estate services’ accounted for 18% of all businesses.  Note that formal definitions of each sector can be found here.

Property operators and real estate services

All states and territories have seen a reduction in the number of businesses within this category over the past year apart from the Northern Territory.  The largest decline in business numbers was in Queensland where there were 734 fewer businesses which is likely to be a reflection on the soft market conditions that have been evident in the State.

The fact that that there are fewer property and real estate businesses over the 2012 financial year should come as no surprise.  Housing and commercial market conditions were pretty tough during this time and many smaller or less efficient operators would have felt economic pain.  What is perhaps more surprising is that the fallout has not been more significant.

 

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

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5 Responses to Fewer Australian real estate businesses over the 2012 financial year

  1. Brian David Thornton August 23, 2013 at 4:04 pm #

    Why the reference to the economy in 2012? Should it not be 2013?

    • Tim Lawless August 30, 2013 at 10:16 am #

      Unfortunately, that is the most recent ABS data that is available.

  2. Eric A. September 6, 2013 at 4:14 pm #

    It’s also not a surprise that the ‘Professional, Scientific and Technical Services’ came shortly behind construction, since IT Services (for example) is often the foundation for almost any business regardless of sector. In Asia, I know of construction firms that have branched out to real estate, property management, finance, and investments. I wouldn’t be surprised that this may be the case for successful construction companies in other areas of the world.

  3. Colin Rounds February 28, 2014 at 10:48 pm #

    Tim Lawless, 2012 is most recent ABS data that is available. Nice Discussion, Really one of the most informative post i ever read . Keep updating and sharing with us.

Trackbacks/Pingbacks

  1. Have Australians become German? Or are we just a little stale? | An Abundant World - September 19, 2013

    […] For instance, this data from the ABS, compiled by RP Data, show that 1,644 real estate and related b…I would imagine this reflects the moribund property market of 2012. Even worse, over 3,000 small finance firms closed, around 3% of the total number of firms in the industry. This was the sector that was most hard hit by slowing transaction activity in Australia. […]

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