In order to fully understand Australia’s property market, it’s essential to take into account the state of global markets. While Australia may not follow the same trajectory as our international neighbours, our market is most certainly influenced by their circumstances. Nicholas Thiele looks at the trials and tribulations of international markets and what we can learn from them.
We’re hurrying headlong toward the spring selling season of 2010, with anticipation of increasing sales volumes and improved auction clearance rates. There is little doubt that Australia came through the challenges of the Global Financial Crisis (GFC) relatively well positioned but our future which is undeniably linked to that of a global economy is looking increasingly fragile. As Regional Director of RE/MAX in Australia I get the unique opportunity to glean information and perspective from other RE/MAX Regional Directors and owners from over 80 countries around the world. My reports and conversations from major markets are telling a concerning story yet as I see, an opportunistic one.
How prepared are we as a country, really, for challenging times ahead? For those of us with a vested interest in the industry including home owners, investors, sales people and business owners, the answer is certainly eagerly awaited. Regardless of the outcome, what can we learn from the difficulties experienced by our colleagues abroad? Do we ignore the signs and think that the Black Swan won’t suddenly appear in our financial and property waters? The obvious answer is for all and sundry to look for the opportunities and apply these insights to ensure Steven Bradbury type results, and to be the last man standing.
In difficult times, only those businesses that provide the best value for money and exceptional service end up surviving, with consumers the beneficiaries of competing service providers. During difficult times, the smart operators focus on strengthening relationships with their existing database, rather than chasing new business, and as a result will be exceedingly well placed for the correlating upturn that will follow.
You might be reading this while enjoying a well earned break and even a cup of coffee. You might be questioning the relevance of the happenings overseas and its impact here in Australia. It happened before and we were OK, why would the next time be any different? Many of you succeed in this challenging industry due to your positive outlook regardless of the macroeconomic environments that exist around us. This approach does not dismiss the need to be aware of the current brutal realities present in all markets. As spring approaches the question for most is, What type of market will we find?
I am an unshaken in the belief that there is always an equal and corresponding upside for those that choose to look for it. These are the markets that yield immense opportunities for those that are aware of the risks and yet take action regardless. These are the times to identify where cost savings can be made and that any marketing expenditure is leveraged to achieve cost effective results. Money is tight and your clients will demand value for money. Repeat and referral business is the key for anyone to thrive in real estate sales.
The opportunities lie in tracking and communicating with your previous clients and to deliver value on the simple yet powerful platform of information, advice and help. In providing this honest approach you are not accepting responsibility for markets or house prices. Being honest and truthful in your presentations allows you to more effectively qualify those that want to sell from those that have to sell. The critical issue during periods of market contractions is to ensure you’re dealing with motivated vendors. What will you communicate to buyers and sellers?
It is now taking many months for consumers to make the decision to buy or sell. During the process they will all be seeking someone to provide this relevant market information and chances are they will return to the source that provides this in a timely and relevant fashion. This does not always yield immediate opportunities but is a time proven method to generate enquiries. We, as an industry, must face the reality that we cannot continue to approach different problems with the same solutions of the past. Our clients continue to grow in awareness and are more informed than ever before and we must collectively meet this opportunity.
Blood on international streets
The GFC crept up on a generation of optimists that have yet to experience anything near the magnitude that is approaching. They have always had access to jobs of their choosing and their wages continued to rise simply by changing jobs. For many, the word “downturn” didn’t even exist in their vocabulary. But that’s OK, you may be thinking, we in Australia are planning to capitalise on the growing Chinese influence. Again, not meaning to be the eternal pessimist, but China is also facing the challenges that come with how to manage an overheated economy and a fragile housing market.
I am fascinated by the study of human nature and the despair shown by some and the optimism show by others during challenging economic times. Why don’t we rather cement our strategy for the potential downturn by seeking out cost saving opportunities, and alternate revenue paths? In the book, The Snowball: Warren Buffet and the Business of Life, Buffet states that when there is blood on the street, this is the time to take the opportunities ever present. While there may not be blood on our local streets, there is certainly blood on the streets globally. How could there not be? Over the last 40 years we have seen the contribution to world GDP from financial revenues increase from 12 per cent to 43 per cent, while at the same time seen manufacturing contribution fall from 45 per cent to less than 15 per cent. What did all that paper swapping actually create? Can you say GFC?