Friday, December 12, 2014

The 'staying put' effect... positive signs for investors.

It's looking like a great time for South Australian property investors. 

In property investment news this week we saw articles such as 'Australian Landlords take record debt as rent yields fall'. From reading the article, this headline is based on there being an oversupply of rental properties in the market. Sydney and Melbourne produced the lowest yields across the country for investors but this 'oversupply' combined with escalating prices may be isolated to those east coast markets, and not affecting the entire country. It certainly is not the case in South Australia – rentals are very strong in our market.

As a result, our leasing teams are seeing increasing numbers of tenants who are deciding to renew their lease due to the extremely competitive market. Tenants are even offering a higher rental amount than they are currently paying to ensure they secure a place to live. It is very competitive at the moment. 

Toop&Toop saw this trend start late October and reported it to you with my Inside Story headlined 'Fear of missing out has hit the rental market!'. What we are witnessing is a new cycle of rental increases under way, and once this cycle starts, it's hard to stop the momentum! Landlords are happy and tenants are no longer feeling the control they've previously enjoyed in the market. There is a much healthier balance between tenant and landlord now. As tenants see less stock on the market and become worried of not being able to secure something else, they are opting to renew. This behaviour fuels the whole rental market... and the 'staying put' effect starts to infiltrate. This is what is happening right now.

This December, we are seeing the full effect. Last December our stock level was up 180% (to the date, 13th December 2013) from what it is now. This is an incredible statistic and this 'staying put' effect is having a direct, positive affect on securing returns for our landlords.

Chatting to other agents earlier in the week, this firming of rents is happening across the whole South Australian market. Some smaller operators have just a handful of properties available... others have none! 

According to data from SQM, Adelaide currently has one of the lowest vacancy rates of 1.5%. Compare this to Sydney at 1.6%, Brisbane at 2.2% and Melbourne at 2.5%, Adelaide is in a rental property shortage. Sydney's 1.6% initially seems odd, but the headlines of yields falling is a direct consequence of rapid rises in property values and a lag in rental increases. 

Across our Toop&Toop portfolio, our vacancy rate is currently sitting at 0.66%. This is phenomenal news for our landlords. It is clear the current investment market is extremely tight. We expect to see 28.7% of our total stock become available between now and March next year – yet we are seeing this extremely low vacancy rate. It is apparent that rents will be under a lot of upward pressure if this trend continues.

Tenants are opting for shorter leases to 'get them through' until more properties become available, but those properties as of December have not eventuated. Other tenants are seeking a rental property as a stop gap while looking to purchase a property as they have been unsuccessful in this strong selling market. It's certainly a hot market right now, for both buyers and renters, and investors are finally beginning to experience the inevitable flow-on effect.

What do the official stats say? According to RP Data, Adelaide recorded the strongest annual growth in house rents at 2.8% in the September quarter review. 

Looking ahead, we no longer expect the severity of the seasonal flood of stock to hit the market in January, and given stable prices in South Australia, we're definitely not feeling oversupply nor a dip in gross yields.

Investors, this is as good as it gets! 

Thursday, December 04, 2014

December Distractions... It's an industry thing.

In our real estate world, December marks the start of 'trading' season. Traditionally across Australia this is the time where many real estate agents re-assess their business and contemplate any career moves. It also happens to be the time competitors traditionally step up their hustling for sales representatives to defect and move to their 'amazing' businesses.

While on the surface this 'trading' season may look like it has nothing to do with buyers and sellers, it can actually impact them a lot more than you would think.

If not managed extremely well, there is an immediate impact to vendors if a sales representative leaves a company. Some moves happen quite suddenly and 
if a real estate agency doesn't have smooth processes in place to transition vendors to a new agent, the disjoint can impact negatively on their sale process. 
In other cases the moves are planned to a tee whereby the agents have all their sales agency agreements expiring in sync with their planned move, and many vendors are faced with conflicting loyalties. This is a terrible burden to impose on clients.

Changing to a new sales agent within the same company is not necessarily a bad thing, in fact it can actually be VERY beneficial for your sale. We find that it brings a fresh energy and sale strategy to the table and re-invigorates a campaign. But the agency has to be geared up with a seamless process to get the best results.

A company's recruitment strategy can also give vendors a key insight into how the business is run and the type of service levels they could expect to receive. In the marketplace for example, some businesses have 'a numbers game' strategy around sales recruitment. This group will typically hold large scale career nights to attract big numbers of people to the profession... knowing that realistically, only a small percent of these people will work out. This type of strategy is not suited to Toop&Toop because it can directly affect clients and their property sale. With large influxes of new industry recruits, sellers may (without even knowing it) be allocated a sales representative who is not adequately experienced or skilled to get your property the best result possible.

The way we operate at Toop&Toop seems unique. We appear to be one of the only real estate agencies in Australia who do not run a head hunting program for staff. We are proud to have one of the most stable and experienced sales teams in the country with 50% of our team working with us for over 10 years. As a consequence we are seen by many as being exclusive and hard to get into as a company. 

We don't see this as a negative. We are proud to be exclusive in our sales recruitment. The role of a sales person should be hard to get into and come with high levels of accountability. Given we deal with people's largest assets, only the highest level of trust, knowledge and performance should be expected by clients from a premium agency like Toop&Toop.

We currently have the unique position in the market with so many experienced, time proven and knowledgeable team members blended with younger passionate sales partners who bring energy, excitement and their own experiences to the table. This creates the perfect mix for our business leading into the next generation.

We work with sales people who have some runs on the board and who have the proven drive to go to the next level. We want to work with agents who are excited to do things differently and thrive on getting clients the very best results. We equip them with the best tools available anywhere in the world, and we train non-stop. 

Just like Harvard, our benchmark and expectations on our team are high and it's because of this the Toop&Toop brand is known for excellence in the industry.

What's in it for our clients? For potential sellers and buyers, this means you can have peace of mind when you call Toop&Toop and that you are only dealing with passionate, experienced and knowledgeable agents.

Anyone wearing a Toop&Toop name badge has earned it.