Think HBR

Change is elementary to real estate markets

Steven Dick
Raine & Horne Commercial Newcastle
Change is something we face every day, and it often upsets the routine of the regular daily patterns we set for our life. As I get older, the normality of these daily patterns or rhythms become a comfort in themselves, and when disturbed I’m finding that an old man’s testiness edges through.
Changes are looming too for our real estate markets, and we are astounded when the pundits (economists and commentators) tells us, “the markets are heading down,” “we’re coming off the boil,” “auction clearance rates have fallen.” What does this all mean really?
Changing markets only affect buyers and sellers
Market conditions only affect you if you are buying, selling or leasing. If you’re not, the changing market is only a byline for a conversation over coffee or a bar.
Better still, changing market conditions present a good time to look at the fundamentals of your own investment. Here are some questions to ask yourself that might help you benefit from current market conditions.
Have you kept up with the maintenance? Whether your property is commercial or residential a routine maintenance schedule is essential. Moreover, budgeting a little each year for maintenance will save you in the long run.
Have you been paying down extra on the mortgage? While interest rates are still low, seek to pay down mortgages where there are no tax advantages on your interest. In other words, consider paying off household debt – your accountant will be able to tell you more.
How’s the business health of your tenant? If the tenant is residential, stay away. However, if you have a commercial tenant enquire about the state of their business and whether they have any maintenance requirements. You don’t have to be mates with your tenant (better that you’re not) treat them like a valued client.
What strategies do I have in place when the lease ends? There are very few lessors who own a building and never need to find a new tenant. The better the relationship with the tenant the more likely they will give you more than the standard three months’ notice that they intend to move.
Auction is still the best method of sale
Whether you are selling or buying in a variable market, auctions are still the best method of sale.
Even in Sydney where auction clearance rates have fallen to 49.9%, it still means that half the owners seeking a sale on the day achieved it and at a price of their choosing.
What’s not published with these statistics are how many properties sold prior and how many sold a couple of hours or days after the auction. Just last week my colleague Jason Morris effected a house auction with three registered bidders who had conducted their checks and obtained finance.
The auction started and closed with just one low bid. Immediately after the auction all three bidders made offers and by the close of business on Saturday the property was sold. Did you know that the auction statistics only show what 9% of the market was doing? The other 91% were not up for sale on auction day.
Tips for bidding at auction
The three tips you need to remember when bidding for an investment property include:
• Do your research and walk into the room with a price in mind
• Do not disclose that price to anyone
• Do not let anyone influence your bidding - it’s a business decision, so treat it that way.
If you walk out with the property at your price, it’s been a good day in the office. If you pay less for a property, it’s been a great day. The number one question you should always ask the agent when attending an auction is: “Why is the owner selling?”. The best buys in a slowing market occur when the owners are forced to sell.
Change, well, that’s upon us every day whether we are surprised by the cold heading into winter or the first hot day of summer. Change is also fundamental to the real estate world. You can still buy and sell well in a changing market, but you must do your research, know your values, and have clear objectives in mind.
Remember declining real estate values only affect those buying and selling. If you’re not doing either, maintain your property and keep your tenant happy.
For further information contact Steven Dick on 0425 302 771, email or visit
Steven Dick Steven Dick
has had a varied background with experiences in geotechnical engineering to hospitality and catering. He also represented at NBL Level Basketball. His expertise, experience and analytical skills have seen him involved with a number of companies at board level. He has also attained the highest level of recognition in the LJ Hooker and Raine & Horne Commercial Organisations.