What’s that definition of insanity….

….that Einstein probably never said?

Real estate agents are starting earlier this year.

Shame. You’ll be telling us next that divorce lawyers, journalists and politicians are having a hard time, and then we’ll really have to get the tissues out.

Falling prices, tighter credit and uncertainty ahead of a federal election and the final report of the banking royal commission mean a busier year for agents on the country’s eastern seaboard as they sell an increasing stock of homes on the market.

I’m not sure that statement is completely accurate; perhaps replace “busier” with “tougher”?

As several commentators on here have pointed out, in a falling market most sellers will rethink whether they really need to move. There’s a high degree of emotion attached to the perceived value of one’s house and the attitude that “it’s worth $x and I won’t take a penny less” can be deeply ingrained.

So therefore we may well see far fewer properties up for sale this year. Those who have to sell due to death, divorce or unsustainable debt will be the exceptions.

Something else will need to change too, although Eliza McGrath hasn’t spotted it yet;

Our first open [day] is on 19 January. Then we’re extending it to be a five-week campaign with the first auction on 16 February.

Given that fewer than 1 in 2 properties are selling at auction, it seems somewhat poor advice to her clients to chuck a bunch of cash at a marketing campaign and planning for an event that has a higher probability of disappointment than ever before in living memory.

Finance is getting harder to get,” McGrath says. “So getting a five-week campaign is more standard. Some people are asking for six weeks. They know from trying to buy themselves how hard it is to get pre-approval.

She’s not getting the hint, is she? The auction favours the seller only in a rising market, that power dynamic reverses on the way down.

A search for her on Google Images explains why. She looks like she is barely 30 years old. The last time the market was like this she wouldn’t have been potty trained.

Ren Hor Wong seems to have a better idea, however;

“Given the current market condition and low auction clearance rate, vendors’ confidence is low when it comes to selling,” chief executive Ren Hor Wong said.

“We see a surge in listings activity, but majority of them would not go to auction, and some probably don’t even want to go for a marketing campaign.”

Quite.

This is interesting too;

“So it’s imperative for agents to have a database of finance-ready buyers”

He might regret dropping that gem into the interview. He’s just told his competitors a good tip on how to survive this year, if they are clever enough to listen.

He’s got some other intelligent insights too;

Going off market also allows the seller to save marketing costs, a key for vendors at this low point in the market, Wong adds.

“When you can’t ask for a higher price in the market, next thing you want to do is to save money,” he says.

Smart thinking; drop the price and lower your sales costs.

Meanwhile, on Planet Millennial, reality hasn’t arrived yet;

McGrath isn’t sure what will come. The year is likely to start well, but it is hard to see further beyond, she says.

We’ll have a strong start to 2019, like 2018 did, but it’s hard to say what’s after the first quarter, with the election coming up and the royal commission [final report],” she says.

I bet you won’t, Eliza, I bet you won’t.

Bill’s Opinion

For some time now, being an estate agent on the east coast of Australia required nothing more challenging than possession of a cheap suit, a driving licence and pulse.

Things have changed this year. There will be significant consolidation of agencies and a huge reduction in the number of agents employed.

The question is, what does one do as an alternative job if all your previous work experience consisted of handing out leaflets at open houses for the last decade?

The price of Uber journeys and dog waking services in Melbourne and Sydney are likely to reduce significantly.

18 Replies to “What’s that definition of insanity….”

  1. “She looks like she is barely 30 years old.”

    This is when it last happened so she would have just about been legal at the time.

    …………………………………………………………………………………………………………………………………………………..

    Going, going …

    The property bubble has burst. House and unit prices in particular are dropping in several capital cities, even in suburbs thought to be immune from falling property values. Prices have fallen more than 10% in Sydney and almost 15% in Melbourne so far this year, according to the Reserve Bank of Australia (RBA). Auction clearance rates in Sydney and Melbourne have plunged to levels that some analysts describe as a crash. So-called “distressed sales” of apartments in over-supplied, inner-city areas are rising sharply, and more investors are threatening legal action against property developers. The downturn in property prices is starting to turn ugly.

    https://www.theage.com.au/business/going-going-20040521-gdxw5n.html

    1. “Just about legal” isn’t a valid defence in, court. Just sayin’

      I do like Wong’s thinking on this. I’ve spoken with a local EA recently and told them that, if they find a motivated client willing to sell at or close to 2020 prices, to give me a call.

