THIS TIME last year, Real Estate Businesswas reporting on a nationwide jump in listings, the decline of property prices and cautious buyers. The cash rate was stabilizing, but that didn’t help much.
There were myriad issues and you know them all: continuing effects of the global financial crisis; job cuts left, right and centre; negative media influence; and problems in Europe and Asia – all while the Australian economy was looking shaky.
Consumer confidence was low – very low.
“There was a subdued confidence, a real ‘down’ sentiment, and that really transpired into the number of properties that were put on the market last year,” says managing director of Propertybuyer.com.au, Rich Harvey. “I think most agents had a reasonably disappointing season last spring.”
According to November 2011 data from SQM Research, the market was oversupplied with 388,000 properties.
“When you look at stock on market and auction clearance rates, it was pretty clear that the market was quite weak,” Louis Christopher, managing director of SQM Research, says.
“Auction clearance rates were well down on the level recorded in the spring season of 2010. Total real estate listings were rising throughout that time, definitely an uptrend of more and more supply. The reason that was happening was because stock being advertised on the market was simply not selling so it was getting built up.
“It was becoming stale and not turning over.”
Compare this with July 2012 (the most recent data available at press time) and things look more promising. SQM Research shows there were just under 368,000 properties on the market.
“It is early days; however, this could be an indicator of a turning point in the market,” Mr Christopher says.
“Overall, I do think it is still a buyer’s market – they still have a lot of choice.”
Mr Harvey, however, while wary, believes agents are on track for a better spring this year.
“I think there will be a renewed optimism, overlaid with a strong sense of caution,” he says.
“You’ll see buyers out there trying to get a bargain and vendors trying to achieve a sale, but they are not going to get top dollar. I think it has been a fairly long winter, I think there is an air of very cautious optimism.”
Todd Hunter, location and research director for buyers’ agency wHeregroup is feeling even better about the market: “We have seen a considerable amount of interest rate drops in the past months so that is going to spur some interest and get people organised to buy and sell,” Mr Hunter says.
“In Australia, we have weathered the GFC quite well so I think we should have a pretty good spring this year.”
According to Paul Giezekamp, director at property investment firm Property Secrets, this is a buyers’ market and they know it.
“It is a very good opportunity for buyers, they will feel confident in getting into the property market, whether it is for their principal place of residence or an investment,” Mr Giezekamp says.
“Some sellers are getting the prices they want to get, either for sale or at auction, but they really are going to have to make sure they are presenting the property they are selling in the best possible light, using the best possible agents.”
Mr Harvey says ‘smart’ buyers will be cautious when looking at property.
“I am seeing buyers taking their time and watching the market very cautiously and some of them are just sitting on their hands,” he says.
When it comes to selling property, some markets will obviously perform better than others.
Steve Walter of Right Property Group agrees that vendors will be feeling more confident, depending on the area.
“Once again, I think it will be area by area and demographic by demographic,” he says. “If you look at the northern beaches area of Sydney, they are doing it tough. The sellers are finding it hard to get the sales that they want, whereas if you go to the western suburbs of Sydney, buyers and sellers are fairly confident.
“Buyers from an investment point of view are extremely confident and sellers, who are realistic, are seeing things sell very quickly.”
However, industry trainer and auctioneer, Jason Andrew, believes that the increase in consumer confidence might bring on arrogance in vendors.
"I hope there isn’t a confidence that turns into arrogance from sellers because it is not a sellers’ market,” Mr Andrew says.
“There should be confidence in the fact that sentiment is on the rise and that people who were putting their hands in their pockets and keeping them there are now willing and prepared to spend.
“Sellers shouldn’t have confidence that they will receive great prices like they once have, but they should have confidence in the fact that interest rates are at a good level and buyers are coming back into the market.”
While warmer weather and blooming gardens are reasons for buyers to get out there and look for property again, there are also many reasons why buyers and sellers remain wary of putting their hands into their pockets, according to Mr Giezekamp.
“There is just a fear of the unknown; we are actually seeing some of our buyers now getting cold feet in regards to moving forward,” he says.
“They are thinking, ‘Is the price of this property that we are looking at now going to be dropping by five or ten per cent?’
“I don’t believe we are going to be seeing massive drops. I think Australia’s property market is going to hold quite well. In actual fact, I think we will start seeing some increases.”
According to Steve Walter of Right Property Group, the cost of money will be a factor in whether buyers and sellers take advantage of the 2012 spring selling season.
“The cost of money – what interest rates currently are – is in people’s minds,” he says. “[Also] I think the uncertainty in Europe at the moment is certainly playing havoc with some people’s heads, especially in the higher end of the market.”
Vendors will need to ensure they do their research to stay in tune with market and buyer expectations.
“I think vendors need to research the market just as much as buyers do,” says Mr Harvey. “They have to have a realistic sense of what they can achieve for their property in current market conditions. If you hold out for a price that is just too high, the market will tell you it won’t pay it.”
