Decision ris proposal for national licensing of the property occupations

Inputs and assumptions underlying the analysis

Assumptions in the cost–benefit analysis

The following tables provide details on all the key data sources and assumptions made in the impact analysis for this Decision RIS. In some areas assumptions have been made where data is not readily available. Where these assumptions are made the method for making the assumption is explained in the text and tables below.

Real discount rate

All future cost and benefit cash flows will be discounted to 2012 dollars using a real discount rate of 7 per cent in line with the requirements of the Best practice regulation handbook, which also recommends sensitivity testing using 3 per cent and 10 per cent discount rates.¹¹⁸

Table G.2: Discount rate and sensitivities

Assumption	Unit	Value	Source
Discount rate
Real discount rate	% p.a.	Headline: 7% Sensitivity: 3%, 10%	Australian Government, best practice regulation handbook, Canberra, 2010, page 66.

Evaluation period

The Best practice regulation handbook states that ‘the total period [of evaluation] needs to be long enough to capture all potential costs and benefits of the proposal’ and provides guidance that ‘in view of the difficulty of forecasting costs and benefits over long periods, exercise caution when adopting an evaluation period longer than 20 years’.¹¹⁹ Accordingly, an evaluation period of ten years has been used, with sensitivity testing using 15 and 20 years.

However, for the purposes of the impact analysis, it is assumed that national licensing will commence for the first tranche of occupations from 1 July 2013.¹²⁰

Western Australia has advised that the operating start date in its jurisdictions is uncertain. Western Australia will consider its position following the consultation period. This has not been reflected in the cost–benefit analysis.

Table G.3: Timing of analysis

Assumptions	Unit	Value	Source
Timing
Operating start date	date	1 July 2013	Unpublished advice provided by COAG National Licensing Taskforce
Evaluation period	years	Headline: 10 years Sensitivity: 15, 20 years	Assumption based on advice in the Best practice regulation handbook

Note: Australian Government 2010, Best practice regulation handbook, Canberra, p. 63.

Wage rate

A jurisdiction-specific wage rate has been used in the model, based on data available from the Australian Bureau of Statistics relating to employee earnings and hours.¹²¹

Hourly cash earnings

Data on hourly cash earnings for real estate sales agents has been sourced from the Australian Bureau of Statistics, Employee earnings and hours (catalogue 6306.0) using the Australian and New Zealand Standard Classification of Occupations (ANZSCO) codes.

According to the ANZSCO code 612, real estate sales agents sell, lease and manage non-residential property and private properties, and broker the buying and selling of businesses.

ANZSCO suggests that an indicative skills level for this occupation is an Australian Qualifications Framework Associate Degree, Advance Diploma or Diploma or at least three years of relevant experience (ANZSCO skill level 2). Alternatively, the indicative skill level of this occupation is an Australian Qualifications Framework Certificate III, including at least two years of on-the-job training, or a Certificate IV, or at least three years of relevant experience (ANZSCO skill level 3).¹²²

It is acknowledged that these wage rates overestimate the wage rate for an agent’s representatives.

The hourly cash earnings rates below are based on ordinary time worked per person (excluding overtime), based on the specific hours worked in each jurisdiction.

It is assumed that as the activities involved with national licensing are ancillary to employment, the opportunity cost of time is the wage rate that can be earned in the industry (i.e. hourly cash earnings).

On-cost and overheads

According to the Australian Bureau of Statistics survey ‘Labour Costs, Australia, 2002-03’, an on-costs multiplier of 1.129 is appropriate for the ‘property and business services’ industry, which includes:

• 
  employee earnings
  
• 
  superannuation
  
• 
  payroll tax
  
• 
  worker’s compensation
  
• 
  fringe benefits tax.¹²³
  

In the absence of any other information, the Victorian guide to regulation suggests that an overheads multiplier of 1.5 is appropriate.¹²⁴ The Victorian Competition and Efficiency Commission suggests that overhead costs include building costs (floor space, fixtures and fittings maintenance and services), equipment, consumables, IT and other support services, administrative support and corporate overheads (senior management, corporate finance, human resources and legal services).

Based on this information from the Australian Bureau of Statistics and Victorian Competition and Efficiency Commission, an on-cost and overheads multiplier of 1.693 is applied to the hourly cash earnings of property occupations (that is, 1.129*1.5 = 1.693)

Inflation rate

In order to inflate the hourly cash rates to 2012 dollars, the national consumer price index (CPI) for the period March 2010 to December 2011 was used based on data from the Australian Bureau of Statistics (catalogue 6401.0).¹²⁵ Note that the national CPI figures have been used. While ideally the wage rates would be inflated to 1 July 2012 (as the net present value is calculated as at 1 July 2012), the most recent data available when writing this report was CPI figures from December 2011.

