Each week, well known real estate industry expert, Anthony Toop, releases his views, opinions, observations and predictions of the South Australian real estate market, as well as talks about the latest on his national award winning company, Toop&Toop Real Estate. Anthony is happy to answer any questions you may have, simply visit www.asktoopie.toop.com.au to submit them.

When I was about 6 years old I was at my Mum’s workplace running amok as I always did. When it was time to go I’m not sure what came over me, but I refused. I hid under tables, I ran from my Mum and I basically caused all sorts of fuss and embarrassment for her.

I then got the brilliant idea that with this newfound leverage over my Mum I’d start making demands (genius I know!) I wasn’t leaving the office until she promised me that we could go out for pancakes.

After much to-ing and fro-ing my Mum finally gave in. I’m sure I let out a yelp of delight and we left the office.

I’m sure it comes as no surprise to you that, sadly, there were no pancakes that night or for a very long time afterwards.

It taught me a really important lesson though – making demands is pointless if you’re looking for a good long term relationship. Even if you are able to demand your way into what you want, the animosity created by that demand leads to ongoing acrimony.

I’ve seen it time and time again in workplaces where employees will make demands of their employer and wonder why neither party ends up with what they want. So, how about this – the next time you want something, rather than demanding it, why not show some VALUE.

If you want a new coffee machine at work, put together a quick proposal that will show your boss that it’ll give each staff member an extra half an hour in the office a day (rather than going across the road to get coffee) thus providing him with X number of extra work hours a week, that’s a VALUE.

If you want a payrise, put together a list of your VALUE (not demands) to the company. Show the improvements you’ve made in the past X months, the increase in revenue to the company, the benefit on office morale and then go to your employer with a plan for how you can continue increasing the VALUE to them.

As a child, how much better would I have been when Mum wanted to leave the office for me to say, sure, let’s go now, and by the way, is there any chance you could look at us having pancakes at some stage in the next little while if I clean my room and do the dishes as soon as we get home? Ahhh… if only I’d known!

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In November 2004, Ray White South Brisbane Principal Dean Yesberg decided the time was right to expand his successful real estate business. A long awaited opportunity had come up to take over the inner-city Ray White franchise and Dean took the unusual step of opening up shop in a retail premises in the heart of Brisbane’s CBD.

In less than five years, the CBD business has grown rapidly. Today Ray White CBD has more than 20% share of the local market, employs 20 people and is on track to turn over more than $80 million this year.

Effective succession planning has been a key driver The Ray White CBD success story. Brendan Tutt first met Dean when Dean employed him as a 19 year old cadet. Brendan worked with Dean as a leasing agent for a year, and then moved into sales for three years in the South Brisbane office. As the first salesperson in the CBD office when the business opened, Brendan worked hard to establish himself in the area, eventually taking on the role of manager two years ago. This year, Dean invited Brendan to join him in the business as a partner and in May the two formally became joint principals of the CBD business.

“It’s important to keep the talent in your business. For someone to really take control, they need to have equity in the business, and to be able to grow with it. It was an intuitive step to include Brendan as a business partner” Dean says.

The pair’s achievements in the CBD business are particularly impressive in light of the fact that the inner city market of most cities is different to other property markets and can be significantly more challenging. First of all, the zoning in cities is generally high density, with a significant number of apartments and units and very few houses, if any. This results in a much lower proportion of owner occupiers in cities than in middle ring and outer suburbs and regional areas and a more transient population of renters. In Brisbane’s CBD, approximately 80% of properties are owned by investors and occupied by tenants.

There are several things that differ from a “normal” real estate business in a market like this. Prospecting is more complicated; letter box drops and cold-calling are ineffective. Marketing in the inner city is also different proposition to other markets as signboards cannot be used, making it harder to create a visual brand presence. On top of that, investors tend to be less emotional than owner occupiers on both sides of the property transaction.

Both Dean and Brendan say the secret to their success is not real a secret – they say they do simple things, but they focus on doing them right and doing them consistently. It’s clear, though, that these simple things are having a tremendous effect on the business.

The first topic that comes up when talking with the duo is their database, which they consider to be the foundation of the business. The most effective way for them to contact prospective vendors is via direct mail and phone calls, so the need for a comprehensive database is critical. Brendan and Dean are currently in the process of hiring a full-time database manager who will focus on growing the database further and working with the salespeople to use it effectively. The team uses weekly emails, regular direct mail and a schedule of phone calls to stay in touch with their customers and provide them with quality information.

Flowing on from the database is communication. Vendors receive twice-daily phone calls and if that sounds like a lot, Brendan says if a salesperson can’t find anything to say, they’re probably not doing enough for their vendor. On top of that, there are regular feedback reports and emails and far from being over-the-top, their customers love it.

