Don't follow the herd!

Despite economic uncertainty and a turbulent equities market, the real estate market continues to offer opportunity. Scratch the surface of the most recent statistics and you’ll find that the volume of property in WA exchanging hands has been consistent for the last three quarters signalling steady supply and demand. Smart buyers will stay ahead of the pack and look for opportunities – now.

There’s no doubt that any changes on the global economy and the local markets causes anxiety for both investors and the general Australian public. There is a general “sense” out there that things are “a little unstable.”

This might be causing some prospective real estate buyers to sit back, waiting for the bottom to fall out of the property market. I believe the data we are seeing is actually telling a different story. Since the June 2007 quarter, we have seen a consistently healthy level of supply and demand.

In fact, around 13,000* properties have changed hands each quarter, which equates to approximately 1000 per week. This indicates that there are still buyers out there. And if buyers are astute, they will move to buy now. There is a steady amount of stock offering excellent choice and the potential for good value as well as the potential to negotiate fair terms and conditions.

Interestingly, the type of buyer in the market place has changed a little over the past few months. The number of investors and first home owners has decreased by 5% while those buying their second or third home represent an increase of 5% in the market.

No doubt this is because the higher interest rates are impacting some investors who may be paying more to borrow money and may have been too confident in the value of their assets. But if people can get over the current sense of economic anxiety and affordability issues, it’s never been a better time to buy – and buy well!

The real estate market will always peak and trough and admittedly we have seen some very strong growth up until last year. But overall, the WA economy is very strong and is likely to be for the mid to long term. Furthermore, the demographic data indicates that housing demand will continue to grow. Similarly, the real estate market data tells us things are also consistently positive.

So our message to buyers is “don’t hold back" waiting for a dramatic negative change in the market that is unlikely to happen. Be confident and take the opportunity while it exists today.

“Stay ahead rather than follow the herd.”

* Source REIWA Market Update

"penny wise pound foolish"

Due to the slowing nature of the Perth residential property market sellers maybe tempted to consider private sale rather than engaging the services of a real estate agent. Cost saving is probably the principle motivation for such a decision.

Sellers may see this as a smart option to reduce the cost of marketing their property and avoid paying a selling fee to a real estate agent. However experience has shown that this is false economy. By entering into a private sale, sellers generally harm themselves in respect of the sale result.

Sellers may see it as an easy task to put a for sale sign on the property and place an advertisement in the newspaper. Experience has shown, however, that the buyer of today is a very different creature to that of the past. The methods of communication are far more diverse and buyers are generally much more informed prior to making enquiries about a property.

By decreasing the extent of buyer exposure in the market place sellers in effect reduce the number of buyers attracted to their property and also dilute the focus of buyers. This combines to reduce buyer competition for the seller's property. Buyer competition is all about generating a better sale price for the property.

New consumer
Accordingly it is important that a marketing campaign be assembled to create market impact around the property and generally this can only be done through the extensive resources offered by a progressive real estate agency. In particular, marketing not only via the internet but also b direct presentation to a buyer database is probably one of the most beneficial ways of focusing buyer attention to a seller's property.

Another consideration is that sellers do not have the expertise to apply the different selling methods employed in today's real estate market. Historically Perth sellers have became overly familiar with the private treaty sale with set asking price method, however, this is not necessarily the best method to employ especially in the current market conditions. Furthermore over the course of a property being on the market various different marketing and selling methods can be employed by a professional real estate agent for the benefit of the seller.

Having yourself as the client
The other failure of the private sale comes from the sale negotiations. When sellers negotiate directly with a buyer they are more likely to agree to the buyer's terms, because they do not have the advantage of an independent and impartial person standing between themselves and the buyer to negotiate the best seller result.

So, as a seller it's smarter for you to choose a real estate agency and take full advantage of all it can offer, so you get a better sales result because it will be worth the investment...a few $1000 in commission and marketing can deliver tens of $1000's in sale price!

