National Auction Round Table Part 1: Around the Grounds

TRANSCRIPT

Steve Carroll: Why don’t I kick off with, “What’s happening in the market at the moment?” We’ll kick off with New South Wales. What’s happening in the market in Sydney and wider New South Wales? Anybody can attack the question and jump in as you feel fit.

Stu Benson: My clearance rate up in the North West of Sydney, it’s certainly not where it was a year on year. I would imagine this to be national, but we’ll see where the conversation goes. It needs to be managed, where a four-week clearance rate up in my district is down 15 per cent lower than it was. If I step back and look at a six-week clearance rate, I would look at what the process was able to do, was it able to affect a sale in four weeks? Or, did it condition the owner on the fourth week? That, perhaps we were too high. Let’s go back to market. My six-week clearance rate is hovering around 90 per cent. So, the auction process itself is still working. It’s still a great way to sell property, of course. But, it is taking a little bit longer, given the vendor expectation of price at the moment.

Steve Carroll: Yeah, okay. That’s good. Anybody want to add to that?

Will Hampson: I think across Sydney we’re seeing reduction in the amount of investors in the market, particularly in the apartment auctions, that the numbers and volume of bidders both on apartments and houses. They’re probably the number of registered bidders that we’re seeing across auctions, across Sydney, is not to the same volume. Then, in saying that, a lot of the buyers are of a really good quality and the buyers that have been looking in the marketplace for some time are very well educated to the market.

There’s been an adjustment, as the media’s reported and as we’re seeing in the residential sector, on process. Now that we’re a few months into the market, that a number of vendors are seeing that, and they’re able to meet the market. And the good auction agents are able to educate those vendors to make the market.

After we’ve had significant growth over the last five years, most vendors that are long term vendors are still seeing a really strong result that’s far above what they paid for the property. It’s only those that perhaps bought short term, which there wouldn’t be too many vendors, they were reselling, they have only owned their properties for 6 or 12 months. So, most vendors still make a profit on their sale. But perhaps, not the lofty margins that they were over reserve. Perhaps, earlier this time, last year.

Steve Carroll: Yeah, makes sense. And, James from a Ray White perspective?

James Keenan: Yeah, look I’m very fortunate as an auctioneer, to work in a very active auction market. And also, to work with some particularly good agents. The auction has never been more important than it is now. The heat in our marketplace has come out a touch. That doesn’t mean we’re not selling properties. In fact, our clearance rates in the inner west, inner city, Eastern suburbs, at the moment is above 90 per cent. But, that’s coming down to hard work and the expertise of the agent. And, the auction process works if it’s handled correctly. And as I said, I’ve got some particularly good agents that I work with that understand the auction process.

I’m finding, and I feel, that a lot more properties are going to go to auction, and a lot more vendors are going to commit to auction campaigns. Because, the slight difference in where we were, probably 12 months ago, was the buyers were walking into properties. The heat was in the market. They’re all saying, “Well, what’s it going to take to buy the number to be put on the table?” and they buy it.

What I’m sensing now is that buyers are wanting to buy, but they’re taking things a little bit more cautiously. They’re going, “Okay, but look, that’s great. We like it, keep me posted,” and we’re tending to run through the auction process. And, we’ve got to educate our vendors, as well. But as I’ve said, I’m fortunate. I’ve got some great guys around me. They know what they’re doing, but it’s hard work. And, it’s gonna get harder, but the auction process will never be more relevant than what it is now, and I believe in the year or two to come.

Steve Carroll: Yeah, okay. And before we go to Queensland in a second, but listening to Mark McCleod at your Ignite conference, Mark McCleod was saying that the agents in Sydney are going to have to work harder than they’ve worked for many. many, many years. Comments on that?

James Keenan: Absolutely, and it’s all about process, and the agents stick to a process, and stick to a planning. You cannot deviate from that. And, it’s a little bit like a game of football, you go out with a game plan, and you start your campaign. But, you’ve got to adjust it accordingly to what’s happening. If you don’t do that, and your rely on just turning up at action and hoping you’re going to sell it, well, you’re going to be disappointed.

Stu Benson: Yeah, the good agents love a market like this, because it really differentiates the ones who know what they’re doing, and the ones who’ve been recipients of market heat and external factors, and low interest rates, and supply and demand factors. And once that all thins out, and it’s ‘mono y mono’, and you’ve got to actually approve that you know what you’re doing and run the process. And, you’re not just gonna put up an auction sign, turn up in three weeks later, and have 12 people registered.

Reality is not that you will put up the auction sign, turn up three weeks later, and you might have two. What have you done with those two? What have you done with your vendor? How are you gonna get this done? And again, agents love this time of the market. It’s a good time to be an agent, if you’re a good one.

Will Hampson: Agents that have been in the industry less than five years and they’re finally working a rising market, will have to do a lot of work on their vendor management skills, hone that, and increase their ability to manage vendors. As Stuart touched on, those agents that have been 10 years or longer, like myself, love this market, love the ability that they have around the process, and as James touched on, sticking to the auction process. I think that the auction process is going to be more relevant for sellers and for agents to utilise that to still achieve a premium price. It may not be about exceeding reserves by the lofty heights that we’ve seen, but it’ll be about getting the property sold in a reasonable time frame.

