Believe it or not, interest rate rise is good news

Interest rate rises are never seen as good news, because for the everyday borrower they simply mean another cost to worry about. And while that is understandable, people need to realise that the first interest rate rise since the global financial crisis is actually a very good sign.

I believe the recent rate rise was a bold and wise move by the RBA, and it is also an indication that here in Australia we have managed to come out of the global financial crisis in a far better position than other nations. For us, the outlook is good. We are only the second developed nation to officially increase rates since the emergency lows.

What this really highlights is how strong both our economy and our banking systems are. And I think we need to understand how lucky we are to live in a country where the RBA is willing to make a move ahead of the curve to ensure our economy is not exposed to any further risk. Despite the fact it was never going to be a popular move.

This rise was necessary especially for WA. Why? Because with the Gorgon announcement and growing confidence there is a risk WA may slide back into a boom time mentality.

The increase will assist in protecting housing affordability here in WA by ensuring that the market isn’t fuelled by misplaced confidence. Gorgon may ignite the market somewhat and dropping stock levels are already threatening affordability, there is a significant risk that another housing ‘bubble’ may occur.

What I am asking people to see here is the bigger picture. When the cost of housing increases it causes a wide ripple of problems, rents go up and other living costs are affected. As a consequence, those most vulnerable in society are the hardest hit – this really is a social issue, not just an issue for borrowers.

In the short term rapid price increases favour a few people and businesses, in the medium term, unsustainable price hikes are actually detrimental to the overall strength of the market.

For all you borrowers out there who are facing bigger repayments as a consequence of the rate rise, remember to keep it in perspective. The three per cent interest rates were at emergency levels because there was significant risk to our economy, they were never going to stay there for long. At the moment interest rates are still very manageable.

The outlook for interest rates is that they will now continue to trend upward, so understand this and stay informed so you can make the best decisions when the time is right.

Agents must think laterally

Despite the West Australian boom ending almost two years ago, some agents and agencies in this state are still living with a boom time mindset and are resisting the need to adapt to the needs of a new market and a new era in property and finance.

The past year has been a very challenging one in this industry, but we had the First Home Owners boost firing up the market. We are now facing a whole new range of challenges and those agents who cannot shake that boom time mentality are going to find survival very difficult and in turn find it very hard to deliver for their clients.

In WA, the most critical issue facing agents is plummeting listing stock. There is going to be a whole new level of competition in the market place and agents are going to have to fight for listings.

Agents should already be proactive in seeking listings. Often agents are only ever focused on the immediate and the ‘sale’, this is a serious mistake. Their focus should shift more heavily to an emphasis on business development, concentrating on that first part of the cycle and their role should involve aggressive and proactive measures to attract more sellers. This is the perennial challenge all real estate principals face through all phases of the property cycle.

The fact is competition will increase as fewer properties become available, creating a whole new playing field for agents. It will be the agent who thinks strategically who will score the new listings. Roll up your sleeves and sell yourself, or you are simply going to be left behind

In my opinion this situation will see some agents leave the industry, because if you are accustomed to easier times, these conditions will feel very difficult. What is interesting is the fact I’m seeing a high level of employment enquiries from people outside the industry who are looking to enter. We usually only work with experienced agents but we are starting to see a real opportunity in hiring inexperienced agents. The thing is these new agents haven’t been spoilt by the boom or practices that belong in another era. They’re fresh and ready to meet the demands of the new market, as opposed to some existing agents who will stick with old comfortable approaches and wonder why business is so difficult. Of course, we are also always on the look out for established agents who have the ability to shift with the market.

The way forward for agents is to rebrand themselves, they need to become seller managers, not sales agents. Sure the sale is a big part of what we do but the cycle begins with attracting listings and this needs time, energy and resources. At Realmark we promote this internally by building on the thing agents find easiest – the sale – and automating work flows in a way that automatically draws more and better sellers and listings to them.

There are two types of sellers; ones who are ready to sell today and others that will sell in the future. Too often the attention is on the immediacy of the seller for today, not on building long term working relationships with potential clients. Our business begins with the seller and many agents are just not putting enough effort into connecting with them in a meaningful and distinctive way over time.

As originally posted on Sold. The Magazine for Real Estate Professionals.

Realmark wins x 2

Last week Realmark was announced as the winner of two major awards at this year’s REIWA Awards for Excellence. Voted Residential Estate Agency of the Year and taking out the Communications Award for the third time.

We are incredibly honoured to be recognised by our peers in this way. There is no doubt that these two awards belong to the people of Realmark, who work so hard everyday to ensure we are the best at what we do.

Next stop is the national REIA awards in Adelaide early next year, fingers crossed for a national win!

What comes next?

As we edge closer towards the end of 2009 I think we may have seen the worst, but I don’t think that means everything is coming up roses.

The market is moving into a new phase which also means a whole new set of challenges.

Stock levels are plummeting. To date, new listings have dropped by 40 per cent. This is of major concern because together with other pending economic factors, such as looming interest rate rises, affordability will be the next challenge. It is likely that prices are going to be inflated by this shortage of stock and some potential buyers will again be squeezed out. This will also make it harder for real estate agents as the competition for new listings becomes tighter.