Watch those days on market

When a property market slows (as it is occurring now in various sectors of the Perth property market), both real estate agents and sellers adopt an attitude that it will simply take longer to get a result.

When a property market slows it is important for a seller to seek a result within good time because the longer the property is on the market it is increasingly less likely to attract the seller's price expectation.

Why?...because prices are falling rather than rising and also because buyer interest will be diluted the longer the property is on the market, especially with increased buyer choice continuing to enter the market weekly. The result is the seller often finds itself chasing the market (price) down!.

Put more simple, a longer time on market means a decreasing opportunity for a premium price.

Unfortunately, most real estate agents adopt a mindset that this "is just the market" and therefore ask for longer and longer listing periods to give them more time to let the market slowly "condition the seller". This in tern creates a mindset in both the agent and the seller that
it's going to take 80, 90, 120, 180 days or longer to get a result, rather than keeping a focus on trying to achieve the sale within the optimum 30 day selling period whilst the property is fresh to the market and buyer interest most acute.

In these circumstances sellers should consider only issuing real estate agents a tight selling appointment period of say not more than 45-60 days to keep the agent focused on achieving a result for the seller in the time period that is optimum for them in the current market conditions.

WA economy continues to boom, property market challenged...informed buyers & sellers will adapt & prosper

Market Realty

Notwithstanding that the WA economy will continue to be positive and strong for at least the next couple of years there are underlying turbulent world economic conditions that will affect us. The rising petrol price and interest rates are obvious examples of this impact.

The recent boom period in the Perth market is well and truly behind us. This market was driven by cheap easy credit, this is no longer going to be the case. In 2008 we are now faced with conditions were credit will become less available and increasingly more expensive. The single most influential factor on the property market is always interest rates (the cost of money). Some analysts will go as far to say that there is a pending debt crisis that is sitting like a set of poised dominos ready to fall.

The Financial Review on the 1/1/08 forecasted that only five (yes 5!) Perth postcodes were expected to avoid negative price adjustment in 2008.

Pricing Sensitivity Will Be Acute

In 2007 we saw that the Perth property market moderate but also splinter with various suburbs performing differently. In 2008 buyers and sellers will carry a sense of unease in relation the property market. Recent press has delivered a strong negative tone that both sellers and buyers would have absorbed. This sentiment will be fueled by;

1. affordability will tighten even harder (especially in Perth which is the second least affordable capital city in Australia)
2. tapering demand with upward interest rates will force a further correction in property values, particularly in outer suburbs or those not offering lifestyle attraction
3. mortgage sales will continue to increase

Conversely there are great opportunities in the top end of the market due to the lifestyle choices the wealthy and retiring baby boomers have the ability to pursue. In particular, coastal - water front and CBD will present the best opportunities. Under $500,000 especially on the outer fringes will be severely challenged and the $500,000 - $1m range will continue to moderate significantly. Facing price reality will be critical in 2008.

Up, up and away!

On one hand Perth vacancy rates have eased slightly. This is good for the rental market. On the other hand interest rates have gone up twice and this is not so good for the rental market. With Perth’s population increasing and any government intervention unlikely to make an impact for more than two years, the experts are divided on how, and when, our red-hot rental market will begin to find some balance.

Recent figures released by the Real Estate Institute of Western Australia show the number of rental properties on the market increased during the September quarter by 3.4 per cent. This is still tight, but at least a small an improvement on previous quarters. It might just be enough to lift the spirits of thousands of Perth tenants who have long found it difficult – and expensive – to find quality rental options. The light is finally starting to shine at the end of the tunnel. Maybe…

Supply is also at an all time high and still being fuelled by investors looking to feed the strong demand with CBD apartment development at a consistently high level. However with a net positive population growth in Perth and plenty of young people choosing an inner city lifestyle, this supply is in constant demand.

A recent article in The West Australian suggests Perth tenants can expect little relief for at least the next two years. Westpac senior economist Mr Matthew Hassan believes the current market conditions will either stay much the same, or even worsen slightly before they improve.

