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Jan 10, 2024
Missing Out
Licensed real estate agents are regulated by the Department of Mines, Industry Regulation and Safety (DMIRS) with consumers able to seek advice and lodge complaints about agents’ behaviour to that department. The Real Estate Institute of WA (REIWA) also has a community hotline where consumers can obtain real estate advice when dealing with a member agent. Current market conditions of savagely low supply and strong demand for both sales and rentals often leads to a spike in enquiry with REIWA and DMIRS, especially from tenants and buyers that have missed out on the opportunity to either buy or rent a home. Most are just wanting clarification of the process. When representing their vendors and landlords, agents have a role to play in ensuring their communication with interested buyers and tenants is clear and thorough, especially in circumstances where there is strong competition to either buy or rent the properties they represent. In the first instance, agents should make it clear to buyers and tenants that there is competition for the home. This can include asking prospective buyers to sign a document that acknowledges an awareness that their offer is one of many and that they’ve had sufficient opportunity to put forward their best offer. Similarly for tenants, the sheer volume of visitors to a home open should indicate that renting a home will be competitive. It is unlikely your application to rent will be the only one submitted. Local agents mostly manage competition amongst buyers and tenants in a professional, process-driven manner. However, it’s worth noting that agents are not obliged to inform you that there is competition for a property, albeit best practice to do so. Buyers and tenants ought to remember the agent is duty bound to act for their client and is not working in your interests. Agents are merely obliged to be honest, ethical and fair in their dealings with tenants and buyers. Despite this, buyers and tenants who miss out on a property are often quick to blame the agent. Some will lodge formal complaints against an agent even though the agent is simply discharging their responsibility to their client in seeking the best price or highest rent. A recent experience from a buyer who was repeatedly told a property would likely sell for above $900,000, was aware they were in competition and still insisted on submitting an offer for $875,000, was livid when told someone else had paid $975,000. Similarly, a tenant who offered $80 per week above the asking rent lodged a formal complaint against the agent when their landlord accepted an offer to lease $130 above the asking rent. Higher rents and selling outcomes are part of the natural market in action. Agents understand that buyers and tenants are trying to secure a property for the lowest possible price or rent, but it is not the agents’ role to achieve that outcome.
Jan 4, 2024
Go Local in 2024
In a hot market, finding a buyer for just about any piece of real estate is considerably easier than in a comparatively slower market. Knowing this, some sellers are inclined to list with agents known to them by association rather than choosing local practitioners. Caution is advised when taking this option. Most agents, local or not, will promote their property listings via the well-known portals and by targeting the largest of the buyer groups; the active “unknown” buyer, via this method will probably find a buyer in this market. The other major buyer groups can be described as the “active known buyer”, those the agent have on a data base and the “latent buyer”, those buyers not actively looking but may be tempted to buy after seeing a particular property advertised. It’s these remaining buyer groups that sellers miss out on when listing with out-of-town agents. Latent buyers are often attracted by large colour press adverts where only local agents advertise (such as those found in the Herald), whilst known buyers respond best to direct contact from local agents where they’ve registered their buying requirements; something missing from non-local agents’ data bases. Bear in mind most buyers are local folk moving about within their immediate neighbourhood. Local Fremantle agents report that 68% of their buyers come from within the localities of Cockburn, Melville and Fremantle and East Fremantle. Given that the majority of buyers are locals then it makes sense to target property marketing locally and thankfully, the nature of the world-wide-web captures everyone else. It follows that sellers benefit from gaining access to a local agents’ network of would-be buyers and data base of active known buyers. There are, therefore, tangible benefits in using the services of a local agent when selling property. Every area has a uniqueness punctuated with subtle nuances that an out-of-town agent can easily miss, and buyers are usually more comfortable relying on the expertise of the local agent. Local agents are familiar community faces most of whom enjoy a positive reputation that, in turn, boosts a buyer’s confidence in the accuracy of the information the agent provides. In the new year, if you are thinking of selling in the Greater Fremantle area, it is in your best interests to choose an agent that is inherently and thoroughly local.
Jan 2, 2024
Personality or Proficiency?
