Sentiment Survey- Measuring the pulse

ECONOMIC OUTLOOK

Perhaps not surprisingly, this section of the survey garnered some of the most passionate feedback.

According to the survey, 85.5 per cent of the 358 respondents say they aren’t impressed by the federal government’s management of the Australian economy.

Moreover, 52 per cent of respondents feel economic conditions have deteriorated when compared with the previous (third) quarter.

Century 21 Australia regional owner Charles Tarbey says he was not surprised by the lack of support for the federal government.

“From a commercial perspective it is clear why there is so much disappointment,” Mr Tarbey says. “I just think there is a total lack of commercial experience in the current government, and they have little idea of how to effectively manage a business on the scale of the Australian economy.”

However, Mr Tarbey questions whether current economic conditions are worse now than during the previous quarter.

“You don’t have to look too far to find this is not the case,” Mr Tarbey says. “People are driving down their mortgages at a faster rate than we have seen in years, with an increasing number saving larger portions of their income each month.”

L Janusz Hooker, CEO of LJ Hooker, was surprised by the negative sentiments considering that “we are the best performing developed country in the world over the last 20 years”.

“In regards to that response rate, I would go to the contrary and say we have constantly outperformed the rest of the world. I think our government has been doing a [relatively] good job,” he says.

However, Mr Hooker acknowledges that the state of global markets continues to undermine consumer sentiment.

“That being said, the good operators in particular businesses are still taking more market share and our performance has been consistent through the last two quarters,” he says.

Just over half the respondents (51.1 per cent) feel the RBA is doing a good job controlling inflation through its management of monetary policy, although just under one in three respondents (31.6 per cent) believe current interest rates are having a negative impact on the demand for residential property.

Around 44 per cent claim that current interest rates have little to no impact on buyer demand.

Raine & Horne chief executive Angus Raine says any drop in interest rates “will be a real shot in the arm for Australian buyers and really boost consumer confidence.”

Mr Hooker believes the RBA is doing a good job in controlling inflation, based on recent data. He says that an analysis undertaken by Macquarie Bank shows that, seasonally adjusted, inflation was only 0.3 per cent last quarter.

This was significantly less than the headline CPI, which was 0.6 per cent. “It is [therefore] going to be very hard,” he says, “[for inflation] to be anything above two to 2.5 per cent for the whole year, which is well within their two to three per cent [CPI] range.

MARKET OUTLOOK

The sentiment was clear – more than 87 per cent of respondents say the property market over the October to December quarter will represent good value for buyers.

Destiny Financial Solutions’ Margaret Lomas says that while some markets are sluggish, others are booming, indicating that the property market is far from flat.

“We have thousands of property markets all over Australia and even in the past couple of years many of those have been very vibrant and have been growing very well,” she says.

L Janusz Hooker believes there will be a lift in sales in late spring. “October and November are typically our strongest selling months, particularly October and half way through November,” he says.

“We are seeing affordability start to come in where wages are slowly but surely increasing, and they are increasing faster than house prices are. As that affordability improves there is a higher chance of getting deals done.”

John Percudani, director at Perth-based Realmark, believes this outlook is “highly optimistic.”

“It is going to be a normalised…somewhat mediocre market for some time, and in some markets like Melbourne I would have thought that it would be quite the opposite. I just can’t see the justification in this response, it’s almost just wishing for it to be the case.”

Nine out of 10 respondents expect property prices in their area either to fall or remain the same in the next three months.

“I see in the coming quarter a lot of people looking at the broader confidence levels and people who are pricing their properties correctly are getting deals done, and we are seeing that consistently,” Mr Hooker says.

James Wardrop, franchise and training manager at Victoria-based Stockdale & Leggo, is not as sure. An interest rate cut would be required if property sales are to improve in the coming months, according to Mr Wardrop.

“We need a bit of fuel,” he says.

Meanwhile, almost one in two respondents (48 per cent) believe listing numbers will rise in the three months to December.

Mike McCarthy agrees, while admitting the increases will obviously vary depending on the area.

“Listings are increasing, but I think [agents] should be more selective of the listings they take on,” he says. “They are of no service to the vendor if they take on overpriced listings that they don’t believe they can genuinely sell.”

Brett Hunter, principal of Raine & Horne Terrigal-Avoca Beach, on the NSW Central Coast, says auctions remain the best way to move property quickly, usually within a six-week period.

But he doesn’t think auctions, which made up around 25 per cent of the sales within his region, will ever take over as the dominant selling method due to vendor preferences for private treaty and a lack of agents with the confidence and skill to undertake the auction process.

