Where is the happy ending?

It is human nature to want everything to be OK. That is why we love and crave a happy ending in a movie and always want our footy team to win. It is also why we are scrambling for a sign that the economy is going to be just fine, phew the hard times are over!

It is human nature to want everything to be OK. That is why we love and crave a happy ending in a movie and always want our footy team to win. It is also why we are scrambling for a sign that the economy is going to be just fine, phew the hard times are over!

Well it is a bit early for that yet. There is plenty of talk in the headlines around the first ‘green shoots’ of recovery, but in my opinion we are not going to get off quite that easy. It is likely we will be feeling this global financial crisis well in 2010 and any talk otherwise might make us all feel good on the inside, but really it is just spin. When you look at the fundamentals the second half of this year is going to throw up a range of challenges, from rising unemployment, to increased interest rates and the final deadline for the First Home Buyer Grant. The recent economic fall out is like nothing we have seen in recent decades and we need to understand that the issues we face are not going to vaporize so quickly. The regeneration of the economy takes time.

I am not saying that now is a time for pessimism, it is simply a time for realism. Clasping your hands over your eyes and blocking out the reality isn’t going to do anyone any favours. But fronting up to the real situation and forward thinking is.

If you are in business, you always need to think beyond the present day. You need to put strategies in place and be ready and willing to make changes. This is nothing new, even when times are good, solid businesses plan for the down times rather than just letting them sneak up.

If you are selling your home, it is a time to be informed and it is a time to find the right advice. Don’t choose an agent who just tells you what you want to hear, choose an agent who understands the market and is realistic. If you are looking to buy, then ensure you don’t make decisions on what the rest of the world is doing. Don’t be tempted to follow the herd, look at the facts and again, be informed.

No matter who you are, keep your eyes open for the opportunities that present themselves in this current climate, because I assure you they are there.

And in finishing, I have to say it is refreshing to see a little confidence return, it just needs to be harnessed in the right way.

History Doesn't Always Repeat Itself

The market correction after the recent boom still seems to be rippling through the housing sector, with REIWA figures for the September quarter showing a fall in median prices for the third consecutive quarter.

However despite these official statistics and the messages of doom and gloom we regularly see in the media it is important to look at what is actually happening in the ‘real’ world.

Many of you will very clearly remember the stock market crash of 1987 which led to a surge of money flowing into the property sector. Then in 1989 it became apparent that property would suffer the same fate as the equities market. This typical boom to bust cycle left us with an oversupply of housing, high interest rates, high inflation and an extremely flat market for several years.

Unfortunately it’s impossible to predict the future of today’s property market, however given past history we can take a look at current conditions to see if we can draw any comparisons to the crash of 1989. Will history repeat itself?

In 1989 the property market was in a similar condition to today. However from my business and personal experience I definitely see hope in today’s market. We need to look at the ‘real’ market and the ‘real’ economy to really assess what we are seeing with the current conditions.

While figures and statistics can be extremely valuable they don’t necessarily reflect what’s happening on the street on a day to day level. In 1989 we saw the equities market drop 25% overnight. This was very dramatic and caused a tidal wave type surge straight into property. The current equities market has lost 50% of its value however this time it has been a more stepped decline. We have also seen that median house prices have also adjusted over the last periods but they have not dropped anywhere near as significantly as the stock market.

In many cases it is more that a sellers inflated expectations of price has returned to market normality.

Current market conditions also indicate that employment is still very tight, interest rates are very low (and lowering) and inflation is low. Perth also has a much broader population base than previously and is still experiencing strong population growth. This time round circumstances seem to be much better than the late ‘80s and early ‘90s.

I see two key factors dictating market stability, and buyer confidence. Firstly, the availability of money and people’s access to buy it. And secondly, the sustainability of employment. With the recent restructuring of the finance industry the availability of money has definitely stabilised and people are still finding good access to it. While employment will, most likely, be affected by economic conditions we are coming off a very tight market and we may see only marginal shifts in unemployment figures in WA. Buyers should continue to have confidence if they can still see value in the market.

There are still plenty of buyers active in the market. Attendances at auctions are still quite high and there is a really good energy to the bidding. We are also finding a really positive level of enquiries on internet listings, our online property magazine, over the phone and at a pen for inspections. Properties are still selling in a fair and reasonable time and at fair and reasonable prices.

Statistical trends will become clearer over the next quarter or so and we may continue to see some jittery and erratic results from suburb to suburb but there is still movement and energy in the market. People are still buying and selling so there is definitely still plenty of hope!
On this occasion history doesn’t have to repeat itself because the fundamentals are different.