“It’s very difficult to envisage anything but a continuation over the next couple of years at least,” said Mr Hassan.

Even if the government intervenes by releasing new land areas for development, completion of any construction is years away. In the meantime, the demand continues to grow as disenchanted buyers flood the rental market and other would-be buyers are choosing to invest in equities as opposed to bricks and mortar.

REIWA president Rob Druitt also believes the recent interest rate rises will not help reduce the heat in the current rental market.

“Typically a rate rise will see owners and investors pass on the additional cost to the tenant through rent increases, however this will depend on whether or not the current market will support it.”

November through to March is recognized as a busy time in the rental market as people look to settle in to a property before starting work or university. So it looks like a case of “watch this space…”

Look outside the square when tackling rental affordability

Record high median prices and increasing interest rates have made the “Great Aussie Dream” of owning a home a challenge for a lot of Australians, especially first home buyers. But there are now more financing options available than ever to help you break in to the market or grow your property portfolio. You just need to think a little outside the square.

The topic of housing affordability has been hotly debated in recent times, especially in the lead up to the recent federal election.

In Western Australia, the average mortgage has risen by $28,000 in the past 12 months. For most people this means finding an extra $5,500* per year to service this increase.

The factors leading to the this affordability challenge are well documented: the recent property boom and house price increase, a steady rise in interest rates since 2004 and lack of supply have all contributed to forcing some people out of the market.
But, according to RFS Finance Manager Simon Randall, there are gradual economic changes afoot that would indicate a swing back in favour of home buyers.

“Housing prices in Perth have steadied dramatically over the past year,” said Mr Randall.
“This normalization is good news for first home buyers.”

“Other positive economic factors are a strong labour market and low unemployment
– around one per cent in Perth
– and an increase of 6.3% in the average household’s disposable income.”

Mr Randall recommends seeking out the advice of an experienced finance manager before leaping into the market. “They have access to a wide range of lenders and will be able to talk you through the many home loan options available,” says Mr Randall.

“A lot of lenders are looking outside the square to tackle the affordability issue. This means offering less-traditional lending options such as increased loan terms – up to 40 years, no deposit home loans and equity finance mortgages.”

“Talking with a finance expert will help you negotiate through the many options and loan types and can help tailor something to suit your exact needs.”

Simon Randall is a Finance Manager
at RFS Finance – Realmark’s
approved supplier of customer
finance. www.rfsfinance.com.au
*Source: Reserve Bank of Australia,
Australian Bureau of Statistics, AFG
Mortgage Index

Innovation Regeneration

When Realmark launched their new brand two months ago, it was more than a cosmetic change of logo. It was a statement to the market place reflecting their values and service, designed to meet the needs of their contemporary clients.

Realmark started nearly 20 years ago as a single office with less than 10employees. Today the business comprises five offices with more than 100 staff. Along the way they have operated independently, as well as part of a franchise. Now they are a stand-alone group again, with innovation as their mantra.

“Perth is a young, fresh, contemporary city with a fast corporate life,” says Realmark principal Mr John Percudani. “Realmark differentiates itself from its competitors by being first to market with new ideas and fresh concepts. That’s why we are a recognised innovator and communicator in the marketplace.”

This is supported by the team’s outstanding success at the recent 2007 Real Estate Institute of WA Excellence awards where they collected the prizes for both Innovation and Communication. Launching their new brand is another way of promoting their unique marketing approach, which embraces full utilization of the web through their e-marketing campaigns and other methods.

“We provide buyers with information about our properties which is rich in information, including quality photography and virtual on-line experiences,” say Mr Percudani. “This gives our clients an advantage because buyers arrive at property inspections with all the facts. They are ready to make informed buying decisions. Our properties sell quicker and both sellers and buyers are satisfied.”

Mr Percudani and his team researched what leading marketers do across the world to promote and deliver products to their client base.

“A lot of agencies go through cosmetic brand changes,” says Mr Percudani. “But we have made real changes – to systems, tools and marketing methods. And our clients benefit from this ongoing improvement.”