Your real estate blogger

Predictions by REIWA president Rob Druitt on the front page of  The West Australian (Saturday, May 24, 2008) that the Perth real estate market is set for a 5% percent decline this year casts serious doubts over the independence and reliability of the state’s purported peak industry body. My belief is that public trust in the institution is no longer warranted or deserved. At the very least the time has come for the public to take the Institute’s opinion with a healthy grain of salt.

To understand my position one needs to go no further than REIWA’s own history of prediction. Just over a month ago, REIWA claimed that, until the market saw a renewal in buyer confidence, we “…are unlikely to see any significant price growth in the Perth market”; hardly an indication of the market “correction” reported today. Going back to August 2007 REIWA’s president, as reported on ABC News, suggested that the local market “…will cope with the [the most recent interest rate] increase.” Then in October 2007, and following a slight increase in the median house price in the September quarter, REIWA predicted a return to a normal market stating:

“As a result, we see a modest increase of around two to two and a half percent and that’s in line with our more traditional growth rates of between eight and ten percent per annum.”

“Some eastern states commentators said the Perth property market was heading for a major fall but certainly there are no indications of that,” Mr Druitt said.

“We’ve got real demand, a strong economy, the market certainly has levelled out, it is still patchy in certain areas, but there is real demand.”

In each of these instances REIWA’s market commentary and market predictions are self-serving. Its assessment of the market invariably underestimates and underplays the potential for decreases in property values, and overplays and exaggerates any perceived strength in the market and the consequent flow on to property values. In effect REIWA takes on the role of a market cheer-leader rather then a reliable and unbiased market commentator; and this role is at the heart of REIWA’s credibility crisis.

REIWA would do well to decide and declare its position with regard public advice. At present the Institute acts in a similar manner to a real estate agent: on the one hand it promotes itself as an independent and expert market analyst, but on the other it maintains an undeclared interest in the conclusions reached through its interpretation of market data. Such a convoluted and unresolved position makes genuine public reliance on its advice and recommendations almost impossible.

Until such time as REIWA makes its position clear the public will have every reason to genuinely question how much trust the organisation deserves. Now is the time for REIWA to decide who it is and what it stands for. Either it’s an organisation committed to the financial interests of its members potentially to the detriment of home buyers and sellers, or it’s an independent real estate industry commentator who’s opinion can be trusted. It can’t have it both ways.

Good to see Commerce Australia have relaunched Rentfind. The site allows owners and agents throughout Australia to upload rental properties for free. I understand that Commerce have a number of partnership agreements in place that will feed the site with new listings from a variety of agent groups.

Stay tuned

The question on the lips of many agents is “When will this market turn around and what will bring about a change in sentiment?” It seems there’s at least one opinion for every agent.

Until very recently I thought that a turn in the market would come from a resurgence in investor demand. This opinion was based on the intense rental price increases being experienced across most sectors of the residential market. As rents increase and property prices fall real estate as an investment becomes more attractive on the basis of cashflow returns; however, a recent conversation with two experienced  property managers  has me is doubt.

Their observation is the rental market has “stopped” in the past month. Whereas previously a broken lease would see rents increase thanks to strong demand, the current market is so soft that property managers are struggling to achieve parity with the rent being paid by the outgoing tenant. If this type of demand continues expect to see the rate of rental growth decline rapidly.

So what’s driving this reduction in rental demand? According to some agents the answer lies in an increase in supply. At the moment there’s well over 17 000 homes available for sale in Perth and many of these are rental properties. In turn, many of these investment properties have been left vacant while their investor owners attempt to cash out of the market. But investors are rarely willing to leave their properties sit vacant for too long and, with a hint that we may be close to the top of the interest rate cycle, and therefore at the bottom of the property market, they’re taking their properties off the sale market and placing them back into the rental market.

From these developments we can expect to see the rate of rental price increases slow as more properties come back into the rental market. The corresponding reduction in sale stock may - and its a big may - see the property market gain some momentum. First home buyers though will be unlikely to purchase between now and 1 July when the new stamp duty rates take effect, and buyers generally will continue to be hesitant until we see some clear indication that interest rates are on the decline.