The upside of uncertain times

These uncertain financial times have seen a real change of pace in this state and while the news definitely isn’t all good, it isn’t all bad either. Opportunities are certainly opening up for us at Realmark.

As an employer, things have really changed for us in the past four to six weeks. Previously and during boom time it was so hard to find good help. Many job seekers had this feeling that there was always more money or more benefits on offer and many followed cash, rather than the best career prospects. Don’t get me wrong, this does not apply to everyone, but it was very noticeable trend for most employers.

Today things are different. When we recruit we find we have much more choice when it comes to candidates, which gives us a far higher chance of finding the quality we seek. I see this as a massive time of opportunity for us. Realmark is going to continue to work hard to find the right people and build a premium team, not just the best agents, but the also best support and administration staff. We have even brought a full time HR manager on board to help us achieve this.

We are very lucky to already possess some of the best people this business has to offer, but there are gaps that need to be filled and now is the time. Our people are our biggest asset, and the right team means better results for our clients, which is the key to our success. We have always worked hard at being an employer of choice and we will continue to do so.

I think this is an important part of any business, making the most of all situations. Don’t get wrapped up in the hype around the financial crisis and miss opportunities because it’s true, there is an upside to everything. You just need to find it.

Check out our site dedicated to careers in real estate www.careersinproperty.com.au

first mover advantage

It is funny how people always feel so much more comfortable in a crowd. It’s human nature to want to run with the herd and the world of real estate is no exception. What people don’t realise is that finding the courage to go against the herd is often how the best and most successful decisions are made.

Right now my agents are seeing plenty of potential buyers at home opens and they are also seeing plenty of buyers who know they have found the right home. Yet many of them are so reluctant to make a move and make an offer because no one else is buying.

There are an amazing amount of things wrong with this mentality, why do people instinctively want to buy when everyone else is buying, when there is competition galore, negotiation opportunities are few and prices are up?

So my message to buyers out there is this, seize the first mover advantage. Today there is so much choice, limited competition and affordability has made a come back. So if you’re ready and have found the perfect home make an offer, know what you can afford and offer it. Sellers today are willing to negotiate and whatever you do, don’t sit and wait for the crowd to start buying because once the herd catches on its almost too late. I know that this isn’t the most comfortable thing to do, but it truly is the key to success in property.

Although there may be some price fluctuation remaining in the market, the advantage of moving now will out weight any short term movements in purchase price.

Go about things a little differently, go against the herd and get a good buy now.

LOOK ON THE BRIGHT SIDE

It’s no secret that the Perth real estate market is no longer booming. Naturally, everyone is constantly trying to pick that silver bullet that will fix everything and make the tough times go away. Many were hoping an interest rate cut was the answer, unfortunately it’s not that simple.

But let me put things into perspective. Sure the market is not an easy place but the news isn’t all bad. If you’re a buyer, the news is actually quite good. The market is full of choice and affordability has made a come back. The cost of money is starting to drop as indicated by the first cut in interest rates and buyers have the time to make informed decisions. Put simply, right now there is an abundance of opportunity out there for buyers. The challenge for buyers maybe the availability of loan funds although the Federal Governments $4 billion initiative last week will greatly assist funds liquidity for housing.

We are truly witnessing a buyers market and to be honest, it is probably about time they had a fair go and actually good for market fundamentals. Boom time pushed the Australian Dream further and further from the reach of many people and while Perth is by no means a ‘cheap’ place to buy, prices have corrected and there is value to be had. I see this continuing well into 2009.

However like all things, this buyer friendly market won’t last forever. The fact is this is simply a normal part of the property cycle and in time things will again turn in favour of the sellers, it’s the way the cycle works. World economic factors may distort and prolong the cycle timing but it will re-align itself.

While things are not going to dramatically change in the near future, Perth is poised for change. The following factors indicate that a strengthening of the market is on the horizon.

1) The dropping of interest rates is always the first trigger – the first sign of the ‘curve’ in the property cycle.

2) Demand for housing continues to accumulate as people move into the state looking to capitalise on the employment opportunities.

3) Another key factor is employment, all signs point to continued employment growth in WA. Security of employment encourages buying confidence.

If you understand the property cycle, you will understand that what we are going through now is completely normal and somewhat predictable. Trust me, I have been in this industry for a long time and I have seen it all before.

Let the facts speak for themselves

Spring – supposedly the “Nirvana” of the real estate year – is upon us once again. With temperatures on the rise, flowers blooming and much talk about an impending interest rate decrease, it might feel like the Perth property market is about to perk up. But don’t let emotion mask the facts – and the facts tell us that there is unlikely to be any radical “bounce back” in
the near future.