Scrolling through the listings throughout Fremantle on reiwa.com the other day, not only are there hardly any homes available for sale – only 27 that weren’t under contract – most of the stock is apartments at a ratio of 80:20. Quality detached homes are in huge demand across the entire metro area with demand for Fremantle homes higher than elsewhere due to the nature of the built environment. Much of Fremantle is cottage built, there are plenty of semi-detached homes on compact lots, and apartments and terrace homes feature prominently. This is better news for homeowners in Fremantle’s outer suburbs, White Gum Valley, Beaconsfield, Hilton, Hamilton Hill and East Fremantle where there is a greater proportion of detached homes than apartment and villa stock. Demand in these suburbs is generating strong competition amongst buyers with multiple offers on single homes on market commonplace. In Fremantle itself, four-bedroom homes are hard to find with 107 of them selling over the past 12 months at a median price of $1,100,000. In contrast, 196 apartments sold this year at an average price of $537,000. Not to be blindsided by charm and inducements alone. With these tight stock levels and escalating sales volumes, competition amongst agents to secure listings, knowing that they are almost guaranteed to sell, is fiercer than usual. Letterboxes are filled with agent flyers informing occupants of everything from market updates to Christmas pudding recipes. Some agents will go to extraordinary lengths to ingratiate themselves on would-be sellers. Presented with the opportunity to list, some agents will turn up bearing flowers, champagne and chocolates on multiple occasions to encourage the owners to list with them. There can be a fine line between delivery of service and harassment. I have heard many times vendors end up listing with an agent just so they’d stop harassing them. And this is often not their agent of first choice. Accordingly, sellers ought to carefully consider their reasons behind choosing their agent. I doubt would-be sellers would actively seek an agent that delivered the best gifts or had the most vibrant personality. Surely, sellers would prefer their agent to have a demonstrated competency and proven method of delivering the best sales outcome. Sometimes, your preferred agent will have both, but sellers are well advised to not be blindsided by charm and inducements alone. Look for substance over style, professionalism over persistence. It’s not a personality contest. Obviously, sellers are likely to choose an agent they warm to and like over one they don’t. However, look for agents that will genuinely care about the outcome for you rather than those desperate for a listing to make their numbers look good.
Dec 14, 2023
Christmas Markets
Around this time of the year, property markets normally begin to slow in anticipation of and planning for Christmas festivities and the summer holidays that follow. This year is shaping up to be different with buyer enquiry remaining strong and sellers committing to coming to market during the Christmas period. Property values across Australia continue to grow, spurred on from the demand side by higher migration levels and low stock levels. The federal government have already predicted a 115,000-property shortfall by mid-2024 and with dwelling commencements stubbornly stuck below the long-term average, there is little relief for buyers on the horizon. The Real Estate Institute of Australia released the comprehensive September quarter Market Facts report this week, revealing Australia’s median house prices rose 3.2 percent in the past twelve months to rest at $990,807. Perth’s median house price was at $595,000, the cheapest major capital by some margin. Sydney’s median house price as at September 30th was an extraordinary $1,578,000. The remaining capitals (aside from Darwin) returned a median house price of between $710,000 (Adelaide) and $934,000 (Melbourne). With such a yawning gap between our local market and eastern Australia, there is a sense of inevitability that prices here will continue their upward trajectory and the Christmas season will have little impact in quelling buyer and seller enthusiasm. Most agents I speak with expect a flurry of fresh listing activity in January, with new stock to be taken up from buyers bereft of choice. A recent property my agency sold received 20 offers. Another 15 offers. That’s 33 buyers that have committed to purchase, have missed out and will keep trying until they succeed. It is going to take some time for this buyer pool to deplete given stock levels remain below the five-year average, and new buyers keeping entering the pool. Meanwhile, rents continue to rise up to $581 per week nationally and $550 per week in Perth for 3 bedroom homes. Returns on investment for buyers in Perth are at 15.1 percent, leading the nation by some margin. Investors will take note of these numbers and continue to grow as a buyer cohort adding further pressure to our undersupplied market. This year, there will be no Christmas slowdown and buyers holding back waiting for the Santa Claus to deliver a market correction are likely to find their Christmas stocking empty.