People will also start to find it difficult to borrow, banks have already started to tighten their lending criteria in preparation for interest rate rises. The cost and availability of money will be a big factor and it is likely to impact negatively on the participation of investors and developers, the two groups we really need to be more active at this time because they are part of the solution to Australia’s significant housing shortage.

We are also going to see the end of the First Home Owners boost at the end of this month and while first home buyer participation has already eased, it is still likely it will have some impact.

It will be interesting to see how these fundamentals come to play over the next few months. But there is no need for negativity or panic, there is just a real need to be prepared.

A spring in our step

The recent and far-reaching decision to green light the Gorgon gas project off the State’s north-west coast has certainly injected some enthusiasm and faith into the economy.

In Greek mythology a gorgon was a vicious female monster with sharp fangs. One of her incarnations was Medusa, who had a head full of snakes and could turn anyone who looked at her into stone. A meeting with her certainly wasn’t going to be pleasant.

At the same time, images of the gorgon were placed over doors, on floors, on shields and coins to ward off evil. So perhaps that’s the preferable interpretation – an image to stave off bad things and offer renewed hope.

It’s been amazing to see how quickly people have taken up the Gorgon announcement as a symbol and used it to buoy their spirits. There’s a spring in our collective step again because we perceive something big is happening and feel there’s going to be a flow-on effect.

We’re closing in on the last quarter of the year and I think many people in WA anticipated some truly cataclysmic events this year. Yet, we’re still shopping and eating out.

We really are living in a very lucky place and feeling that life is pretty ok. Unlike previous cycles, particularly after the crash of ’89, when things shuddered to a halt, things are still flowing. Yes, the bump in the road rattled us, but we’re getting back on track.

Despite the scare, there’s little doubt we’re still a rather self- indulgent society and we expect life to draw us an easy but rewarding ride. When our political leaders are peddling the “nice life” line, who wants to argue?

There’s a lot of criticism of Gen Y but perhaps they are simply the obvious examples of where our world and values have moved to. They demand that everything should be ok tomorrow but they are also impatient. They don’t want to be humble – they just want to get there now. They’re expressing it bluntly, openly and directly.

So maybe if we are a little more honest we would admit how keen we are to embrace a gorgon in such a reactive manner! Equally, we need to keep good news stories in perspective realising it takes many successes to fully assure our future.

Gorgon great news, but don’t hold your breath for a boom

Unless you have been living under a rock, you would have been reading and hearing a lot about the Gorgon project in WA’s north, and probably a few headlines around how it is tipped to push WA back into boom. There’s no doubt the Gorgon project is certainly a positive. It will definitely produce much needed employment and inject some strength back into our economy, but is it going to save the day?

As important as this project is to our economy, it is not the answer to all of our woes. It isn’t going to see us return overnight to the prosperous boom times, where WA in particular, reaped the benefits from the booming minerals sector. It is naïve to think the Gorgon project alone will have the same affect and return us to the same position we were in two years ago, there are so many fundamentals that come to play in a recovery.

The thing about the recent boom is it has given many people in WA unrealistic expectations and this longing for good times gone by. The boom was not real life and if you spend your days wishing it back you’re wasting time and energy in the wrong place. If you understand the situation you can react to it, if you’re living on false hopes you’re not doing anyone any good.

Ever since the economic fallout people have been grasping at facts and figures that may signal that everything will be A-OK, it is human nature. And the Gorgon story is just another example of this.

In saying all of this, it is worth noting how compared to other countries around the world, ours has experienced much less damage from the global financial crisis. WA in particular has been quite sheltered from the fall out experienced in countries like the USA and Japan.

So yes, Gorgon and the recovery of the minerals sector is positive news for us but keep it all in perspective and keep focused on the bigger picture.

Finding your spirit level

Stop dreaming because of the recession! Too many people have put their lives on hold this year. Yes, it has been a good chance to take the lay of the land but it’s been an even better chance to change direction and look at fresh options. While we can be cautiously optimistic, we’re also living in promising times.

It’s fallacious to talk about the world “going back to normal”. The boom before the bust was by its very nature unnatural. What we should be doing is looking for a new spirit level; one which is sustainable and contributes to the betterment of the world today, tomorrow and next year.

A valuable thing you can have done over the past year is to take stock. We’d been running so fast and so hard, no one had time to stop.

So stop! Take a deep breath. Remember what standing in the sunlight for two minutes feels like. (Actually it’s quite energising!)

The boom and bust has made people realise firmly they can’t take bumper business for granted. There’s an end to gratuitous good times. We’ve seen and felt it.

There are now sensible decisions to be made and work to be done. Oh yes – work! That four letter word we kind of forgot about when business was so successful all we had to do was spend each day taking orders and not always caring about the quality of our service.

Work requires skill, application, energy and consistency – all the foundations that have been removed from our working world in recent years. Sheesh, just writing about it makes me feel like my grandfather sprouting old fashioned values. They STILL stand though; now more than ever perhaps.

While BC (before the crash) all you had to do was buy a ticket, stand in the marketplace and the work just happened. We can no longer take for granted the dollars will roll in.

Businesses cannot deal in sales platitudes and casual commentary. Our survival on many levels demands a return to meaningful information and solutions.