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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.
Oct 25, 2023
Real Estate Ethics
As a junior sales agent many years ago, I lost a listing to a competitor. The seller’s rationale surprised, telling me, “We really like you, Hayden, and the other guy makes my skin crawl, but we reckon he can get us the best price.” The idea there was a disconnect between being a good person and achieving the best market price was difficult to comprehend then as it is today. Thankfully, the two are not mutually exclusive. The Governance Institute of Australia undertakes an annual survey of Australian society’s perceptions of ethics across the major occupational sectors. Unsurprisingly, nurses, veterinarians, doctors, teachers, ambulance and fire services all rank in the top ten of ethical occupations. The bottom ten are made up of lawyers, politicians, senior executives and fund managers. Real estate agents appear third last with 46 percent of those surveyed suggesting we were ‘somewhat unethical or very unethical’. Remarkably, the militant Construction Forestry Maritime Mining Energy Union ranked higher in ethical behaviour than real estate professional associations. Clearly, the community judge us and those who represent our interests (as President of the REIA that includes me) harshly. With such a poor ethical reputation, it is surprising that many real estate agencies survive as long-standing small businesses. It’s hard to imagine a local restaurant, retail shop or other cottage business that suffered such a poor reputation surviving very long. As a local real estate practitioner and employer, your reputation is everything. Damage your reputation through misconduct in the market and word quickly spreads that you’re untrustworthy. Most local agents enjoy a solid reputation, attract repeat business and have serviced their communities for years. For example, a quick Google search of Fremantle’s top three real estate agencies boasts 418 reviews at an average of 4.6 stars. And ask random folk about real estate agents and the reply is often, “they’re terrible, but mine’s great!”. So, why is there a disconnect between community perception and most users of real estate services? It's noteworthy that during peak COVID in 2020, the ethical standing of agents improved, a result of our sector’s management of rental moratoriums and tricky selling environment. Current market conditions where buyers and tenants are disadvantaged can lead to a perception that agents are acting unethically. Mostly though, it is our fiduciary responsibility to work in our client’s best interest that impacts community perceptions of an agents’ ethical conduct. Being duty bound to achieve the highest possible rent and/or market price for a property in times where supply is tight and demand is high, impacts those on the buying and renting side. It follows that a buyer or tenant can feel ‘forced by the agent’ to pay more and that is perceived as unethical behaviour. Perception or reality, the work of real estate agents requires greater transparency. The community, especially younger people, expects more from us in how we conduct our business. We can find reasons and get defensive about it, but the reality is we need to do more in this space to win the hearts and minds of the communities we serve.
Oct 12, 2023
Australian Housing and Urban Research: A Real Estate Perspective
Real Estate's Role in Housing Supply The Australian Housing and Urban Research Institute's (AHURI) annual conference is a crucial platform for addressing housing and urban planning policies, primarily supported by government funding. Surprisingly, the real estate sector has remained largely on the sidelines of AHURI's efforts. This is somewhat perplexing, considering that real estate represents and plays a pivotal role in approximately 97% of all homes in Australia. Real Estate's Limited Participation In a gathering of roughly 80 speakers at the conference, only a handful of real estate agents, including myself, were in attendance. Instead, the majority of speakers and participants hailed from the not-for-profit social housing sector, dedicated to supporting marginalized Australians who struggle to find stable housing. Housing as a Fundamental Right Stable and sustained shelter is a fundamental human right. Even as the housing market is a capital asset class, every Australian deserves a place to call home. Currently, about a third of Australians own their homes outright, another third hold mortgages, and the remainder rent. It's essential not to forget the approximately 160,000 individuals, as of the last census, who are without a home. The Global Housing Supply Challenge Participating in an international panel discussion on rental markets and systems, a common theme emerged — there's a significant housing supply problem. In the United States, there is an estimated four million home shortfall to meet demand. In Australia, we are projected to be 110,000 homes short within the next year, given the current pace of construction and migration trends. Rental Market Dynamics Our rental market is primarily supplied by ordinary Australians, with the majority owning a single investment property. However, this group of property owners has been facing challenges. Since the peak of COVID-19, investors have had to deal with rental moratoriums, rising mortgage costs, increased maintenance and insurance expenses, substantial changes to tenancy laws, higher land taxes, and criticism from various quarters. Reevaluating Housing Policies There appears to be a shift away from relying heavily on individual investors to supply rental homes. With the current supply crisis, there is an urgent need for housing policies that actively encourage investors. The Role of Government Housing While there's a call for more government housing, these should primarily serve those genuinely unable to participate in the open housing market. It should not be the ambition of ordinary Australians to receive taxpayer-funded housing. Build-to-Rent (BTR) Sector The BTR sector is often considered the "supply saviour." However, it primarily caters to investors looking for appealing returns on investment. They deliver high-end lifestyle rentals in premium locations, but affordability remains a challenge for many. Supporting Property Investors It's imperative to acknowledge the contributions of everyday investors, often labelled as 'mum and dad' or unsophisticated investors. They play a significant role in supplying rental homes in Australia. Let's stop undermining the individuals who provide much-needed homes to the market.