James Keenan: And I do think that the other thing is that it’s up to the agents to have the trust of their client, and having the tough conversation before you actually start the campaign. Because, if you actually don’t start off on a realistic playing field, then it’s going to be a fight, from start to finish. And I think that’s become even more.

Steve Carroll: So, Queensland, we don’t have the peaks and troughs, would that be fair to say?

James Bell: I think for Queensland, it’s moving on from that country feel to it. But, in terms of auctions, I think we’re transitioning into somewhat more of an auction culture over the last two years. Quite similarly though, listening to the comments from the Sydney side of things, I think from that I’ve seen already this year, the agents are very capable and competent auction agents.

They’re actually doing a lot better this year, in comparison to those that probably over the last year or so, caught on that hey, auction is a method of sale that we can utilise. And similarly, they’ve been on the back end of a rising market where, yes, you’re right, you put a sign up. We might not get 12 bidders, but we might get five or six and so then that’s a successful, huge result.

I think clearance rates for us this year are probably across the board in the 40s at the moment. The group that we, or I work for, we’re probably about that 60, pushing up to 75. I think last month, I think we were about 88 auctions across SEQ. Different markets prove to be certainly a bit stronger and better representation than Sunshine Coast and Gold Coast, at the moment. But, yeah, I think for us, that transitioning time as an industry growing up, in terms of understanding the auction method as a style, I think, is moving forward. But certainly, I have to agree. Those are the really competent agents with auctions that are smashing up this year.

Steve Carroll: Yeah, that makes sense. Matt, Victoria?

Matthew Scafidi: Yeah, Vistoria is… the last quarter of last year was, it did take a little bit of a dip, the market. And then, we came back in January. We were talking before that there was a couple of properties left over from last year, so I think we had five or six that sold really really well. And we thought the markets back. We had good numbers through OFIs, and everything else as well.

But, what we’re are seeing now is another little dip. Clearance rates, in our market place, are probably down about 52, 53 per cent the last couple of weeks. So, as the guys from Sydney we’re saying before, it’s really important that agents are doing the work right now. And, I think that they’re being hit a little bit with giving potential vendors, six-month-ago-pricing. Now, they’ve got to go back and have the hard chat, and say, “We had $100,000 price reduction on a property that was at 165, back to 155, just this week. But, we’ve not had two repeat inspections through that property. I’ve got another one tonight. And, we’re probably going to see that one sold.”That was a hard chat to have.

Steve Carroll: I can imagine!

Matthew Scafidi: But, one that needed to be had at the same time. And people are still wanting to get sold. One thing we did see in our market place, was Spring was quite quiet this year, compared to others. February/March has been absolutely massive. We’ve had our biggest first quarter, ever, on record. But, it’s just about making sure that the agents are having those pre-campaign, mid-campaign, and pre-auction meetings along the way, and having those difficult chats.

Steve Carroll: So fellows, anything to add on the Victorian front?

Andy Reid: The order takers of the industry are gonna get found out, in a big way. I’m working with a couple of franchise groups, and I’m saying to them that vendor perception generally tends to work about six to nine months, like you said. Like, six to nine months behind what is actually happening in the market. And if at a franchise level, they are not focusing their franchisees and their sales managers and their sales associates on the art of vendor management…and, it’s not a case of bashing vendors and all that sort of stuff, far from it. It’s a case of being able to have the real conversations.

I’ve had agents on the ground, say to me when I’ve mentioned something bout a transitioning market place, and saying, “Oh, yeah look how depressing and all that.” Well, no, it’s not the right way to look at this. We need to be looking at this as, how can you provide the value that you’re attempting to even gain from these vendors. And, that’s the way that a lot of agents need to start looking at it, because at the minute, they’ve been getting easy money.

Like you said, vendors are still in that honeymoon period. I think they’re just about to get a bit of a hangover, unfortunately, but.

Steve Carroll: Okay, that was good. Peter?

Peter Gourdouros: Look, I agree with you whole heartedly, it’s a process and I’ve been in real estate for 24 years, and I remember when I started working this market. I literally found it tough, obviously because I was the new boy and what may they be. The auction system right now is, for me, is the process from go the way you do it right. We’ve got to educate our salespeople, right now, to do it properly. But, it’s gonna get tough, make no mistake, it will. I can feel it. But I’m also about, you’ve got to be strategic in the way you do things. One of the things that I do find, our job at the end of the day as auctioneers, and obviously marketing properties, is to do the right thing by a vendor. That’s the most important thing.

We’ve got to forget about everything else, it’s about doing the right thing by your vendor. And for me, as far as I’m concerned, if I have to take an offer prior to auction, I will. As long as there’s an unconditional contract, and obviously 10 per cent deposit down and what may be. I will do what’s right for my vendor. Sure we’ve got to educate, our job is to give honest feedback, do the right thing with integrity and authenticity, the rest will just happen. It’s simple.

Steve Carroll: Okay, that’s good. 