      1. 2020 prices, I like it!

        Just remember that about a year after that situation in the article that I posted above was occurring, prices started shooting up again, then they stagnated, then they really shot up for a long time, which brings us to now.

        Good luck with your buying efforts, its well time you got yourself a gaff old boy, as one cant be seen as coming all this way from the mother country only to merely squat your life away in the colonies. Not saying that there is anything wrong with the renter class, but its better to pay of your own mortgage than some random landlords. Plus you will be teaching your kids something worthwhile.

        1. There’s a couple of assumptions about my circumstances there that I won’t bother correcting you on.

          As for the possibility that prices will “shoot”!up, good luck. You’ll get more of a bite from your mates over at the other place than here.

          1. No worries, I always knew that you were a reluctant tenant anyhow.

            Just ask your parents if their house has went up in price over time or any of your mates or colleagues how they made most of their wealth, you may surprise yourself and find out that luck has nothing to do with it.

            The good conversations are to be had on the investment blogs.

          2. “The good conversations are to be had on the investment blogs.”

            Not from what I’ve read. It seems to be a bunch of name-calling between a bunch of bitter bears and bulls at about 1am.

            Perhaps I’m looking at different forums to the ones you mean.

          3. Yes the heady days of HPC are gone now, for me anyway, Aussie is too small a pond for a decent blog.

            I am in a paid for one, which is mostly about stock, but serious money making themes and concepts always going on and there is a smattering of property bulls and bears but they are all bread heads at the end of the day. We discussed this concept recently and why they will never change it.

            https://www.youtube.com/watch?v=WL-lJV2S4XI&t=1236s

            Hotcopper is good Aussie one but again its ASX focused but is good for all round economy and some abusive property banter, I bang on there a bit.

            https://hotcopper.com.au/discussions/economics/

            I also do a bit of construction blogging as well, seen this one about innovation on Collins St, buying air rights as well, because they aint making anymore of air either.

            https://www.youtube.com/watch?v=mKSMT6sEmrs&feature=youtu.be

            The best blogs are in the US, they always have been as far as I am concerned, big readership, fast commenting, zero moderation, blink and its gone.

  2. This one made me look at total listing volumes, which I haven’t checked for a while. While it is true that listings appear to be up from 2017 to 2018, the SQM data shows it to be marginal, with a spike in Oct subsiding in Dec. I don’t have the raw data to check (just graphs), but the longer term trend appears down, although we are still well above the levels of 2009, which was obviously troubled.

    Market health anecdata gained by stopping at a few auctions in the past few months shows a marked change from several years ago. A year ago an auction in my neighbourhood would have a number of bidding parties (no less then 3), and a large crowd of curious neighbours (say up to 30), whereas recent opportunities have had no bids at all. The last one in early Dec had two groups looking (I was one, not a buyer), and the auction started with no one serious enough to raise a hand. There were less than 6 standing around – I don’t think anyone was a potential buyer. The house is now for rent, and was a developer special – subdivided block into two townhouses, happily he had already sold the first one. Others have sold around us though so the market is still functioning, mostly as private sales once the auction fails.

    The best bit for me though is that the agent trying to sell used to drive around in their usual car of choice – the C63 AMG. He now drives a smart new Camry. I think it suits him.

    If you put your name down at an auction, expect calls for some time after seeking your interest in another buying opportunity.

    Lastly, Eliza’s surname might be coincidental, but her interest in real estate could have come from her father. Unless she is renting in Paddington, someone has helped her get into the market there.

    1. Yes, I did wonder at the name but it’s a very common surname in Sydney. Almost as if those Irish were catholic or something.