Oct 5, 2023
How to Buy in Perth's Tough Property Market
The current real estate market in Perth is presenting unique challenges for buyers. According to REIWA, there are only 4,895 properties listed on reiwa.com, the lowest number in a decade. This limited supply, combined with increasing demand, is driving up prices and making it tough for buyers to find their ideal family home among the 2,289 available homes. Perth’s current market for available property Comparing REIWA’s report to 5,131 four weeks ago and 8,117 this time last year highlight’s the challenge of purchasing a property due to availability. With further analysis of the 4,895 listings, 1,196 of them are blocks of land and 1,410 are units, making it particularly tough to find an appropriate family home from just 2,289 homes across Perth. Property prices inevitably increasing With supply so constrained whilst demand continues to rise, prices inevitably increase impacting affordability and making buyer conditions especially difficult. No doubt, it is a sellers’ market with these conditions likely to prevail until we can get more supply into the market. Real Estate agents’ buyer databases are bursting at the seams but because we act for the seller, agents will encourage their clients to expose their property to the widest possible market to achieve the highest price possible through competition. A Seller's Market That means a marketing campaign designed to attract as many buyers as possible, leading to dozens of groups through the home and multiple offers made. If buying by private treaty, most agents won’t declare an asking price for fear of adding a ceiling price to the process that could prove below market sentiment – a definite ‘no-no’ when discharging your fiduciary responsibility. This adds to the buyer challenge when competing, fearful of paying too much but not wanting to pay significantly more than the next best offer. Buying in a competitive market Buyers need to be well prepared. Have your finance; if needed, pre-approved and up-to-date, be clear on your preferred settlement date and research your preferred buying areas to gauge likely market values for homes suited to your budget and needs. There is no point thinking you can snag a bargain in this market so if the likely market price is say $1M, don’t think you can buy it for $950,000. Sign up for email alerts on the major portals and when finding something that looks promising, call the agent don’t just email them. Build rapport with the agent; if they like you, they’ll be more inclined to want to help. Ensure you arrive at the first home open early or if you can, try and get an inspection prior. Don’t be disheartened if attending a very busy home open thinking ‘I won’t get this one’ because there will be others thinking the same thing. It is not uncommon to have dozens of buyers through a property, plenty of interest, yet no offers. This ‘groupthink’ mentality can work to your advantage if you’re aware of it. When making your offer, put forward your best offer early in the negotiation, remove unnecessary conditions and propose a generous deposit. In this market, buyers will get very little chance to negotiate hard if competing with others. Tips for Buyers: So, what can buyers do to try and get an advantage in such a competitive environment? Be Well-Prepared: Ensure your financing is pre-approved and up-to-date, determine your preferred settlement date, and research market values in your desired areas. Utilize Email Alerts: Sign up for email alerts on major real estate portals to stay updated on new listings. When you find a promising property, don't hesitate to call the agent, as building rapport can be advantageous. Early Attendance: Arrive early to the first home open and consider requesting an inspection before the open house. Stay Optimistic: Don't be discouraged by crowded open houses. Many potential buyers may attend, but it doesn't guarantee immediate offers. Understanding the “groupthink” mentality can work in your favour. Strong Offer: When making an offer, present your best offer early in the negotiation, minimize unnecessary conditions, and propose a generous deposit. In a competitive market, buyers have limited room for negotiation.