Table G.4: Wage rate assumptions

Assumption	Unit	Value	Source__Hourly_cash_earnings'>Source
Hourly cash earnings
NSW	$ per hour	$27.50	Australian Bureau of Statistics, Employee earnings and hours, catalogue 6306.0, May 2010, Australian and New Zealand Standard Classification of Occupation (ANZSCO) Code 612 ‘Real estate sales agents’, Table 1B. Note: Based on ‘ordinary time per person’ (excluding overtime)
Vic	$ per hour	$23.60	Australian Bureau of Statistics, Employee earnings and hours, catalogue 6306.0, May 2010, Australian and New Zealand Standard Classification of Occupation (ANZSCO) Code 612 ‘Real estate sales agents’, Table 1C. Note: Based on ‘ordinary time per person’ (excluding overtime)
Qld	$ per hour	$23.60	Australian Bureau of Statistics, Employee earnings and hours, catalogue 6306.0, May 2010, Australian and New Zealand Standard Classification of Occupation (ANZSCO) Code 612 ‘Real estate sales agents’, Table 1D, viewed 29 March 2012. Note: Based on ‘ordinary time per person’ (excluding overtime)
WA	$ per hour	$30.60	Australian Bureau of Statistics, Employee earnings and hours, catalogue 6306.0, May 2010, Australian and New Zealand Standard Classification of Occupation (ANZSCO) Code 612 ‘Real estate sales agents’, Table 1F, Note: Based on ‘ordinary time per person’ (excluding overtime)
SA	$ per hour	$27.30	Australian Bureau of Statistics, Employee earnings and hours, catalogue 6306.0, May 2010, Australian and New Zealand Standard Classification of Occupation (ANZSCO) Code 612 ‘Real estate sales agents’, Table 1E, Note: Based on ‘ordinary time per person’ (excluding overtime)
Tas	$ per hour	$30.20	Australian Bureau of Statistics, Employee earnings and hours, catalogue 6306.0, May 2010, Australian and New Zealand Standard Classification of Occupation (ANZSCO) Code 612 ‘Real estate sales agents’, Table 1G. Note: Based on ‘ordinary time per person’ (excluding overtime)
ACT	$ per hour	$22.20	Australian Bureau of Statistics, Employee earnings and hours, catalogue 6306.0, May 2010, Australian and New Zealand Standard Classification of Occupation (ANZSCO) Code 612 ‘Real estate sales agents’, Table 1I. Note: Based on ‘ordinary time per person’ (excluding overtime)
NT	$ per hour	$35.00	Australian Bureau of Statistics, Employee earnings and hours, catalogue 6306.0, May 2010, Australian and New Zealand Standard Classification of Occupation (ANZSCO) Code 612 ‘Real estate sales agents’, Table 1H. Note: Based on ‘ordinary time per person’ (excluding overtime)
On-costs and overheads multiplier
On-costs and overheads multiplier	Multiplier	1.693	Assumption based on Australian Bureau of Statistics labour cost survey data and guidance material from the Victorian Competition and Efficiency Commission.
Inflation rate (May 2010 to December 2011)
Inflation rate	%	4.91%	Australian Bureau of Statistics, Consumer Price Index, Australia, catalogue 6401.0, December 2011. Note: Inflation index from March 2010 (index number of 171.0) to December 2011 (index number of 179.4)

Industry growth rates (employment)

The net industry growth rate represents the number of people leaving and entering the industry per year. The proportion of new applicants only takes into the consideration the number of new entrants in the industry.

South Australia has provided specific data on the number of applicants in a given year. Where this information has not been provided, a national figure based on data from the Australian Bureau of Statistics labour mobility survey has been used.

Table G.5: Business sector revenue contribution

Assumptions	Unit	Value	Source
Industry revenue – national
Office	$’000 per annum	27,200,000	IBISWorld Industry Report, Office property operators in Australia, February 2012
Retail	$’000 per annum	30,200,000	IBISWorld Industry Report, Retail property operators in Australia, March 2012
Residential	$’000 per annum	29,200,000	IBISWorld Industry Report, Residential property operators and Developers in Australia, March 2012
Real estate	$’000 per annum	9,000,000	IBISWorld Industry Report, Real estate agents in Australia, March 2012
Industrial	$’000 per annum	21,000,000	IBISWorld Industry Report, Industrial and other property operators and developers in Australia, November 2011 – annual change in employment
Property – total	$’000 per annum	116,600,000

Table G.6: Industry growth rates (employment)