“When a vendor is paying us several thousand dollars for service we should deliver a high level to them. We get great feedback about our service – our vendors are never left wondering what’s going on” Brendan says.

The third thing the pair highlights as being fundamental to their success is the auction culture of the business. 70% of all listings in the CBD business are marketed via auction campaigns and the results are staggering. Over the past year, Brisbane’s auction clearance rates have hovered between 20% and 40%, peaking at between 50% and 60% in recent months. Ray White Brisbane CBD consistently averages at around 68% sold under the hammer, with the clearance rate rising to 89% when properties sold prior to auction day or within 14 days afterwards are included.

“We promote auctions because when they’re done properly with a good process, they work – we believe it’s the most effective way to sell property” Brendan says.

When it comes to brand strategy, the business has a large on-line component, with the aim being to dominate the major web property portals.

“As we can’t use signboards in the CBD, we aim to dominate in portals like realestate.com.au. We believe if you can dominate the portals, you will dominate the sales” says Dean.

As the business gains momentum its success is becoming self-perpetuating. The two say they are in a consolidation and growth phase and plan to bed down their success, working with their salespeople to improve their individual market share. At the same time, their success is beginning to attract good people from other businesses, making recruitment easier.

“Someone once said to me the bigger it gets, the more you have to feed it and I believe this is true. We will continue to focus on just doing the simple things well and build on our achievements” Brendan says.

This entry was posted on Thursday, September 10th, 2009. Categories: Business Profiles, Prospecting and Marketing, Succession Planning.

Staff retention is a major challenge facing every real estate business. It’s a well known fact that most sales-based industries have a high staff turnover, but in the real estate industry the churn of people coming and going is particularly significant. It’s not uncommon for real estate businesses to have 100% turnover of staff within a period of just five years.

High staff turnover is expensive on many levels. Conversely, having a good retention rate can have a significant impact upon your businesses’ profit, culture and market share.

So how is it done? To be effective in retention you first need to understand why people might decide to leave. A recent survey of a hundred salespeople who had recently left real estate businesses showed some interesting trends.

Initially, we looked at where these people were going to career-wise after leaving the business they were in. The vast majority left for two reasons; either to leave the industry completely (43%) or to stay in the industry but to work for a competitor (43%). A smaller number were leaving to start a real estate business themselves (14%).

It’s critical to understand each of these outcomes does not have an equal impact upon the business that the person is leaving. And here’s why.

If a person leaves the industry altogether, any market share they had is effectively up for grabs. The business then has every opportunity to keep that market share and probably a better opportunity to do so than its competitors. The survey showed the majority of people (56%) who left the industry altogether did so mainly due to personal reasons such as retirement, health issues or they were simply not making enough sales. Only 20% of these people were leaving due to dissatisfaction with the principal of the business.

On the other hand, if salespeople leave to go to a competitor’s business they are likely to take some, if not all, of their market share with them. Interestingly, only 9% of these people were leaving to go to a competitor because of better remuneration, while 45% were leaving because they were unhappy with their employer.

An even stronger impact is likely to be felt in the existing business if a salesperson leaves and decides to open up in competition. In this instance, they will also take their personal market share with them but on top of that, they are also likely to recruit more salespeople to work within the new business. And guess whose people make the most attractive recruits for an ex-staff member opening their own business? Yours! Importantly, of the overall survey respondents, this group had the largest percentage of people (61%) that were leaving because they were dissatisfied with their employer, while just 28% left because they wanted more opportunities.

Due to the nature of real estate, there will always be a number of people who join the industry and then leave because they find it’s too hard for whatever reason, or their personal circumstances have changed. Training, support and mentoring can help reduce the likelihood of this outcome. But in any case, this reason to leave is far less costly for the business than the other two possible reasons.

People leaving to go to a competitor or to open their own business are clearly are the most concerning to the business. The survey showed the top reason why people left for a competitor or decided to open their own business was due to dissatisfaction with their current principal (65%). This dovetails with the fact that good leadership is a common trait in any successful real estate business and it follows that in addressing this issue, many salespeople who would otherwise leave may very well stay.

Another finding worthy of note – the vast majority of the people who left the industry completely were gone within 36 months, whereas those who left to work for competitors or open their own business had been employed between two and five years beforehand. This three year time frame can be seen as the “danger period” and beyond that, a salesperson has “survived” the initial stage of establishing their career. In order to keep them at this point, the principal needs to ensure their other needs are taken care of.