Sep 28, 2023
Preparing Your Home for Sale: Making a Great First Impression
Selling your home is akin to a first date — those initial moments are crucial. Just as you'd dress to impress and mind your manners, your property should radiate charm and care when it's time to list it for sale. The Power of Small Improvements In the process of getting your property ready for sale, it's often the seemingly minor tasks that hold significant sway. Those "I'll get to it someday" jobs around the house? Now's the time. Building that garden bed, freshening up the front fence, fixing the side gate, or bidding farewell to that old couch are prime examples. These tasks fall into the "small but impactful" category. Why Small Tasks Matter Addressing these minor tasks is essential for achieving a swift sale at the best possible price. Buyers notice these details too. A rusty downpipe, for instance, can appear as a major issue to them, potentially hinting at overall neglect of the property. The Balance of Renovation However, it's crucial to strike a balance. Beware of overcapitalising on costly renovations like bathroom and kitchen upgrades. Depending on your property and location these investments might not yield the desired return. On the other hand, a charming Fremantle cottage could benefit from such improvements due to the strong demand for turnkey properties in popular areas. General Guidelines for Presentation While specific recommendations vary by property and situation, some principles remain universal. A clean, tidy, and well-maintained home is your strongest asset. "Present it like you don't live in it," as one client aptly put it. Key Tips: Neutralise Interiors: Paint over bold wall colours to create a neutral canvas. Declutter: Store away trinkets, family photos, and personal items to create a spacious feel. Clear the Fridge: Remove magnets and children's artwork, maintaining a clean appearance. Consider Stylish Furniture: For vacant properties, renting tasteful furniture can significantly enhance the appeal and expedite the sale. Focus on Paint and Landscaping Don't underestimate the power of a fresh coat of paint and well-kept gardens. These relatively simple improvements can yield a substantial return on investment and attract prospective buyers. Professional Guidance Lastly, consider consulting a qualified home stylist. While it involves an investment, their expertise can be the difference between exceeding your selling price expectations and no sale at all. Property Preparation Checklist In the world of real estate, presentation matters. Before listing your property for sale, consider these essential steps: Minor Repairs: Address any minor repairs and maintenance tasks around the house. Neutralise Interiors: Paint over bold wall colours with neutral tones. Declutter: Remove personal items, trinkets, and excess family photos. Kitchen and Bathroom: Evaluate whether a renovation is warranted, considering the property's location. Landscaping: Ensure the garden is well-kept and attractive. Furniture Staging: For vacant properties, consider renting stylish furniture. Professional Advice: If uncertain, consult a qualified home stylist to optimise the presentation. A well-prepared property stands the best chance of attracting potential buyers and achieving a favourable selling price.
Sep 20, 2023
2023 Australasian Auctioneering Championships
This week I attended the Australasian Auctioneering Championships, hosted in Auckland. The best auctioneers from across Australia and New Zealand fought it out ‘theatre-style’. An amazing event with the very best auctioneers moving through extraordinarily difficult bidding sequences that, thankfully, auctioneers don’t normally encounter. Christchurch based Ned Allison taking home the 2023 major prize with a stunning call of a very complex bidding sequence. I’m an advocate for the auction process as a method of sale for several reasons. It remains the most transparent selling process with all buyers able to see competing buyers, with the auctioneer bound by an ethical REIWA code of conduct, bringing fairness to the process. Buyers also usually have the time (unless the seller accepts an offer prior to the auction) to view the property several times, undertake all necessary due diligence, and be ready to buy on auction day. The benefits to sellers include cash, an unconditional contract, a settlement period that suits their needs, a healthy deposit, and the delivery of a price that is the 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 who may not otherwise consider the property if it were on the market at a fixed price by private treaty. the auction process ‘shakes the buyer tree’ In short, the auction process ‘shakes the buyer tree’ and reveals all possible buyers. If the property is being sold under an executorship arrangement, or the market price is difficult to determine, then auction may be the most appropriate method. And of course, let’s not overlook the X-factor an auction brings which, through fierce competition, sometimes delivers an amazing result well above expectations, one that can be hard to replicate with other methods of sale. Auctions may not be for everyone of course, it’s important that Sellers understand the process and feel comfortable with the strategy. Some sellers can sometimes feel under pressure to ‘meet the market’ on the day of auction if the highest bid is below their original reserve price. The lead-up to the auction day can be stressful too with multiple home opens and inspections during the weeks prior. Some buyers remain deterred by the auction process too; either too nervous to bid or unprepared to buy without certain conditions being met, such as finance approval for example. However, more and more these days, many buyers appear to be welcoming the transparency of the auction process over the blind, confidential negotiation of a Private Treaty sale. Be sure to ask your agent about all the options when coming to market, as there are benefits with all methods of sale. It’s a matter of choosing one that suits your needs and circumstances, and agents should offer you that choice and confidently explain your options.