This correlates with the survey’s findings, with a majority of respondents, or 76.3 per cent, saying private treaty will remain the most effective selling strategy over the coming quarter.

Mr McCarthy says creating buyer urgency – regardless of whether it’s via an auction or private treaty - is the key to achieving a prompt sale.

“I think by putting a time frame around [the sale], with a partnership approach with the agent and the vendor, means that you are more likely to get a good result,” he says.

“Having some set times around [the sale] and a clear objective of getting the property sold within a four to five week period…is a very simple strategy, whether it be auction, private treaty or [private] sale by set date.”

A significant finding in this section is the days on market result: 44.7 per cent of the 358 respondents expect days on market to rise in their area over the final three months of this year.

“I think the industry and the practices of sales people have a lot to do with the blowout in days on market,” Mr McCarthy says.

“I think if people are setting listings up correctly, communicating with their vendor correctly, marketing the property correctly, and giving them open and honest feedback, then if the vendor is working with the agent and is realistic about the outcome, then the days on market shouldn’t be blowing out.

“If I look at the better performing agents [in Barry Plant], even in private sale areas, they are still achieving days on markets of 27-28 days. What they’re very focused on is the process, and setting it up correctly from day one.”

This includes establishing a realistic “price range”, he adds.

Starr Partners’ CEO, Douglas Driscoll, agrees, citing similar low days on market figures for franchisees within his Sydney-based group.

“There is no point in [playing to] the vendor’s ego,” he says.

Stockdale & Leggo agents are also focusing on giving sellers a clearer idea of what similar houses are selling for in their area, says Mr Wardrop – representing a much better price guide than the ‘prices’ taken from current listings.

Vendors focus on what’s on the market, he says, rather than what people are actually paying.

BUSINESS OUTLOOK

Another of the survey’s key findings relates to careers, with 86 per cent of the 358 respondents saying they are not considering leaving the real estate industry during the next quarter.

However, Anthony Toop, director of Adelaide-based Toop&Toop Real Estate, remains sceptical.

“Unless the Reserve Bank cuts rates and the international economy stabilises, I would suggest these figures are extremely optimistic,” Mr Toop says. “Most of those agents that exited the industry earlier in the year were not prepared for the challenges ahead, but it seems a lot of those people who were going to leave already have.”

If they are staying, then Mr Percudani questions whether they’re really changing their ways. “That is great that they are all staying put, [but] are they planning on just doing the same thing? Are they really resetting themselves and reinvesting in their business?

“I think those that have been around for a while have got that continuity of the business, but I don’t see any big change in the way that they are doing business.”

While most agents are not considering leaving the industry, few principals and licencees plan to hire staff in the coming months. In fact, only one in five business owners plans to hire staff in the coming quarter, while 71.5 per cent intend to keep staffing levels the same.

Mr Toop believes there is more emphasis now on the standards and professionalism of all recruits.

“I expect to see a significant increase in the quality of agents over the coming 12 months.”

LJ Hooker has just completed a successful recruitment drive, Mr Hooker says.

“Our philosophy is very much [a case of] grow and attract the best people in the industry in times when other people are shedding staff, because it is very hard to recruit the top people when everybody is making money hand over fist.

“In the last quarter, we have put 25 offices on as of September 31, and over 130 sales people.

“We have got another seven offices that will have joined by the end of this month [October], and we are talking to a huge pipeline of individual sales people and offices.”

Another key result was that just over half of respondents (57.3 per cent) had cut their commission in the third quarter of 2011.

This was in response to intense pressure from vendors, with almost four out of five respondents (79.3 per cent) reporting that vendors had asked them to reduce their fee in the past (third) quarter.

Starr Partners’ CEO, Douglas Driscoll, says he wasn’t surprised with the sentiment poll results considering the lacklustre condition of the property market and economy. He feels, however, that agents were too quick to “drop their pants” in terms of commission when pressured by vendors.

“It’s the first sign of panic,” he says.

Agents should be prepared to show vendors tangible proof of why they are worth their commission. This includes showing the vendor a detailed schedule of how they will sell their property, along with backup plans.

Mr McCarthy agrees: “If it is handled correctly, the fee is normally just an end discussion as you are filling out the authority.”

Property management remains a key focus for principals, with 45 per cent of respondents expecting this part of their business to be the busiest in the next quarter.

“We’ve got about 24,000 properties under management across the group in Melbourne and that has grown significantly in the last five years, [up] from 14,000. The bulk of that has been organic growth,” says Mr McCarthy.

“[Growing a rent roll] is something we’ve put quite a bit of focus on – we’ve got a specialist property management consultant who trains and works with the group.”