Vendors often fall into the trap of thinking their property is worth what it was during the boom times, adds Mr Hunter.
WHAT TYPE OF BUYER?
First home buyers and up-scalers will be the groups that will mostly take advantage of the 2012 spring selling season, according to Mr Walter.
“I think first home buyers and people going into their second home will be the most prominent,” he says. “I think there is huge activity in the mortgage belt when you consider all the home and land packages.”
But Mr Hunter believes there will be huge variances from state to state. Due to the change to the First Home Owner Grant in NSW on October 1, for example, first home buyers will not have a huge effect on the spring selling season.
“In different states, I think you’ll see first home buyers definitely out there,” he says. “I think there are opportunities out there for those who want to upgrade as well – those who have a nice home but want to go up to a bigger price point.
“You’ll see investors across the board; they will probably keep to the cheaper end of the market, up until $500,000.”
By the time this edition of Real Estate Business hits desks, the spring season will be well and truly underway, but that doesn’t stop principals, agents and property managers from implementing plans that will ensure they finish the year with strong results.
“You need to make sure you’ve had enough contact with people throughout the year, and especially in August and September,” Mr Andrew says.
“September is really a warm up for October and November.
“The first two to three weeks of December are pivotal to your business for 2013 as well and the flow-on effect you have in the spring selling season really does transition your business into the next year.”
With the sun (hopefully) shining and gardens at their best, spring is the perfect time to hold a successful on-site auction, says Mr Andrew. And with an average of 2.03 registered bidders per auction in his region of south east Qld by the end of winter, he believes auctions are a strong marketing tool during spring.
“I call auctions the ultimate listing presentation because when you are selling things under the hammer, people go ‘Wow, they are doing well, let’s deal with them’.”
Mr Andrew suggests thinking outside the box when it comes to spring auctions: “What we find in spring is that earlier morning auctions are a really cool thing and later evening ones as well,” he says.
“I read some data on this the other day, that 9am and 5pm even 10am and 4pm auctions, which people would usually say is too early or too late, turn out to be sensational.
“Some agents are so closed minded, with the belief that they must run auctions at 11am, 12pm or 1pm.
“Our data show us that the crowd sizes are excellent,” he says. “Plus, you are not competing with other auctions.”
WINNING SALES TACTICS
Changing tactics in the spring might be necessary to reap the full benefits of the season, according to some of the country’s top agents.
Ric Serrao, principal of Raine & Horne Double Bay, NSW, placed third overall in the Real Estate Business Top 100 Agents ranking for 2012 and has been in the industry for 20 years. He believes this year might be slower than many people are expecting.
“What we are gearing up for is more properties on the market, which is common knowledge. However I’m feeling that the success rate from listing to sale may not be so great.
“In the period of time when there are a lot more properties on the market, like spring, you need to create a sense of urgency in the buyer more than usual, because they have more choice.
“Although we push for auctions, we find that we sell a lot prior to auction. If you’ve got good offers on the table, there’s no point going to auction.”
Kevin Attree, from Attree Real Estate in Perth, agrees that spring is the busier season, but claims going against the grain can also pay off.
“It’s not as simple as ‘spring is the best time to sell a property’ because everyone else thinks that way. And if they all think that way, go the other direction!
“The day you need to keep in mind is that magical day, December 25. Everyone wants to be in their new home before that date.
“So, leading into August, September, October, we see a lot of movement on the market, because people want to be done and dusted by Christmas Day. It’s a massive thing, so it creates urgency in the market which isn’t around during the rest of the year.”
Top agent Stephanie Hearne from Lindfield, NSW, is the number one ranked agent in the CENTURY 21 network and has worked in the industry for a decade.
She believes schools can be a major selling point during spring and summer. “I’m very lucky to work in an area with two very good schools and we often find vendors with school age kids who want to settle a property before the new school year starts,” she says.
Ms Hearne also believes agents have an easier time preparing for inspections in spring.
“First impressions are paramount; it helps in springtime that we don’t have to do as much work because generally the garden is looking its best. I always suggest to my owners to have some fresh mulch in the yard, to fix the letterbox, to paint the fence just to make sure that first impression is fantastic.
“One thing I do is shorten the open house times a little so buyers come to my open home first, as opposed to going to another agent’s. If mine is only 40 minutes, buyers will work to fit into my framework”
Ron Baur from Ray White Bondi, ranked 21st in the Top 100 Agents list, believes being heard in a crowded spring market can become difficult for agents.
“Sometimes in spring, especially heading towards summer, there can be an oversupply of properties, it happens quite frequently. Everyone gets the idea at the same time, the market overall has too many listings, but the buyers thin out because they have choice,” he says.
Mr Serrao agrees that with more choice for buyers, some agents can fall behind, which is why he has implemented strict prospecting rules.