Sep 13, 2023
Pricing Your Property Right
Fremantle’s property market continues its positive trajectory with short supply and solid demand. This current imbalance is keeping up property values as buyers continue to compete for the limited homes available in the area. Although interest rates have stabilised and inflationary pressures have tempered some of the FOMO enthusiasm, the limited buying opportunities have buyers competing for homes. The short supply means agents are desperate for listing stock and, unfortunately, one response to this market is for agents to offer ‘happy prices’ to would-be sellers, the aim being to secure the listing and hope the market catches up during their period of authority. Additionally, emotional attachment often leads homeowners to believe their property is worth more than a market consensus of a fair price. Opinion of market value for a property is largely a subjective exercise; various agents will have differing views of market price, and friends, lovers, and others have their own opinions as does the property owner. take in professional advice from a local REIWA agent Sellers who have committed to another property at a higher-than-hoped price will also be pressured to sell their own home for more than the market will bear. The result can be price expectations that well exceed market reality. In truth, the value of a property is not determined until a buyer is found, negotiations finalised and the contract for sale is completed. The combination of market information, comparative property sales analysis, demand and supply levels, buyer activity, and property presentation provide an insight into what fair market price might eventuate for a property, but what does the anticipated or listing price have to do with the final market price? In short, plenty. Statistics show that sellers who over-price their property lose money in the end. Sellers that allow their property to languish on the market due to unrealistic price expectations (either derived from themselves or an over-zealous agent) end up fighting against the buyer sentiment of a stale listing; a property that has been on the market for above average periods of time. Such properties are often simply over-priced and buyers will discount them because they think “there must be something wrong with it if no one has bought it.” Sellers that have to discount listing prices to sell will almost always end up selling for less than if they had a realistic market price expectation from the beginning. Sellers are well advised to take in professional advice from a local REIWA agent and form a considered, unemotional opinion of value based on facts, evidence and reputable market data.
Sep 7, 2023
Short Stay Rentals Australia
A recent visit to the Gold Coast on REIA business revealed one of the more vexing issues around rental affordability in Australia. In one of Australia’s favourite holiday destinations for both domestic and international travellers, the Gold Coast region has a high number of apartment homes traditionally used as a holiday flat or rented investment properties. A search of rental homes available across the Gold Coast region reveals about 1800 properties available for lease. By comparison there are some 5500 short-stay properties available. REIA’s analysis shows investors favouring the short stay market for a typical 2-bedroom apartment earn the same income in 156 days compared to a long-term rented property across a twelve month lease. a deep-dive study into short-stay accommodation Armed with this information, REIA undertook a deep-dive study into short-stay accommodation (SSA) across the nation which we released this week. The numbers reveal a remarkable level of growth for this sector with 133,968 (81.9 percent of which are entire dwellings) short-stay accommodation places across Australia, an increase of 22.8 percent for the period March 2022 to March 2023. Tasmania has witnessed the largest increase in SSA places, up an incredible 66.4 percent in twelve months to 4255 properties. Canberra came in second with a 49.6 percent increase in SSA places, followed by Victoria’s 32.4 percent, NSW’s 25.3 percent and Queensland’s 23.7 percent. Here in WA, there are 8,056 SSA places, an increase of 16.2 percent across the same twelve-month period; the lowest growth rate across the nation. Regional areas have the highest proportion of SSA places, making up 61.2 percent of all properties, with the highest differential between city and regional places found in Queensland (thanks to the Gold Coast and other coastal holiday destinations) at a ratio of 82:18 regional to capital city. In WA, 45.9 percent of SSA places are in the Perth metro area, the remaining 54.1 percent in the regions. Mature tourism destinations along with those more recently discovered thanks to the COVID-19 pandemic, welcome SSA opportunities for visitors with tourists contributing to local economies. Yet, the increase of SSA places has meant fewer properties available to traditional long-term renters with this shortening supply contributing to recent rent increases. SSA investments can be an appealing alternative to the long-term rental market. In Perth, an average two bedroom dwelling in the rental pool, earns $25,800 per year. The equivalent dwelling in the SSA market, based on average nightly rates, earns the same revenue in just 132 days. In regional WA, the gap in earnings from SSA and a long-term rental is even wider, taking just 107 days for a SSA property to earn the equivalent in the long term annual rental market. However, higher management costs (15-25 percent), no regulatory protections, risk of property damage and increased wear and tear are important considerations for SSA investments. The ‘gap’ in earning potential between short and long stay renting poses an immediate threat to further deterioration in rental affordability. Longer-term though, I predict the combination of cost of living pressures, slowing domestic tourism, potential excessive supply of SSA and risks associated with the SSA asset class will see long term rental investments regain favour.