It’s important to consider every salesperson as an individual and then tailor solutions to their specific needs. The employee/employer relationship needs to fit both parties, and this means the financial arrangement as well as the working relationship. In some cases it may be best for the individual to remain as an employee with full support and for others, a more independent arrangement may be more suitable, such as the salesperson operating as a contractor.

Whatever the outcome, it’s clear that one arrangement does not suit all and for those principals who try to apply a set formula, the result may not be good staff retention.

It is reasonable to say that creating a good working environment will have a significant impact on staff turnover. It follows also then that the retention rate is a pretty good indicator of the working environment.

It’s common to hear principals with high staff turnover complain that it’s impossible to get good salespeople, that it’s never the principal’s fault when people leave. Easy words to say and expensive to believe – far more effective to listen to the reasons people give when they leave as an opportunity to learn and grow in your ability as a leader along with your business.

Then, you might also find those people who feel dissatisfied in other real estate businesses leaving to join up with you!

This entry was posted on Thursday, September 10th, 2009. Categories: Business Strategy, Recruitment, Succession Planning.

WELCOME to every property investor’s nightmare.

Not only does your tenant shoot through without paying weeks or even months of rent, but they leave a heartbreaking disaster zone.

Rubbish-filled rooms, destroyed carpets, holes in walls and stolen furnishings can be inflicted by these dreaded tenants.

Fortunately for landlords, trashed houses are not too common. However, university lecturer and property book author Peter Koulizos says: “when you do get one it’s very memorable”.

Koulizos has heard of rental property rooms being badly damaged by hydroponic set-ups, and even malicious tenants pouring concrete down the toilets.

 Have you had a hellish renting experience? Tell us below.

“We experienced somebody parking their motorbike in the lounge room,” he says. It was fixed by a couple of doses of carpet steam-cleaning.

While malicious and careless tenants are more about bad luck than bad investing, there are some methods landlords can use to minimise the risks.

“You need a decent property - it doesn’t need to be expensive, just well-presented. If you’re presenting a pig-sty, what sort of tenant do you think is going to go into it?” Koulizos asks.

 He says it’s also important to carefully read tenants’ application forms and verify information with employers and referees.

But don’t always trust a previous landlord.

“They might want to get rid of bad tenants so they will tell you anything,” he says.

Koulizos says with new tenants, landlords might opt for a shorter initial lease – maybe six months  - and even visit the property personally to collect the rent for the first few weeks.

“If rent is late in the first few weeks, alarm bells should start ringing straight away,” he says.

Terri Scheer Insurance general manager Carolyn Majda says simple gestures such as a fresh coat of paint or gardening assistance can help to attract good-calibre tenants.

“Regular property inspections can help,” she says.

Majda says appointing a property manager can help prevent problems because they have experience. They also have access to databases of bad tenants.

Landlord insurance can also provide a financial safety net.

LAST September the Australian Bureau of Statistics produced population projections showing what Australia and its capital cities might look like in 2056.

A high-level projection was also provided to 2101. All projections show the national population growing from 22 million currently to between 34 million and 62 million at the end of the century.

The ABS gives no clue as to what our cities might look like in a world of 62 million Australians, but there is a perspective on how our cities might grow under lesser scenarios.

Under the medium migration assumption of 180,000 per annum the population in 2056 is expected to reach 35 million.

In this world Melbourne and Sydney both approach seven million residents or about three million more than the current population.

To the Australian mind these are huge numbers – but Western cities such as London, Paris and Chicago contain more people. Los Angeles has 18 million, New York 23 million and Tokyo 34 million.

Despite the fact that other cities have grown to this scale and more, it raises the question of what Sydney and Melbourne will look like at seven million.

There are plans to take Melbourne to five million, which involve consolidating the urban footprint and extending suburbia around transportation arteries, mostly in the west.

But what of the next stage of urban growth beyond five million to six then seven million? Melbourne and Sydney jointly contain 14 million residents of Australia’s 35 million.

Does this mean Sydney and Melbourne will account for 24 million if Australia reaches 62 million then? Is this possible?

There is always the argument that new cities will emerge during the 21st century, but in the 20th century only two big cities were created: Canberra and the Gold Coast. Both of these combined accounted for barely one-seventh of the population of Sydney and Melbourne by 2000.

New large cities might be developed in the 21st century, and I hope they are, especially in the north and northwest, but the main focus of population growth will remain the job centres of Sydney and Melbourne.

What is likely to develop during the 21st century is a loose fusing of the cities and towns of southeast Queensland and the NSW Northern Rivers region into a population mass that is never quite equal to that of Melbourne or Sydney.