“What we’ve started to do, straight from the prospecting stage, is emphasise more on the switchover buyers. When we get an enquiry on a property we’re making sure that 99 to 100 per cent of enquiries are put into our database.
“How I traditionally deal with spring is make sure my team is collecting and pooling enquiries into a database so we can switch these buyers onto properties that may, or may not, be getting as much attention.”
He uses his extensive database to promote properties that don’t have as large a marketing budget.
“We also have what I call a ‘stage one / stage two’ campaign. Don’t run into a 21-28 day program, we make our programs a week longer where we have more sneak previews to bring those qualified buyers through,” he says.
“We have buyers, who failed to get a property at auction, come through to a preview showing and they make an offer on the home. Convincing the vendor that this could be the best price you are offered is a real challenge.
“We need to educate sellers so that if they get an offer early they don’t think, ‘Wow, if I’m getting that offer now, imagine what I can get later!’
“So, definitely a slightly longer campaign with a sneak preview or a VIP viewing is something we do more so in the spring season.”
Sales agents aren’t the only ones who are busier during spring. Property managers also receive an influx of people looking to move for work, study or to settle down before summer.
Michelle Williams, managing director of @Home Property Management and national winner of the 2012 PPM Property Management Department Award, believes mid spring through to summer is their busiest time of the year.
“Activity is driven by a few factors,” she says. “Many property investors choose to [arrange for leases to expire] in and around that time due to the increased activity in the rental market.
“A mixture of university students and people arriving into the state for new employment increases demand during the spring and summer months.
“We also see increased activity with new business, with people renting their homes as a result of employment transfers.”
According to Ms Williams, this all adds up to double – and sometimes triple – the property manager’s usual workload.
“Leading up to this time it is imperative that systems are in place to manage the demand, maintain consistent service and minimise error,” she says.
“Our office prepares for the silly season well in advance, with strategies to carry the load and communicate effectively. We involve our reception staff
in the process to ensure we have maximum efficiency and organisation.
“This is a time when you value a full-time letting consultant. If property managers try and carry letting with all of the other tasks required in a day, it is inevitable that mistakes will be made and service levels will drop.”
Having everything up to date, organising yourself and being prepared are the keys to having a smooth spring, according to Ms Williams.
“Being organised and time-efficient are the two main ingredients of a great property manager,” she says. “Reduce the number of routine inspections over this time to no more than one or two per day.
“Manage your calendar to always have one full day in the office to ‘catch up’ on administration – Friday is great to ensure you are organised for the next week ahead.”
Delegating administrative tasks is also vital, according to Ms Williams, who believes receptionists and PAs might have nothing to do if property managers adopt the ‘it’s quicker to do it myself’ approach.
“Focus on revenue activity, such as processing applications, lease signs, new business and monitoring rent payments first. Microsoft Outlook’s calendar is a perfect tool for property managers to set daily tasks and specific times to focus on returning calls, email, out of office time and in-office appointment times.
“We have set up a colour-coded open diary so that all of our team know who is doing what and where – perfect for reception to indicate return call times.”
Despite having to juggle an increased number of tasks during the spring season, communication with clients is more important than ever.
“Diarise communication points to ensure your investors are kept informed when their property is coming vacant or is vacant.
“If landlords have a vacant property draining their back pocket and you are not communicating or offering advice on how to solve their problem, even the most loyal clients will move on because this is the time when they need you the most,” Ms Williams says.
Michelle Rigg, business manager of Harcourts Alliance and three times winner of the Property Management Excellence Award, believes while her sales agents can take a break during the year, property managers need to be available at all times.
“In our office, the reps take the opportunity to go on holiday but for property managers, you’ve still got people moving,” she says. “It’s not in their control, but you still tend to get people who are conscious of their leases if they’re expiring near Christmas.
“If we got a new property on our rent roll, we’d encourage them to get the property on the market in the beginning of December, up until the second half of December.”
With the coming of spring, property managers should also be checking with tenants to make sure parts of the house that haven’t been used for a while are still as they should be, Ms Rigg says.
“People in winter obviously don’t use the pools as much, so property managers should start reminding tenants to check to see if the balance is correct, to make sure all the equipment is in working order and to see if they’ve been keeping up to date with their services.
“If you’ve got a property with a garden, it’s worth making sure it’s in good condition, cut and weeded. In some of the areas where residential crosses with rural, it’s good to check for fire hazards, too.
“It could be worth checking to see if there are any issues with the air conditioning before the heat becomes too harsh and the air conditioner repair man is in high demand. Also, if there are holes in the fly screens they’ll only be an issue during the summer, so it’s good to get it out of the way early on.”
“I think the important thing,” says Ms Williams, “no matter what market conditions you are faced with, is to stay ahead with constant research. There are many tools that we can use as property managers to demonstrate trends to our clients; we just have to be pro-active and use them.”