To suggest what’s going to change the market is an exercise in crystal ball-gazing. Keep a watch out though for interest rates and rental prices. I’m tipping they’re going to be the two big factors in the short term.

Building approvals for home renovations totaling $509.6 million were organized by Western Australians last financial year according to the latest ABS figures.

More Western Australians are deciding to use the rising equity in their home to renovate rather than pay the change over costs associated with buying a new home such as stamp duty.

Jay Wood, Director of pfr.com.au believes that home owners should carefully consider the long term financial benefits of a home renovation.

“Home renovations make financial sense if you employ the correct building contractors, stay within your financial budget and spend your money in the correct places in the home.

“Very often, home owners make emotional decisions when undertaking a home renovation and at the end of the day they would have been better upgrading to a new property,” he said.

Based on the sale price of many renovated homes organized through pfr.com.au, home renovators can expect to achieve the following financial returns when renovation the following parts of a home:

* New room i.e. home office/home theatre (70% - 95% return)
* Bathroom renovation (65% - 90% return)
* Kitchen renovation (65% - 90% return)
* Master bedroom en-suite (60% - 80% return)
* Patio (65% - 80% return)
* Landscaping (80% - 100% return)
* Security (75% to 100% return)
* Swimming Pool (50% return)

The returns that a home renovator can achieve on a renovation, however, do vary from location to location depending on the capital values of the properties and the type of homes in most demand in the area. However, the above guide does indicate that not all home renovations deliver high financial returns to the homeowner and they should undertake careful research before undertaking a major home renovation.

Home renovators should also visit the Archicentre website (The Royal Australian Institute of Architects). This website provides a useful cost guide for home renovations at

One of the benefits that come from attending REIWA’s Christmas cocktail party is to hear lots of industry gossip. A big story doing the rounds is that a prominent young sales representative is in negotiation for a stake in one of the big agencies in South Perth. If this is the case it will come as no surprise. For starters, the people in question all appear to get along well, and secondly the amount of business this sales representative is producing must surely be a significant contribution to the success of the agency.

Once I get some confirmation of the story I’ll post an update.

I’ve been to a few (read a lot) of REIWA Christmas cocktail parties but tonight’s event was a dud. Harsh? Maybe, but compared to previous years, attendance was down and the evening was the same old formula that’s starting to bore everyone to death.

OK there was an interesting twist with a bunch of good looking people pushing wheel-barrows of booze around. Lots of the girls, and some of the boys, were quick to notice the “guns” on some of the T-shirt clad himbos. That aside, the evening followed the usual formula with the same old cheese-laden pizza slices and over-battered prawns. And as usual the same mid-range beer and wine was served, completely missing people who’s preference was for spirits and mixers.Yet again there was no entertainment. Could REIWA not afford a Santa turning up on a jet sky, or perhaps a three piece jazz band? Surely a little bit of thought could make the night more interesting than a few glasses of plonk and a pizza slice. And why did REIWA cut the bar off at 8pm? Is it such a stretch to imagine that an organisation that’s doing as well as REIWA could afford to buy a few more beers for some thirsty agents - particularly when you take into account that most paid fifty odd bucks a ticket for the privilege of enjoying a bit of nosh overlooking the river and city? Considering the numbers present, it wouldn’t be a big ask for the boss of REIWA to keep the bar open for a bit longer.

I’ve always enjoyed REIWA’s cocktail parties and this year was no exception. It was great to catch up on some old sparring partners such as Gary Bishop, Alan Bourke, and Russell White. But REIWA needs to radically overhaul their Christmas cocktail party - one of their marquis events - and do so quickly. If this year’s attendance is anything to go by, agents are losing interest in what should be a fantastic evening.

I’m impressed with Michael Ruzzi at pfr.com.au. Ever the innovator, he’s listed a property for sale on Facebook Marketplace. Whilst Facebook is primarily a social networking platform it’s easy to see how clever real estate agents might use Marketplace to advertise their properties and their own services. What’s going to be interesting will be the new ways customers will interact with agents who are displaying a much less formal, less contrived version of themselves on line.