It is impossible to predict the future of the property market – unfortunately we don’t have a crystal ball! But according to Realmark principal John Percudani, we can use current data mixed with historical evidence to look at probabilities. And the most recent facts and figures tell us that no matter how much we might want to see a strong positive change, it is unlikely to happen this year.

“If you look at the recent REIWA figures, we can see that the volume of residential transactions or sales is down this June quarter (as compared to March quarter 2007) by 25 per cent,” says Mr Percudani. There are currently 17,500 properties for sale in Western Australia. This equates to about 5 months supply of property. In March 2007, we had only 3.5 months of supply.”

“Not only is there a glut of property, but they are taking longer to sell. The average days on market are 74 as compared to 55 days in March last year. This is an increase of 35 per cent. And we already know that this has had an effect on overall median house prices In Perth which are down approximately four per cent.”

Even with the likelihood of an interest rate drop, which has been touted by the Reserve Bank and the media in recent times, Mr Percudani believes it would unrealistic to expect an upswing in 2008.

“It’s not all doom and gloom – this current downturn is part of the overall property market cycle and with any price correction comes buying opportunities and increased affordability,” says Mr Percudani. “But I think it is important to understand the factors that lead to this downturn in order be realistic about any positive change in the property market ‘curve’.”

Mr Percudani points to a number of events that have influenced today’s market. Not only is there a global economic downturn which has created a general sense of unease and caution amongst buyers and investors, but also our major lenders are suffering from a global credit squeeze, forcing interest rates up. Even if the Reserve Bank lowers interest rates, there is no guarantee that this will be passed on by the banks and lenders who are finding it increasingly difficult to borrow money themselves in the global credit market place.

“All I’m suggesting is that it has taken a number of changes in the market to create the current situation,” says Mr Percudani. “So it would be unrealistic to suggest that only one change – such as a decrease in interest rates – will be enough to radically change the property landscape. We cannot expect one factor alone to influence such a major turn around.”

“Agents are intrinsically optimistic – they want the best price for their clients and themselves,” says Mr Percudani. “But advice that is not based on facts can be misleading and unrealistic. And the current facts tell us that a Spring upturn is unlikely. Agents need to be using transparent evidence on which to base their estimates. Otherwise sellers will be living with false hope.

Talking about my generation

It’s hard to pick up a newspaper or turn on the TV without hearing something about generations X & Y and how different they are in their outlook and demands from their baby boomer predecessors. So what does the real estate industry need to do to adapt and relate to this group of buyers and sellers?

For the first time in two decades, baby boomers – those born between 1945 and 1965 – no longer represent the “majority” of real estate buyers and sellers. This mantle is now held by Generations X&Y who represent a whole new outlook on life.

Statistics recently published by www.realestate.com.au paint a very clear picture of today’s real estate buyer:

• 60% are female
• 75% are aged 25-49
• 70% work full time and have a household income of more than $100,000

So what does data tell us? Principal of Realmark Real Estate John Percudani strongly believes that agents need to recognise this shift in buyer/seller population to a younger, more technology savvy and sophisticated market.

“This clearly shows us that women are the primary decision maker when it comes to selling and buying property,” says Mr Percudani. ‘’Addressing their needs and requirements is paramount to agents wanting to grow their business going forward.”

Mr Percudani believes women demand an honest, up-front type of real estate service and place emphasis on honesty and reputation.

“Women like a dedicated contact person within the agency with whom they can develop a relationship of trust,” says Mr Percudani. “They are also natural information gatherers and want good statistical data and lots of relevant detail so they can make informed decisions.
“Customer loyalty matters to them as does a no-nonsense, no-jargon approach.”

This is a shift away from the past 25 years of baby boomer relationships, which were based on repetitive habits and patterns and a sense of strong brand loyalty.

“Baby boomers are really yesterday’s buyers and sellers,” says Mr Percudani. “They also represent a large proportion of today’s real estate agents who are used to dealing with fellow baby boomers. This means that some agencies will need to actively educate their people to understand this new strongly emerging buyer and seller.

“Gen X&Y sellers in particular will be looking for a like-minded agent to represent them,” says Mr Percudani. “They understand that today’s buyers are unlikely to be local to the area, therefore a wide-spread, sophisticated marketing campaign using modern tools and mediums is going to be imperative. They will want an agent who can demonstrate that approach and understands that it is important to communicate with a wide audience.”

