oc | Tuesday 18th December
Artboard 1
Got Questions?


Or you ring us confidentially 03 9804 3133


Are You Awake To What Is Really Going On?

This is the first of two articles about what is really happening in our markets.

We live in exciting times in the business, in the emotion of and in the life of Melbourne Top End real estate.

Is it a dawn or is it a midnight?

Who knows but it is one of the more interesting times we have seen, full stop, period.

Our industry is like no other, and in many ways has not yet met the challenges faced by other industries but in all likelihood, this is about to change!

With the Chinese money falling away and the Big 4 banks refocussing on community image rather than profit at all costs, cash in () has dropped significantly, thereby making new phenomena and it appears, they will be this way for some time.

What is the big picture and how will it affect you as individual buyers and sellers?

JamesTidal

Changing Phenomenon One

A tidal wave of money had covered a lack of expertise.

Our market has key decision makers on all sides – buyers, sellers, agents, ancillary providers – many whose only knowledge is, things go up and quickly.  Their decisions until now, have been disguised by a tidal wave of more and more money – Chinese and OPM (other people’s money).

These players are now like polar bears – they’re not extinct but the environment is changing around them, it’s beyond their control and they have no experience to guide themselves or their clients on how to deal with it and what to do next.

A tidal wave of cash (demand) made almost every decision look at least OK because it made all decisions look similar –  in the shorter term.

How important is good long-term decision making for you, for your agent? Does it remain as it has been in the past decade for many, that almost any decision, on any , is a good decision?

Example: Today, right now, if you are the only buyer on one home and when you sell you only have one buyer – then is it better to have no advisor, the cheapest advisor or a good advisor? On a $4m buy and a $4m sell is the difference between good and bad, $400,000 + $400,000 = $800,000?

Question: Are you a polar bear, is your agent a polar bear?

Changing Phenomenon Two

This latest cycle may destroy a Temple or two

Real estate operates in cycles, which unlike the demand for the boring old widget, go up or down without warning and in very large amounts.

Just when you believe you’ve got it sorted, the engine turns off whilst you have a full tank or the accelerator is pressed to the floor when you are running lean, near empty.

In the 1990’s, we had a revolution in real estate. It was during the 7 years of turnover drought in the middle of the decade and it was preceded by a big drop from the crazy late 80’s and proceeded by the new millennium of sustained price increases, immigration and the internet.
In those 7 years of flatness and lack of excitement, the agency names you see today were born – such as & and a few agencies around a bit earlier began to strengthen, such as .
The men in real estate (and it’s almost all men as we are still largely like the Liberal party – a relic rather than a representation) may be a little greyer, a little wealthier, but largely these controllers are still the same as they were 25 years ago.
With the birth of the super agency or conglomerate, we saw disciplines, training and structures as we have never seen before.

There is no doubt these highly regimented units contributed to the massive price growth.

With the internet and the ability to cut out the middleman, will we see the decline of the conglomerate or super agency?

The padding is always under pressure when the upholstery is no longer seen as attractive and many of the conglomerates are shedding padding.

But also we are seeing some of the “padding” shedding the conglomerates.

Stats are showing big drops in new agents joining, as well as many at the bottom are already leaving.

But we are also seeing a few new boutique agencies popping up.

Question: Who is best for you now; a super agency with disciplines but lacking flexibility or a boutique agency with freedoms but lacking checklist disciplines and coverage?

 

trucks

Changing Phenomenon Three

Are you about to hire a toll collector or a driver?

Some parts of the market are moving into gridlock (poorer prices, poorer levels of good stock, people less willing to transact, increasing unsold stock (stales.)

Some parts of the market are developing real roadblocks.

How do you get through, around or avoid those roadblocks, so as your product gets to market and is sold well before it goes off?

The lorries (failed deals – unsold homes) are backing up at the toll gates and if all you have is a toll collector (an agent who simply has his hand out and takes the fee) rather than a good driver, then you could be in for .

In 2018, the speed the average lorry is moving through the toll collection point has slowed dramatically, meaning your product may well get damaged if left in the sun too long or unnecessarily exposed to the weather for long periods of time (advertising).

If you are a seller who simply has his lorry lined up at the tollgates, waiting for a toll collector, then good luck because three of the four lanes are closed and nobody is on repair duty (clearance rates).

There is a high chance your goods may spoil unless they’re A grade and very well priced.

Whilst there are some risks you may need a driver (agent) who can navigate the roads less travelled. It could be cheaper, more adventurous, longer and with a higher chance of success, than just sitting in the sun spoiling.

Question: Are your hired guns, toll collectors or good drivers?

 

Changing Phenomenon Four

A better recipe (plan) for baking a better cake

Between 2015 and 2017,  a buyer recipe was, get as much money as you can and then some more and then throw it at any home and hope it sticks to one.

It was not always a good recipe, but who could be heard in a market where everybody “knew” how to bake?

Two years ago the market was like a department store of cakes that you see in Tokyo – hundreds of delights, floors and floors of them and all you have to do is choose and swipe the credit card on the way out – somebody else picks up your rubbish (you’re previous home), disposes of it without a worry and when you bother to stop and check your bank balance, somehow you found that even after the gluttony, you had more in your account than you had 5 years before.