Alec Brown: The market’s strong. We’re in a merging market, in the sense that, while auctions been around for quite a while, it’s now being engaged as one of the, if not, the choice method of sale. We have started, much like most of the other marketplaces, a little bit cautiously. The activity and ferocity of the buyers have cooled somewhat and they’re a little bit more cautious, a little bit more educated to the sense that they’re doing a little bit more background on each property. Where we would’ve expected six bidders, is now is more two to one bidder. I guess the relationship between auctioneer and agent hasn’t been more important, I think, and that’s often overlooked. Having a good working relationship between the agent and the auctioneer is vital to see it through.

You need to know what your agent’s gonna be doing or prompting. In particular, those one-bidder auctions, am I right? Where you got to actually rely on them other than being the piece of furniture next to you looking good. You need them to actually have primed the buyers, making those conversations mid-auction, where you need that time. Look, on the whole, I think we’re in a very positive market. We remain wary of what’s happening around us in the other states, but at this stage the forecast is pretty bright for Canberra.

Steve Carroll: Yeah, good.

Josh Hart: Tasmania’s in a really exciting position at the moment, because we’ve come from behind and we’re almost there above Australia at the moment. There’s been a lot of reports about what’s happening in our marketplace.

Hobart’s been the leader in excess of 13 per cent growth over 12 months, and that’s certainly trickled across the state, which is really good. You know, we’re in a pretty dire position, probably five or six years ago, when we had a hung government between Labour and Green, and were in a really big pickle. But the interesting factor of that is, that also, in last year, we only had 1.6 per cent of all transactions were done through auction.

So we’re a very small auction market. It’s the perfect mixture between an uneducated agent, who is fearful of the process and doesn’t understand the process. But also a fear of the consumer. We’re very conservative, we’re regional and our market down there has seen the failings of auction before, and unfortunately as an industry in Tasmania, we haven’t got together to say, “Hey don’t be fearful of it, actually embrace it, and use it to your benefit.”

So we’ve got some challenges from the auction process down there, but certainly from a real estate market point of view, would be one of the best in Australia currently.

AJ Colman: So Adelaide is quite interesting, we’re a very small percentage, I think 8 per cent of all properties on the market go to auction, which considering the eastern states is very, very small, again, they say that internationally if you want to see if something works around the world you take it to Adelaide. What works in Adelaide will work anywhere in the world, that’s how conservative we are. But our volumes of auction are the best they’ve ever been. So, we’re seeing a high auction rate, but we’re seeing low volumes of stock.

Steve Carroll: Okay. Darwin?

Karl Secondis: Darwin. Completely opposite to Josh’s market in Tasmania. I think we’ve gone the other way, 15 per cent probably backwards, if not more. We’re actually having a massive shake-up. In my 23 years, never seen it so difficult. Auction hasn’t really ever played a massive role in our market. As a culture, in the industry or as a method of sale in what is a very transient market. Everyone in Darwin’s from somewhere. You very rarely find someone that was born in Darwin IN Darwin, they normally get out. We have a very high turnover market, people come and go all the time. The good thing about that is is, you get to resell property frequently, you’re not waiting eight or nine years to resell a property, you can resell a property out in 24 months or 36 months.

But we’ve gone through a massive shake-up with the offshore project the Inpex gas project. $34 billion project, biggest gas project or biggest off-shore project in Australia coming into our market. A lot of money being thrown around, people went from getting $700 a week rent for their property to $1100 a week rent for their property, and they’ve been on that honeymoon for four years. Now we’re back to $700 a week rent. So property values have kind of followed a similar trend. Everything went up for four years, and now it’s coming crashing down in a big, big way. Lot of first home buyers entered the market a few years ago. Obviously, no stamp duty, low deposit, things like that. Massive critical situation at the moment. A lot of people are negative equity in their property. Paid $550, they’ve got a debt of $500, and the property’s worth $430.

So obviously death, divorce, the bank, people moving and leaving town. When the rents were high, they could kind of afford to hold the property. Because the rent was covering the outgoings. Now the rents have gone from $800 back to $500 a week. All of a sudden there’s a shortfall in mortgage payments, and there’s obviously, they have to pay their outgoings, body corporates, council rates and any maintenance. So it’s putting a hardship on people.

We’re seeing more than ever before, mortgagees sales numbers have lifted substantially. So auction numbers are starting to lift because that’s often the preferred way of mortgagees to sell and liquidate property. We’re starting to see agents that never traditionally offer auction as a method of sale starting to try to get some of that mortgagee work.

We’re seeing, Raine & Horne, for example, who typically don’t do any auctions. They’re doing ten auctions in two weeks time. Auction numbers are starting to lift. The clearance rates towards the end of last year were sitting under 50 per cent. I think there’s a lack of skilled people in our market. But the people that I trained during my previous business are probably the strong auction agents in the market. They’re the ones that are kind of cutting through the market. We’re seeing a property that we auctioned before Christmas that they paid $925 for three years ago sell for $610. So that’s one example.

Getting back to what we’re also experiencing. An onsite auction, three-week campaign, meet two people over three weeks, through a three-week campaign. One person turns up to the auction. Still sell it on the day. So the process is to allow us to sell an unconditional contract. But we’re dealing with a pretty tricky market.