There is the very real prospect that urban planners will have to manage the development of three Australian mega-regions (Sydney, Melbourne, southeast Queensland) each rising to between five and seven million by century’s end.

This means Sydney and Melbourne will have to accommodate an extra three million residents, or two million more than current planning has considered.

Where is Sydney going to add an extra two million residents over and above its current plans for five million? How will Melbourne provide water for an extra two million residents beyond the five million anticipated by current planning?

I get the sense that planners are so focused on managing urban growth to five million that they think it all ends there.

But it won’t end there. It is fair to say that Australia’s role with the rest of the world is likely to remain that of migrant destination for decades to come, indeed for another century and possibly much longer.

If ever there was a need for a nation to naturally develop an inherent field of excellence, it is Australia and the skill of urban planning. We should lead the world in this.

If Melbourne and Sydney are to grow to seven million and beyond, surely both cities need to consider long-term water and power supplies.

It may be possible to crib a few extra years of water supply by preservation and pipelines but this will not supply water needs for the two million-plus residents expected in Sydney and Melbourne beyond 2030.

The same goes for power. How many wind farms does it take to support cities jumping from four million to seven million in half a century? Or is the strategy to crib and stall and to eke out marginal solutions in the hope that something will come along and solve these problems?

Or, and I suspect this is more likely, does this strategy simply buy time to lurch from one election to another, with the objective of remaining in power rather than to find a permanent and sustainable solution. 

And here is the problem. I simply do not see the range of solutions being offered as sufficiently robust to accommodate the scale of growth Australia must accommodate this century.

Urban consolidation is all well and good but it is simply not possible to add three million people to Melbourne’s existing urban footprint. Even if it were technically possible, the citizenry wouldn’t accept it. (Although I suppose there is the option of enforcing compliance to urban consolidation laws using a special squad of enforcers.)

Water savings and renewable energy make a great contribution to the efficient operation of our cities as long as the rate of urban growth is not too vigorous or long-lasting. And that’s the issue. Australia will be an immigrant nation for our lifetime and for the lifetime of our grandchildren.

What this nation needs is a frank and robust debate about options for population and urban growth on a grand scale and over the long term.

In this debate I’d put hard questions on the table such as the option of constructing metropolitan dams and nuclear power stations.

Also on the table would be the option of curtailing migration and lessening the stresses and strains on the urban system. If Australia is to lead the world in urban planning, surely the place to start is an open an honest debate about options for the future management of that growth.

Bernard Salt is a KPMG partner

bsalt@kpmg.com.au  

twitter.com/bernardsalt

A SPELL of warm weather and a surge of new properties on the market have resulted in a strong start to the spring auction season in most Australian capital cities.

The auction market in Melbourne was particularly robust over the weekend, with auction clearance rates hitting 76 per cent on Saturday, almost 20 percentage points higher than that recorded on the first weekend of September last year.

In the bayside suburb of St Kilda, the top end of the property market saw some encouraging results. Auctioneer Leonard Persichetti, a partner with TBM, sold a three-bedroom, two-bathroom single-storey home for $1,026,000 — more than $75,000 above the vendor’s reserve price.

“The property was very hotly contested. There is still a shortage of good-quality stock available at this end of the market, which is resulting in a very strong and buoyant marketplace,” Mr Persichetti said.

“We had about four genuine bidders for this property and a spillover to another three or four groups of people who didn’t even get to put up their hands,” he said.

In Sydney, 70.1 per cent of properties sold at auction with just over $102 million worth of real estate changing hands. The median price for homes sold in the city over the weekend was $653,500.

The result told a vastly different story to the clearance rate of 45.1per cent recorded by the harbour city on the first week of last September, when clearance rates slumped on the back of the global financial crisis.

In Adelaide, the clearance rate was also strong with 73.7 per cent of properties selling at auction.

While just 35 per cent of properties sold under the hammer in Brisbane, the result was still better than the market’s 32.3 per cent last September.

Real Estate Institute of Australia president David Airey said the property market had made a dramatic recovery from last year’s spring slump to the astonishment of everyone.

“It’s hard to believe, in comparison to Father’s Day one year ago, the weekend’s results,” he said.

“It has taken everyone by surprise, even in the industry. The market is very strong and it has moved back into a seller’s market in really about a three- to four-month period.”

Mr Airey said the confidence of buyers and the more realistic price expectations of sellers were driving the market recovery.

But he said, “the most important factor without doubt is the very low interest rates.

“I’m sure we’ve seen the worst of it now,” he said.

In Perth, property industry figures said they were beginning to see signs the market was turning around with the number of homes available falling from 18,300 at the worst of the slump to 11,500 this week.