It feels like it is changing but is it for the better?
Topic – The big moves of 2018
Mentor – John Knight
- The banks
- Some good value
Marketing Monday – How to react when you are asked to give a quote to a news story and get quoted.
Kevin: And this week as our guest mentor, John Knight, joins me from Business Depot. Of course, Business Depot, if you’re not familiar, is specific to … well not specific to real estate, but specialises in real estate practise, in terms of accounting, coaching, legal, and broking.
Kevin: Interesting … John, good morning … and it’s interesting that we’d be talking about broking there, when today we’re going to talk about the the rent roll market.
Kevin: Good morning.
John: Yeah, good morning Kevin, and thanks for having me along again.
Kevin: That’s okay. Well I wanted to ask John, specifically, because you’ve got such a good feel for what’s happening with the property market as it relates to agents and agencies, just to give us a bit of a brief overview on his reflections and takeaway from 2018.
Kevin: John, you’ve chosen to start with the rent roll market. Why is that?
John: I suppose, Kevin, 2018 to me, it feels like the rent roll market is changing. It feels like it’s in a bit of a state of flux. Now we’ve got different locations around the country, and they all have their little micro-influences, or different things that influences the demand for rent rolls, whether you’re a buyer or a seller, but it feels like there’s change. And one of those changes might be coming from some changes in the banks’ lending requirements.
John: And even at the business level, we’re seeing probably, banks changing some of their requirements, or tweaking them, or maybe not letting all businesses get away with a few things as long as they previously did. And it even links in to the lending requirements just for buying properties. We know that finance requirements have tightened for the purchase of those investment properties, but we’re seeing a lot more hurdles, or a lot more boxes having to be ticked, even just for the residential home purchase.
John: So I think that’s flowing through to the overall rent roll market.
Kevin: And I guess, too, the tightening of the screws on investors probably going forward will have some impact as well, in terms of the number of landlords that’ll be available to put their properties in to the rent roll, John.
John: Yes, I believe so, and if we were to look forward in to 2019, and the prospect of a Labor government getting in to power in Australia, talking about removing negative gearing and so forth, the political climate means we don’t necessarily have certainty, and that flows through to the rent roll market. I have that many clients who say, “Is now the time to sell?”
John: There’s this anxiousness or nervousness, and that’s probably leading to some of the supply and demand that’s out there. And I know at least in the Brisbane market, we’re seeing the supply and demand sort of kicking in.
John: We see rent rolls close proximity to the city, and I see this Australia-wide, always still popular, but when there’s a lot of properties on the … or if there’s a lot of rent rolls on the market to buy, it’s having an affect on the prices. And it doesn’t feel like we’ve got those big corporate buyers that we used to have, to come in and take those big parcels of properties under management.
Kevin: Are people looking more to consolidate, do you think?
John: I think they are. I think we’re actually going in to an era of a bit of consolidation, and probably consolidation generally for the industry, as well. When we look at who’s selling rent rolls at the moment, Alan Dawson from our agency broking business talks about the three groups of different types of vendors, and one of those are those people which are, “Just get me out of here. It’s too hard.”
John: They’re not necessarily leaving the industry, but maybe they just want a better lifestyle, or maybe they’re defaulting back to just focusing more on the sales business. And don’t underestimate that one. The amount of principals I’ve spoken to who are talking along the lines of, “I just don’t have the head-space for property management any more. It’s not my passion. Get rid of it. I reckon I can make more money buckling down and focusing on the sales business.”
John: But then, of course, you’ve got what we call the 3 a.m. clubbers, which are those that are stressed. Those who are lying awake at night, not knowing how they’re going to pay the bills the next day, and we have seen a few distressed sales in recent times. Often they’ve built a really good asset, but they don’t necessarily have the cashflow coming in, which is a common complaint within property management.
John: And that’s before we get to those baby boomer succession types, who … the amount of baby boomers within the real estate industry holding on to some high-value rent rolls. Some of them are getting to that point where they are ready to retire, haven’t got a succession plan in place, and throwing their rent roll on the market.
Kevin: Yeah, I’ve got a theory about that, and that is, we’re talking here about the 3 a.m. club and that, “Just get me out of here,” I think the days of high accountability are definitely with us in terms of owners’ expectations, and I think this is because there’s a much higher level of professionalism in property management now than there ever used to be. We used to be able to get away with a lot, but now I think there’s a lot of boutique operators and the bar has really been lifted. And for a lot of brokerages, they’re saying, “Well this is just too hard.”
Kevin: You either specialise in sales or you specialise in property management. That’s my theory.
John: I completely agree. There’s a lot of, even if you look outside the real estate industry, there’s a real theme around specialisation, and as you get these boutique operators who have a really specific point of difference or niche offering, then they can do that really, really well, as compared to others who are just doing it all and doing it all the same way they’ve done it forever and a day. Landlords, tenants, customers generally, are expecting more.
Kevin: They are indeed. John Knight, our guest this week from Business Depot. Tomorrow we’ll have a look at the changing team mix. Talk to you then, John. Thanks for your time.
John: Thanks Kevin.