A property cycle follows market progression from the peak to the start of the decline, then from a declining market to the bottom before recovery and growth lead the way to hit the peak again.
The distance between the peaks in any market is somewhere between seven and 12 years, and the great news is it’s getting shorter. Since the rapid uptake of mobile devices, everything is getting faster.
You need to be intentional about your numbers if you want to grow your income in a declining market. In most markets across the eastern states (excluding mining towns), we’ve seen a six per cent decline in average sale prices with further to go, combined with bouncy volume – some months up and some months down – and a five-year run which saw declining fees masked by a good market.
If you add it up, say a 10 per cent decline in average sale price, 10 per cent less volume and 25 per cent reduction in fees in city markets (in other words, two per cent to 1.5 per cent), that’s a 39 per cent decline overall.
Sell your property management properties to your current investors first to keep them in your ecosystem.
Here are some ways to beat a growth stall:
1. Decrease your cost of lead acquisition through customer experience. One customer served well leads you to your next customer. This is critical so that you control the overall margin – the difference between what it costs you to provide the service and what you charge the customer.
2. Reduce churn – sell your property management properties to your current investors first to keep them in your ecosystem and check your past client program is keeping your past clients, not losing them to the competition. The theory is that past clients pay more, which increases your average fee.
3. Grow into new markets – not just geographically, but also by property type: apartments versus houses, low-end versus high-end.
4. Focus on agent productivity by getting more face-to-face appointments booked.
5. Reduce the ETA for the customer, keeping days on the market short so that you can keep your volume high.
6. Increase the spend of the customer by raising fees and marketing.
Pricing of your services (better known as the fee you charge) is the fastest way to profit and the quickest way to bankruptcy. The industry is fascinated with competitor pricing; I hope the competitor you’re following has priced their services correctly to allow for profit, so you can reinvest to reinvent what you do for the customer. The only way to compete is to make it easier for the customer.
It’s critical you focus on the numbers if you want to achieve your goals. You need to make the small changes to get the significant results; if you fail to pay attention, you could fall well short of last year’s numbers.