In the shorter term, it’s only if you get to a flat or declining market, that the result differences from good and bad recipes begin to show.

In the longer term, bad recipes (apartments v houses, land v none, wow v class, floorplan v disaster, one move v three moves) will show their spoilings more clearly.

Questions: What’s your recipe (plan) look like in 2018? Are you going where a number of the delights are? Have you got the to see the goodies? 

 

tablets

Changing Phenomenon Five

The cure-all may, in fact, be an illness

The internet in many minds is a cure-all.

We look on the internet and buy and then put our home on the internet and sell so, therefore, the magic must have been on the internet. Really, is that what you think?

Question: Is this black magic then?

Example: Sellers are spending $30,000, $50,000 etc on the internet to sell but all some are doing is telling everybody that their home has no interest.

So the damage is not just the $30,000 wasted – it’s also done in the $100,000’s less you get when eventually a buyer comes along and can’t help but see the lack of competition plastered all over the internet in plain sight (at the seller’s expense) – hard to pay a big number with that sort of info.

Many sellers and buyers alike are now finding the internet is to homes like aspirin is to your health.

It’s not the cure-all we once thought and in fact, may be causing additional sickness as seen above.

In the peak of the previous market,  when auctions were flying, I used to get asked the question “Why off-market?”

Now I get asked why off-market when auctions are really struggling.

I guess many, simply don’t understand the off-market. The process, the game, the agents who are good at playing it.

You possibly should understand it, because as a seller it could be a more sensible place to be if you want a particular price and as a buyer, it’s a sensible place to be included into your full search program, if you want all options covered.

Question: Is there another medicine besides the internet?

 

Changing Phenomenon Six

Realestate.com.au v the Agents – who is going to win?

There has always been real friction between real estate agents and Murdoch/Fairfax and vice-versa.

The big real estate portals grew and grew on new excitement, on habit, on greed and they also grew on stupidity. The real estate industry’s complete lack of cohesion and mistrust of each other handed the jewels of the crown to outside players – it’s like when we give minerals to China at almost nothing, they value add and then sell back to us donkeys. The real estate industry gives its IP to Murdoch and Fairfax, who repackage at an astronomical markup and then resell back to the industry.

In this market will we see the agents return to some form of control over their workplaces and reduce the influence of the portals?

Or will the big portals crush all but the nimblest and most expert of agents in a “Purple Bricks meets Amazon” fee destroying “cartel” of the larger real estate agencies?

These are interesting and even dangerous times for some – did I already say that?

Question: Are shrinking incomes and rising costs forcing innovation?

Pies2018

Clearance rates spring 2018

Changing Phenomenon Seven

What’s happening @ James?

Some days not much, as we haven’t completely escaped a 2018 market bruising either.

We made cuts late 2016, early 2017 and those cost reductions have helped us maintain our way of doing business, but not our overseas holidays.

Our doors are still open and we are still transacting on the “right deals only”

Right Position, Right Property, Right Price.

Just not as often.

This is a time when reputations really count.

Why is this important Mal?

Because we don’t have the scoreboard pressure of big overheads to force us to recommend bad deals.

In this market, if you want to transact well, then it can be a patience game whether buying or selling. However, if your agent’s bank manager has no patience, then neither does your agent and ultimately you as the buying or selling client will suffer when a bad deal is rammed through for less, simply because your agent needed the fee.

Buy/sell is now our biggest market.

I’m loathed to use these words but we are just as much cost managers in 2018, as we are deal makers. Loath to use the words, lest I be labelled a bean counter – but effectively, in part, that is what we now are doing.

It’s the overall package – get the buy right but the sell wrong OR get the sell right but the buy wrong and it’s a mess and it’s stressful and it’s expensive.

Our Buy/Sell clients are learning that holding your home for an extra year in a down market (bridging, advertising, cleaning and furniture, not to mention price drops) is a massive price to pay or not get – all because you made a few simple mistakes at the start – because you listened to the wrong person, who wasn’t quite tuned in.

Similarly, selling too quickly is not good either, unless it’s at your price.

And when buying there is more than one way to skin a cat (what an awful expression) with a good budget these days.

You need to get both the buy and the sell right and that’s now our biggest market.

Fees are changing as well?

I never thought I would be saying or advertising that I just completed a buy and sell campaign where we managed multiple agents on behalf of our client to sell, we bought off-market on the buy with leverage, all parties seem happy and our client was not charged a full buying fee due to the economics of it all – we were partly paid from the agents fee in full transparency. The keys in these deals are, think laterally and do not to cross the edge or cross the line.

If you are nimble enough in mind and nimble enough in overhead, then it truly is an exciting time to be in the market.

Nextweek

Next week: The market is NOT one market. This market is many markets. Some of those markets are still working well. Find out which ones are and which ones are not next week.

The following week – Beginning late Spring 100 Auction test over three weeks.

Subscribe to our Market News Newsletter


Tags: , , , , , , ,

View more MasterClass Articles

Inside James Market News