Is this the death of boring corporate and the start of Gen Y real estate?

Technological changes sweeping the real estate industry are capable of cutting real estate agent fees by more than half, without scrimping on quality of service and sales price, saving West Australian home sellers thousands of dollars.

According to property advisor, Michael Ruzzi of pfr.com.au, the real estate industry is entering a new era where online services are empowering home sellers and challenging real estate agents to become more flexible in their service offerings and fees. He said pfr.com.au was leading the field in utilising new technology to tailor to individual seller requirements and win new business

“In some cases it is now possible to cut agents selling fees by over 60% without skipping a beat in quality of service and final sale price,” Mr Ruzzi said. ‘The internet, virtual tours, mobile phones and email all save real estate agents’ time and money – why not pass these savings on to the customer?”

In one recent case, young couple Michael and Lisa McClue were looking to upgrade their home through the sale of an investment apartment on Adelaide Tce, Perth. They listed their property on SellMyCastle, the free online meeting place for residential sellers and agents.

Local agents registered on the site were alerted to make an offer for the sale, allowing Michael and Lisa to freely compare information – including commission rates, terms and conditions, local knowledge, experience and consumer ratings and comments – in a pressure-free environment.

After receiving ten bids in only a few days, saving hours of running around, Michael and Lisa chose Michael Ruzzi of pfr.com.au, as he offered a low fee on conditions tailored to their needs. The apartment was sold in just over one week, at a record price within the complex of $229,000 – $15,000 higher than the previous record set a few months earlier – and a saving of more than $4,000 on agent selling fees.

SellMyCastle CEO Dan Winblad said technology was enabling sellers to take charge to ensure the best agent to represent their interests. He said the SellMyCastle model had proven successful in Europe, and would change the way Australian home-owners sought a real estate agent.Mr Winblad said, with 1,500 agents registered, almost all of Australia’s largest and most well-known franchised agencies had representation.

“The positive feedback we are hearing is the same time and time again – people have simply never seen anything like this before in Australia – and they like it,” he said.

Michael Ruzzi has just listed a similar studio apartment in the complex. For a viewing or to find out how technology can save you money when selling you’re home call 0419 967 269.

For more information about SellMyCastle, contact Dan Winblad on 0437 009 496, email dan@sellmycastle.com.au or go to www.sellmycastle.com.au.

In a win for common sense, the Australian Fair Pay commission recently handed down a decision that must be welcome news to hundreds of real estate agents across the country. In their decision, entitled Real Estate Agents’ (Commission Only) Australian Pay and Classification Scale, the commission allowed, subject to a number of conditions, agents to pay sales representatives on the basis of commission only. Previously, all real estate agencies were obligated to pay their sales staff a minimum wage; and this tended to create a significant overhead of both cash flow and administration time on agency businesses. With the new ruling, many agencies will have the freedom to return to the practice of paying experienced sales people on the basis of commission only; a practice that served the Western Australian real estate industry well for decades.

Anecdotal evidence about the level of wages now being paid to property managers and settlement clerks suggests that agents are under significant pressure in attempt to run viable businesses - particularly in a competitive market. With discounting rife, it’s difficult to know how some small agents are making a dollar. Stories are emerging that some senior property managers are being paid $75 000 to manage a big portfolio - and that’s without relying on a complex incentive system that some of the larger companies have structured. In the world of settlements, sources indicate that salaries ranging from $55 - 75 000 per annum are common for an experienced conveyancer. But the extra money comes at a price with agency bosses demanding high levels of performance and productivity in order to justify paying these sorts of salaries. To achieve the top end of the salary range, property managers would be expected to manage over 200 properties - and that’s a big ask. Whether clients are getting the optimum level of service under this arrangement is open to debate. But one thing is certain - the property manager would be working long days. And while ever the squeeze on the labour market remains as a result of the mining boom - the situation won’t change soon.

How is your business handling the tight labour market? Has your salary changed much over the past couple of years?