      We are recent immigrants and the market looked far too frothy for someone who’s seen a couple of busts already to jump in, so we’ve bided our time.

      I’m building my strategy now but it involves seriously trolling one, perhaps two, local estate agents this year and next. The most aggressive on the ride up *should* be the most aggressive on the ride down too.

      If I’m going to have to spend a lot of money, I’m dam well going to enjoy myself doing it.

    2. “their usual car of choice – the C63 AMG”

      Its a nice machine alright, but its just far too much engine to only be driving it around for work purposes.

      Which is why I decided not to buy one and am now on the cusp of buying a 2018 C43 AMG, being a decent class motor that you can drive around in for work purposes without looking like a spiv.

      With all my previous Mercedes I have always went for the mandatory Obsidian Black but its time for a change this time and its a toss up between Iridium or Silver – Diamond Metallic, what do your reckon?

        1. Up to age 50 I always drove the sexiest car I could afford. A Bee Em or Mercedes keyring does pull chicks in a bar. Then I had my big blowout with a home invasion that has left me not all there physically, mentally or financially. I bought a little Astra just “while I was getting back on my feet.” I’ve had it ten years now and I’ve met the most beautiful, classy ladies of my entire dating career. It runs on the smell of an oily rag and for some reason, hijackers show no interest in acquiring it, even when I’m driving out of a petrol station with an obviously full tank. I have no intentions of replacing it.

          1. Jesus. Home invasions.

            Every Saffa I know has a story about one, including some close relatives.

            Can’t you get out? The place is fucked, you must know that.

          2. @MvR

            For me its not about chicks or affordability for that matter as I can exchange it for my company car on a novated lease and its cash flow neutral. Its just about getting a decent motor that I can use for work as opposed to one that is too high end to drive for work, whereby you need two cars one for the week and one that you drive at weekends. So if it were you what colour would you go for, the Iridium Silver Metallic or the Diamond Silver Metallic?

            http://www.loebermotors.com/blog/2018-mercedes-amg-c-43-sedan-exterior-color-options/

            Sorry to hear about your little unexpected visit. I know SA and Joburg very well and have traveled there frequently, also my wife’s family originally hailed from there. I like it a lot but we made the decision last year to stop tendering for work there, mostly because none of our prospective clients are paying, even Rand Water have stopped paying. When in SA, 95% of my time was spent in Joburg and I only stayed at the Michelangelo and the Beverly Hills in Durban, we were told that the location of the Durban Hilton was not safe. To me it is a bit like PNG, you can be fortunate and not be involved in an incident for man years, but it only takes that one completely random incident that has the potential to be life threatening.

            Due to our business now not trading in SA I am unsure when I will be back, although I have a tentative plan to celebrate my thirtieth wedding anniversary in Cape Town in late 2020. We are still open for business in Africa although we haven’t any immediate prospects, other than some tenders on the Tanzanian Crude Oil Pipeline project which will have no connection to SA other than maybe transiting through OT airport.

  3. Bardon – I have a friend who has the C43. He likes it a lot, and he bought it for the same reason you outline. He doesn’t like to look like a real estate agent. I can’t help but tease him that life just hasn’t out quite the way he would have liked, given he has the discount version. He takes it well, given he could probably buy Australia’s annual import total of C63’s with his spare change. Melbourne’s Jews are like that.

    Colour is your choice.

  4. “She looks like she is barely 30 years old. The last time the market was like this she wouldn’t have been potty trained.”

    Um… ah… er….. .. there is an Australia outside the Square Mile.
    She’d have seen plenty over the past 5 years, if she’d been north of the Hawkesbury.

    Auction clearance rates of 0% and price drops of 50% or more, after a 20-month marketing campaign.

    1. Well…. there’s a place near us that’s had 2 failed auctions and will have been on the market a year next month.

      I think that’s more a case of an inability to deal with reality though. They are asking for 7 digits yet you could knock the place over with a solid shoulder shove.

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