Dec 7, 2023
What’s in Store for 2024?
With Perth’s property market growth leading the nation as at the end of last year, some property commentators are predicting a slow-down in capital gains as the year progresses. Returning a 13.7 percent growth rate in property values to date 2023, Core Logic data showed Perth ahead of the rest of the nation in growth with Brisbane the next strongest market performer with 10.7 percent value gains. Perth is at its market peak reaching a median dwelling value of around $650,000 at the end of last month. Yet, despite Perth’s strong market performance, our local market remains the most affordable major capital city aside from Darwin in terms of median prices comparative to average family incomes. It is this relative affordability, strong economy, full employment, an uplift in migration intakes and limited housing supply that will continue to drive our market forward. Whilst it is always difficult to accurately predict property markets, in the absence of significant and unexpected market shocks, WA residential property is likely to put in another strong showing in 2024 with 8 to 12 percent gains predicted. Turning to the rental market, with vacancy rates below 1 percent for most of 2023 caused by a lack of housing supply, it will take some time to deliver enough homes to the market sufficient to bring the rental market back into balance. Rents have risen sharply since mid 2020 after a decade of falling and stable rents, rising a further 13 percent last year. Strong demand from incoming residents and low supply remains the core cause with little relief in sight for tenants struggling to secure suitable accommodation. With less than 2000 properties listed for rent on reiwa.com, supply constraint due to a lack of investor buying activity over the past decade has seen house rents move from $350 per week in 2017 to $600 per week today. Investors have come storming back to the Perth market as they exit the overheated east coast city markets and look to capitalise on the prospect of price growth and nation-leading yields. As more supply comes to market, rents could moderate this year but further rent rises of at least 5 to 10 percent is likely thanks to the slow construction cycle and lacklustre dwelling approval numbers. Overall, WA is the place to watch in 2024 as its property market continues to expand from a base of relative affordability.
Nov 30, 2023
Rental Reform On Way
The Cook government introduced legislation into the parliament this week that seeks to make sweeping changes to the Residential Tenancies Act that favour tenants. Assuming these changes pass into law the following key changes will impact residential tenancies: Tenants will be allowed to keep pets and the property owner will only be able to refuse in certain circumstances. Tenants will be able to make minor modifications to the property without permission from the owner. Rent increases are limited to once annually. The process of bond disposals can be commenced by either tenant or landlord. Disputes will mostly be heard by the Commissioner of Consumer Protection rather than the Magistrate’s Court. Rent bidding will be banned. Overall, the changes are moderate and align with tenancies laws in other states and territories. Importantly, the changes stop short of prohibiting ‘without grounds terminations’, a silly phrase used to describe circumstances where a tenant requests a further lease term after the end of a fixed term and the landlord refuses without giving a reason. REIWA conducted a survey into this particular element of the tenancy laws with an astonishing 61 percent of the 6,000-odd landlords surveyed saying they’d ‘consider selling’ the property if ‘without grounds terminations’ were prohibited. Given a fixed term lease has a clear end date, neither party should anticipate that an additional lease or reversion to a ‘periodic lease’ is assured. You don’t have to give a reason to end a fixed term agreement in any other circumstance, even a marriage! At a time where supply of rental homes are at crisis point across Australia, new laws that actively undermine the encouragement of supply risks further disincentivising the main cohort of property investors; unsophisticated, family investors the majority of whom own one additional property other than their home. Hopefully, investors consider the incoming changes reasonable and will continue to add to the rental pool by investing in residential real estate. Given family investors provide 9 in every 10 rentals in WA, we cannot afford to discourage them.
