Manos Findikakis is CEO & co-founder of the Eview Group, Australia’s first multi-brand real estate network which was established in 2006. A Xero partner and customer, The Eview Group’s unique business model, titled ‘quasi-franchising,’ represents a shift in thinking for the real estate industry. The model allows its members to retain their own boutique identity, whilst being provided with the corporate support often missed when going it alone.
Editor’s note: As we gear up for 2019, we wanted to get your thoughts on what to expect in the year ahead. So we’ve asked some of the most influential voices in accounting, bookkeeping, technology and public policy to weigh in. Today, we hear from Manos Findikakis, who shares the performance predictions that could shape the state of the wider economy in 2019.
Where is real estate headed this year?
2018 was one of the most turbulent years in the real estate market on record (or at least that I have seen in my 15 years in the industry), many questions are being asked as to where we are headed and what the future of real estate is likely to hold.
It’s funny how often a downturn in the market brings out the punters who have been predicting a crash for some time. There’s no denying that the property market on the east coast has been overheated, and the predicted correction was overdue. Property prices reached record levels, as they always have when we are in the seller’s phase of the property cycle. Now, we are in a buyer’s phase.
So, what happened to bring about one of the biggest and fastest downturns on record in the property market, why couldn’t the property boom continue, and what does it mean for 2019 and beyond?
The law of supply and demand
The property market is affected by the law of supply and demand. In 2018, the supply of listed properties for sale has increased, whilst the demand side has decrease – in other words, buyers have all but evaporated. That’s according to us real estate agents! The truth of the matter is that there has been an average drop in property sales volumes of 30% to 35%, and in some niche markets we’ve seen this fall in volume reach over 50% year-on-year. That’s on top of an overall drop of 20% since 2015. The oversupply of properties for sale and the lack of buyers resulted in a drop in property prices which has ranged from 5% right up to 20% in some rare cases. Have we seen the bottom of the fall? Probably not.
The perfect storm
The number one factor that put the brakes on property is the Reserve Bank and APRA (the Australian Prudential Regulation Authority). Since 2015, we’ve seen these two government bodies bring about policies which effectively put a chokehold on credit. Our understanding is that they were concerned about an overheating market and to avoid a major crash, the regulatory bodies put measures in place to make it more difficult to obtain finance, which of course slowed the market and resulted in the fall of property prices.
Added to the credit squeeze, the Royal Commission into Banking Practices has put the microscope over lending practices, putting more pressure and regulation on the market.
The Domino Effect
Now let’s not kid ourselves, the significant reduction in the volume of property sales has a domino effect. Notwithstanding other industries being impacted, take in case the prestige automobile market. They have seen a significant decrease in car sales; probably because real estate agents have directly been impacted by the drop in available commissions in the market and the desire of a shiny new toy at the moment is not high on the priority list! All jokes aside, the domino effect will impact many small businesses. We have seen significant consolidation in expenditure by not only real estate agents, but all those associated in property sales including conveyancers, building inspectors, values and the list goes on and on.
To this effect, its now even more prudent for professional advisors, especially in the accounting and bookkeeping industry to step in and be ahead of the curve. That is, be one step ahead and be proactive with their clients to help them navigate the current financial environment. It’s a great opportunity to show even more value and create even more raving fans by anticipating what impact the current property market cycle may have to client’s businesses and forecasting solutions to avoid possible dangers and seize inevitable opportunities.
It’s the Perfect Time to Upsize, Jump In or Take a Holiday!
Thinking of upsizing your home or its location or are you a first home buyer? Well now is a perfect time to jump into the property market. With readily information at hand, from real estate portals or market insight providers, (even us real estate agents!) the savvy buyer has all the necessary tools and up to date information to seek out a property bargain.
For the up-sizer, the exchange costs of purchasing in a more affluent location or larger home with more features are significantly lower. Yes, you may have to accept a lower sale price on your current property, but in most cases, your more expensive purchase would have had the same if not greater fall which represents a lower exchange cost when doing the math (I’m sure your financial advisor or accountant can help you with the numbers!).
And those who may want to sit out for a while in the hope that property prices fall even further, the only advice I can offer you is that the only time you truly find out when they are at their lowest (i.e. at the bottom of the curve) is when they turn and are on the way up. Our economy, population growth, and employment are strong. These key factors will always place property as a sound investment that will rise in the long term – and let’s not forget, we all must live somewhere!
But if you are simply too indecisive; not sure if you should buy, sell or what to do – then just take a holiday! The best advice I was given, at a very young adult age, buys or sell when its right for you. Be sure you place yourself in a financial position to not have to do either unless it is purely by your choice and not by external financial pressures. It was sound advice I was given by my accountant; whom I still use today.