Swing to highly skilled agents as Melbourne’s housing market changes gears
In the boom market between 2012 and mid-2017, selling real estate across the city was straightforward, even easy. With the market pendulum swinging fully in the seller’s favour in that period, C- and B-grade properties, which are typically unrenovated, on main roads or near commercial sites, often sold just as effortlessly and strongly as the A-grade houses and apartments.
That’s no longer the case in many suburbs. As a result of the shifting balance between supply and demand, vendors are turning to long-established real estate agencies with the runs on the board to help them extract above-market results.
Nelson Alexander sales director Arch Staver describes the current market conditions for sellers as tough but only when they have unrealistic price expectations. He stresses that hard-working agents – especially those who are not part of a franchise-model real estate company – are going the extra mile for their clients to generate the best possible prices and competition for properties.
Nelson Alexander, a 17-office wholly-owned agency company, contracts the Melbourne data firm Property Analytics to track its market share of listings and sales. A strategy that confirms that Nelson Alexander’s share of the market is on a growth trajectory in areas that range from Northcote and Fitzroy to Essendon and Reservoir.
“When the market is contracting, Nelson’s Alexander’s market share almost always goes up,” Mr Staver says. “This has been shown consistently in the research by Property Analytics, which has tracked our results over the past nine years.
“My explanation for this is that when a market is buoyant and buyers are in a herd mentality and bidding without care, anyone can sell a house.
“But when that market turns and clearance rates drop, you get a flight back to experience as a fail-safe way of selling your house.”
Although Melbourne’s residential real estate market is transitioning to a more stable transaction environment and faces its share of challenges, it is operating at a consistently higher level than the other east-coast capitals.
According to data collected by CoreLogic and the Domain Group, Melbourne’s market has not slowed as much as the Sydney housing market over the past 12 months. That’s because it was not as speculative as Sydney’s market was during the recent boom. Over the five years to mid-2017, Sydney house prices increased by 80 per cent but Melbourne prices went up by 60 per cent.
Melbourne’s market appears to have experienced only a small amount of a cooling in recent months. Little wonder that most economists and property watchers see the southern city’s current market as “healthy,” especially for well-presented homes within a 15 kilometre radius of the CBD. Yet there’s no escaping the fact that the auction clearance rate has dropped almost 10 per cent year-on-year, indicating a more balanced market between buyers and sellers.
There is greater competition between properties, too. Almost 700 more homes have been auctioned this year compared to the same period in 2017, with 5551 auction sales reported to CoreLogic from 9343 auctions to March 25.
CoreLogic’s year-on-year data for the city’s clearance rate — at 68.8 per cent this year, compared to 78.5 per cent in 2017 — reflects an adjustment in the market.
Mr Staver says more vendors were recognising that they needed a higher level of experience and skill to achieve results.
“You can argue that in a buoyant market any auctioneer can extract a high price but it’s not the case when you have a reluctant market,” he says.
“Prospective buyers need to be compelled to take action. The easiest thing for a buyer to do in the current market is to do very little or do nothing, so the role of your agent has to be proactive and that agent continually has to put properties in front of people.
“Our selling agents will pick up people from their place of work and take them to a listed house, rather than give them an open for inspection time and hope that they might attend.
“We are more proactive than any of our competitors.”
The real key to Nelson Alexander’s market share performance is that, unlike many agencies, it does not have franchised offices. Rather, the company, established in 1971, operates as a single team in a similar fashion to a large law firm that is owned by practicing partners.
This means that Nelson Alexander agents are not bound by restrictive sales territories that are the hallmark of the franchise model.
Because of this there is an excellent level of communication and business referral between the Nelson Alexander offices. The Flemington office, for example, can introduce one of its prospective buyers to a suitable property in Essendon, and an upsizing seller in Carlton North can be introduced to a large home listed by the Kew office.
“Our culture is very different to other agencies that focus only on acquiring the listing and who then just sit back and wait for the enquiry and for the buyers to come through,” Mr Staver says.
“We celebrate the fact that a sales executive from our Northcote office has got a buyer for a property in Fitzroy that Nelson Alexander is auctioning. That’s fantastic and it proves that our system works. Our Fitzroy office can introduce a buyer to Northcote as well: the borders between areas of Melbourne have never been as flimsy as they are right now.”
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