Nov 30, 2023
Giving at Christmas
Giving at Christmas The National Hotel and St. Patrick’s Community Support Centre held their legendary Long Table Christmas Dinner on Saturday 24th November and raised much-need funds to assist those without a place to call home. A shout-out to Karl and Janine Bullers for their inspiration. You see evidence of homelessness everywhere every day. I hear that Fremantle has a resident population of about 120 rough sleepers. Such is the confronting nature of homelessness that some of us opine that those in authority must ‘move them on’, put them elsewhere to make our lives less confronted. But this just locates the problem elsewhere. Family break-down, domestic and family violence, job-loss, addiction and untreated mental health issues all contribute to homelessness and most of us can’t imagine ever being amongst their number. It has been said we’re all a handful of catastrophic life events away from homelessness. It is not an incurable disease; it is rarely a choice and it can be overcome. There are dozens of organisations whose sole purpose is to help transition the homeless back into secure, affordable housing. Local heroes like St Pat’s do extraordinarily good work in supporting Fremantle’s homeless. Yet St. Pat’s is constrained by funding, they never have enough beds to house the needy and, amongst many other organisations, can only do so much with their small army of volunteers. REIWA members, through the Community REInvest program provide financial help to the Salvation Army’s various homeless assistance measures. So far, REIWA agents have donated more than $1,200,000. Local agents, Caporn Young, White House and Dethridge Groves support this program and I encourage other REIWA member agencies to join. Current government social housing systems mean eligible applicants can wait up to eight years to get into suitable housing. According to various sources, 60,000 households need social and affordable homes in WA, yet despite the overwhelming need for housing, 1 in 6 homes nationally remain underutilised. The state government has pledged to build 3300 more social homes within the next four year which should help but this is really only playing catch up. There are already 8,000 fewer privately owned investment homes in market now than a year ago. For every government-supplied home, mum and dad investors supply ten. Part of the solution to finding affordable homes for those on struggle street is to incentivise these modest investors. How about removing stamp duty for those that commit to buying affordable rental properties or guaranteeing attractive rent returns in exchange for providing affordable rents. Perhaps early access to superannuation with guaranteed buy-back at pre-determined returns into the future. The great work of benevolent groups is laudable, but investors need more encouragement in solving homelessness.
Nov 30, 2023
To Auction or Not to Auction
Why Auction my Property? With property listings across the Perth metropolitan area dropping below 5,000 whilst property transactions tack 25 percent above the five-year average, there’s little doubt that the current ‘sellers’ market’ conditions are likely to prevail for some time. With strong demand for quality homes our most popular method of sale, private treaty, normally attracts multiple offers and because buyers are making offers ‘blind’, it is possible to have a large gap between the best offer and the one second in line. The auction process is different, of course, with buyers unlikely to bid much above a competing buyer. It is reasonable to conclude, therefore, that selling by private treaty could deliver superior outcomes than an auction in the current market. But this is not necessarily the case. In such a strong market, buyers in open bidding competition know precisely what they need to pay to prevail at auction. With private treaty, buyers will often hold back from their maximum price hopeful they’ll get a chance to further negotiate with the seller. The seller may choose to accept the best offer, perhaps unsure if they’ve extracted the best price. At auction, the seller knows they’ve extracted the best possible price from those bidding in open competition once past the reserve. Other benefits to sellers include a cash, usually unconditional contract at auction, a settlement period that suits their needs, a healthy deposit and the delivery of what is the very definition of fair market value. The “no price” marketing strategy in the lead up to the auction day is also beneficial as it captures all possible buyers, including those that may not otherwise consider the property if on the market at a fixed price by private treaty. The “start low, end high” nature of auctions also discharges agents’ fiduciary responsibility of obtaining the highest possible price. The auction process also “shakes the buyer tree” and reveals all possible buyers active in the market. Once past the reserve price, a skilled auctioneer will extract the best possible outcome and if two or more competing and motivated bidders are participating, the end result is likely to well exceed the sellers’ expectations. An auction campaign also gives sellers the chance to extract strong offers prior to auction day as some buyers may fear a ‘bidding war’ on the day of auction. And most properties that fail to reach reserve price on the day and pass-in sell in the days following. To give themselves the best possible chance of selling well at auction, sellers ought to set a realistic reserve price and talk to their auctioneer about having some flexibility around the reserve and how this may work on the day. When selling be sure to ask your agent about all the options when coming to market as there’s benefits with all methods of sale, including an auction. It’s a matter of choosing a method that suits your needs and circumstances and agents should be across the details of all options.