Assumptions	Unit	Value	Source
Net industry growth – national
Office	% per annum	3.9%	IBISWorld Industry Report, Office property operators in Australia, February 2012 – annual change in employment – average of current and projected rates for 2011–12 to 2016–17
Retail	% per annum	1.32%	IBISWorld Industry Report, Retail property operators in Australia, March 2012 – annual change in employment – average of current and projected rates for 2011–12 to 2016–17
Residential	% per annum	1.0%	IBISWorld Industry Report, Residential property operators and developers in Australia, March 2012 – annual change in employment – average of current and projected rates for 2011–12 to 2016–17
Real estate	% per annum	1.87%	IBISWorld Industry Report, Real estate agents in Australia, March 2012 – annual change in employment – average of current and projected rates for 2011–12 to 2016–17
Industrial	% per annum	0.45%	IBISWorld Industry Report, Industrial and other property operators and developers in Australia, November 2011 – annual change in employment – average of current and projected rates for 2011–12 to 2016–17
Property – total	% per annum	1.728%	This is a weighted average of the net growth rates for each industry above, weighted based on the revenue contribution of each category to the total market. .
Proportion of new applicants in the industry (new applicants as a proportion of existing licensees)
NSW	% per annum	5.166%	Australian Bureau of Statistics, Labour mobility, February 2010, catalogue 6209.0, Table 7, page 23. Based on the ‘Rental, hiring and real estate services’ industry Calculated as the number of employees who entered into a different industry division in the last 12 months, as a proportion of the total number of employees in that industry during that time
Vic	% per annum	5.166%	Australian Bureau of Statistics, Labour mobility, February 2010, catalogue 6209.0, Table 7, page 23. Based on the ‘Rental, hiring and real estate services’ industry Calculated as the number of employees who entered into a different industry division in the last 12 months, as a proportion of the total number of employees in that industry during that time
Qld	% per annum	5.166%	Australian Bureau of Statistics, Labour mobility, February 2010, catalogue 6209.0, Table 7, page 23. Based on the ‘Rental, hiring and real estate services’ industry Calculated as the number of employees that entered into a different industry division in the last 12 months, as a proportion of the total number of employees in that industry during that time
WA	% per annum	5.166%	Australian Bureau of Statistics, Labour mobility, February 2010, catalogue 6209.0, Table 7, page 23. Based on the ‘Rental, hiring and real estate services’ industry Calculated as the number of employees who entered into a different industry division in the last 12 months, as a proportion of the total number of employees in that industry during that time
SA	% per annum	5.319%	Based on information provided by the South Australian regulator on new land agent applications in 2009–10 (272) as a proportion of total existing licensees (5,114), received February 2012.
Tas	% per annum	5.166%	Australian Bureau of Statistics, Labour mobility, February 2010, catalogue 6209.0, Table 7, page 23. Based on the ‘Rental, hiring and real estate services’ industry Calculated as the number of employees who entered into a different industry division in the last 12 months, as a proportion of the total number of employees in that industry during that time
ACT	% per annum	5.166%	Australian Bureau of Statistics, Labour mobility, February 2010, catalogue 6209.0, Table 7, page 23. Based on the ‘Rental, hiring and real estate services’ industry Calculated as the number of employees who entered into a different industry division in the last 12 months, as a proportion of the total number of employees in that industry during that time
NT	% per annum	5.166%	Australian Bureau of Statistics, Labour mobility, February 2010, catalogue 6209.0, Table 7, page 23. Based on the ‘Rental, hiring and real estate services’ industry Calculated as the number of employees who entered into a different industry division in the last 12 months, as a proportion of the total number of employees in that industry during that time

Licence fees

The licence fees presented in Table G.7 are the current fees under the existing jurisdiction-based licensing schemes.

Table G.7: Licence fees – real estate agent

Assumption	Unit	Value	Source
Cost of licence fee – real estate agent (new licence fee)
NSW	$ per licensee	$389	Based on information provided by NSW regulator on 29 February 2012 Processing component ($185) and licence component ($204) for both individuals and corporations
Vic	$ per licensee	$507.95	Business Licensing Authority Victoria, Fees Average of individual licence fee ($372) and company licence fee ($644)
Qld	$ per licensee	$1,628.45	Office of Fair Trading, License Types Average of individual licence fee ($2106) and corporate licence fee ($1151) Criminal history check fee ($36) excluded
WA	$ per licensee	$944	Department of Commerce, Licensing fees The average of an individual fee ($688 licence fee and $150 contribution to fidelity guarantee account) and a company fee ($900 licence fee and $150 contribution to fidelity guarantee account) Advertising fees have not been included as this has been accounted for under the impact of removing advertising requirements
SA	$ per licensee	$586.70	Consumer and Business Services, Fees for licensing – land agents Average of individual fee ($244 application fee and $298 pre-grant fee) and body corporate fee ($244 application fee and $449 pre-grant fee)
Tas	$ per licensee	$612	Property Agents Board, Fees and charges Average of individual fee ($136 application fee and $408 licence fee) and company fee ($272 application fee and $408 licence fee)
ACT	$ per licensee	$637	Justice and Community Safety, Forms and fees Application fee for agent licence ($637)
NT	$ per licensee	$351	Department of Justice, Licensing, regulation and alcohol strategy factsheet Application fee for real estate agents ($351)