Change is the only certainty

Agents take note! Gone are the days when quoting a good selling price for a property was enough to ensure a property listing. Today’s sellers demand much more from their agent starting with a proven ability to communicate campaign updates and statistics honestly and openly.

It’s not surprising that recent statistics show a fundamental shift in what is important to real estate clients when selling their homes. The entire market place has changed and the old “born local, stay local” mentality has all but disappeared. We have a much more itinerant population who are open to moving not only suburb, but state and country to find the lifestyle they are seeking.

The shift towards a more modern style of client representation is imperative and agents need to adapt in order to meet their clients’ expectations and build sustainable businesses. We examine the top 5 “then” and “now” agent criteria.

Traditional top 5:

1.Recommendation by family member or friend – although there is nothing wrong with taking a recommendation, making a decision on that basis alone is no longer enough.

2.Expected sale price quoted by the agent – in other words, the agent who quoted the highest expected sale price was often the most successful. Yet often as the campaign progressed, the expected sale price was adjusted down and the seller was left wondering why… Today’s sellers are more likely do their own research and know exactly what is a fair price for their property. They want the truth, not an inflated number that discourages realistic buyers.

3.Online marketing – everyone offers marketing on the internet today and that ability alone is no longer a differentiator. Sellers are looking for more wholistic marketing approach.

4.Have previously used the agent to buy or sell a property – using an agent you have previously had a good experience with is still a good basis for making a selection, but only if they have adapted to meet today’s requirements.

5.Experience and local knowledge – taking the “if they live and work locally, they must really know my property” approach. What is clearly evident today is that buyers often come from outside the suburb they are buying in to.

Today’s top 5:

1.Demonstrated professionalism and ability – sellers are now looking for agents who can back their “talk” with the “walk”. Facts, figures and a way of demonstrating the ability to market a property and close a deal are vital.

2.Deep neighbourhood expertise – it is important to sellers to feel that their agent really understands the “lifestyle package” that their property represents. If an agent can demonstrate that understanding to a seller, they will feel confident that they can demonstrate it to potential buyers.

3.Marketing acumen – sellers are much more savvy about the importance of marketing. It is no longer just about placing a classified advertisement in the newspaper and some photos on the internet. It’s about a campaign. Sellers are looking for agents who deliver a fully integrated campaign that uses the best photography, copywriting and other modern marketing tools across a wide range of mediums.

4. Value for money – what does an agent’s commission and fee truly represent? This is what today’s sellers are asking. If the value is there, clients will pay a fair fee for the right result.

5. Communication and responsiveness – providing accurate, honest reports with real data on a pre-defined, structured basis is what sellers demand. Being able to demonstrate a communication methodology and responsive manner is important – especially for women who are now represent the majority of property buyers and sellers.

Today’s smart seller will think outside the traditional and some what comfortable square of just calling in the local agent and focus on truly selecting an agent and an agency that can deliver today’s top 5 and get a top sale result for them!

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

A fine equilibrium

After a lengthy renaissance, the Perth property market is beginning to normalise. But with around one per cent unemployment and hundreds of people arriving in Western Australia every day to service the resource boom, the outlook is still strong. The key is to keep properties turning over.

All indicators suggest Australia is driving along a road of strong economic growth. And Perth is sitting in the driver’s seat. As a result, there is always strong demand for good property

“When the property market began its strong upward swing in recent years, Perth was behind the eastern states and was playing catch up,” says Realmark Principal John Percudani. “It was undervalued so it only makes sense that it has also enjoyed a boom”.

“It probably peaked last year and over the course of the past 12 months has reached a state of equilibrium between buyers and sellers. I would say the market has normalised”

Mr Percudani believes that the market is reflecting a slight adjustment in buyer mentality, especially when it comes to “emotional” buying.

“Compared with this time last year, there are nearly 30% more properties on the market. This means buyers have plenty of stock to choose from and are not feeling the same pressure to buy in a hurry,” says Mr Percudani. “The issue of affordability is also key in the sale of property. If buyers do not see value, they are prepared to let is pass.”

This has meant that properties are sitting on the market nearly twice as long as this time last year. Mr Percudani believes sellers can avoid this outcome by reaching realistic price expectations as well as holding real estate agents accountable for the services.

“Sellers need to make sure their agents meet with them weekly and provide campaign reports. If there is no offer within 30 days, then the campaign is in crisis.”

“Sellers should not accept that it will take longer to sell their property, in fact it is imperative it sells as quickly as possible in this high volume market. The property market outlook is strong going forward, but factors such as innovative marketing are going to play an increasing role in the successful turn around of properties.