A couple of years ago in a credit meeting, I listened to the war stories of a Wesbank employee about the market conditions that they experienced that changed my outlook to property. He said that he (the Wesbank guy) used to look down on second-hand car dealers, and that he tried to focus only on new vehicle sales, but that the financial crisis turned Wesbank into one of the biggest second-hand car dealer in the country. Luckily that is not the case with Home Loans, but I quickly learnt that as a bank we are so intertwined with the property market that it is getting more and more difficult to split real estate from banking.
In order for us to grow as a business, it is very important to be cognisant of our business environment to recognise opportunities. In spending more and more of my time with the real estate industry, I have learnt some valuable lessons that I’d like to share.
Here is my current top 10:
- The average age of Estate Agents is 58. This leaves a huge gap from a younger generation to fill their shoes. Particularly black and coloured agents who only make up a meagre 12% (6% and 6%) of the total number. The Property Sector Charter will help to accelerate transformation in the industry.
- Advertising properties via print media (Saturday Star, Pamphlets etc) is a dying breed. Some figures quoted were that some agents still spend 80% of advertising costs, achieving only 20% of sales. Classic 80/20 principle.
- Social Media has a huge role to play in the industry. Agents connect with each other on Facebook and LinkedIn often, but do not tap the full power of Twitter yet. Foursquare, Pinterest and Instagram is probably still the least used, but biggest opportunities for Real Estate companies to reach their markets.
- Agents love technology. However, the market is still very young and has a lot to learn. Almost every agency has an iPad application. Most of these applications are more of a ‘me too’ product than a fully functional property tool. On top of that, it is mainly agents themselves that use these applications, but only 15% of agents have iPads or other tablets.
- Around half of the Estate Agents operating today are not affiliated with a national brand like Seeff, Pam Golding, Chas Everitt etc. We often refer to them as ‘Moms and Pops’ agencies, but they control half of the market. Specific area expertise and presence seems to trump any brand name.
- Skill differences in the industry make a huge difference to agent income levels. The top third of agents sell around 80% of properties. The middle third sells most of the rest and the bottom third sells almost nothing. I have met agents that do very well financially, and ones that struggle in the same market/area. One of the agents I met recently sells around 14 properties on average per month! Her record standing at 28, in the current market conditions.
- A sole mandate is a contract between a seller and an agent that allows the agent a couple of months to sell a property exclusively. During this time, no other agent can sell the house and claim commission from the seller. Many sellers did not/do not want to sign a sole mandate, as they believe that the agent will not work as hard to sell the property. However, a sole mandate allows the agent to spend more time, money and effort marketing and showing the property without the risk of losing the deal to another agent- Increasing the chance of selling and decreasing the time the property spends on the market.
- Mortgage Originators offers a great service to Estate Agents. They often share an office and take care of all of the administration and paperwork when applying for a loan. Agents feel that their time is much better spent on selling property and prefer not to be bogged down chasing documents and submitting applications to the bank. Many agencies cannot operate without support from Mortgage Originators.
- The department of public works how recently claimed the residential property market is worth R2.12 Trillion and the commercial market R1.97 Trillion, making it the second biggest sector in South Africa, after mining.
- Pricing of properties remain one of the biggest challenges that sellers and Estate Agents face. We have proved through Quick Sell and the Properties in Possession sales that there is sufficient demand for residential properties at the right price- with the 7200 properties that we have sold over the last three years (6000 Quick Sell and 1200 PIPs).