Shares in high-profile real estate agency McGrath dived Monday after it signalled weak revenues, which has provided further confirmation that the tide is going out parts of the residential property boom.
The company doesn't provide earnings forecasts, although it did state that analysts' estimates of its full-year profit outlook are too optimistic, while also blaming the defection of a number of high-profile agents for its woes.
"The company has had issues moving into the public company domain," one large institutional shareholder in the company said. "Is it an industry that shouldn't be public? Clearly there are issues here that need to be addressed."
McGrath said the "unprecedented low volumes of listings" it highlighted at November's annual shareholder meeting has shown no sign of improving. Autumn and winter are typically weak selling seasons in the property industry, with most sales recorded in spring and summer.
The company has lost 36 agents, many who are its best performers, which has reduced to 225 the number of agents with the firm. Many have gone to a Perth-based start-up, The Agency.
"It is paying significant sign on bonuses and significant commissions," McGrath chief executive Mr Cameron Judson said of the upstart agency. "Whether that is sustainable, I'm not sure.
"It is disappointing but we'll be stronger for the experience."
McGrath went through a similar loss of staff about a decade ago but was able to recover, he said.
Mr Judson said high prices had discouraged some sellers from putting properties on the market, fearing that prices could rise too far before they could acquire their next property.
The company is still predominantly Sydney-based, he said, where the property market remains strong, unlike some markets such as Melbourne, where parts of the market, in particular apartments, has weakened.
"Clearly, Australians are staying longer in their dwellings. That has changed from seven years to ten years now. And then there is the issue of affordability which is affecting supply," Mr Judson said.
"People are concerned about the low level of stock."
Anecdotally, property market sources said more people are opting to stay put and renovate their home rather than move, which is feeding through to big demand for builders and tradesmen.
Parts of the market with little stock available, such as Mosman on Sydney's lower north shore, are enjoying continued strong prices, Mr Judson said, but in areas where more stock is available prices may be not quite so strong.
The downgrade pushed McGrath shares to new lows, closing down 5.3 per cent at 81c, after touching 71c earlier in the day. The shares are a far cry from the $2.10 they were sold at when it went public a year ago. The shares have never traded above that price. In August, John McGrath, who founded the company in 1988, stepped down as CEO.
In November, Bell Potter analyst Chris Savage forecast a 20 per cent fall in McGrath's year to June earnings before interest, tax, depreciation and amortisation, to $20.9 million, which has proved to be too high.
"Second-half results will be materially weaker than the first half," the company said on Monday.