Archive for November, 2011

Our fab new real estate commission structure

Sunday, November 27th, 2011

I’ve just changed The Property Market’s commission structure. Up until last week we charged clients 1% up to the CV of their property and 5% on the remainder above it plus GST but we now charge a more simple and straightforward fee of 2% of the sale price plus GST.

The concept behind the old commission structure was that it explicitly motivated us to work hard to get the best possible sale price and while it got us a fair bit of notoriety and some handy press coverage, the reality was that it rewarded clients who had a high CV because they paid significantly less than those with a low CV and for whom we achieved a high sale price.

The 1% bit of the old fee structure also appeared to create a perception that we were a budget real estate agency and any misconceptions around us just being cheap couldn’t be further from the truth. The feedback we get from our clients and our buyers makes me proud to have my name over the door and there is rarely a week that I don’t receive a call or an email thanking us for our time and energy and remarking on how the service we provide is a cut above anything else they have experienced.

The transaction of property – whether it’s for an investment or to provide a family home – is a hugely emotional decision so the real opportunity in my mind is to create a smarter real estate agency model that allows us to provide a better service. That’s why I’m hell bent on steering clear of the self-employed contractor status used by other real estate agencies and instead having salespeople who are employees on a base salary with a commission bonus for making a sale. This model exists in other countries (eg the UK) and also in pretty much every other organization on the face of the planet that has a sales team so I can’t for the life of me see why it can’t work in real estate. It also means I can employ a different type of salesperson and as real estate generally requires a truck load of energy, it makes sense to work with young, well educated people who don’t have any preconceptions about the industry and who are every bit as ambitious as I am to try a different approach to selling property.

The perfect townhouse

Friday, November 25th, 2011

Being a Brit by birth, the word townhouse conjures up gentrified and noble connotations. Townhouses were originally the city residences of members of the aristocracy and more often than not, they were terraced dwellings – squeezed together side-by-side in much the same way as the homes of far less wealthy city residents – but they were significantly larger and in more affluent locations.

It’s ironic then, that the word townhouse has such positive connotations but terraced housing doesn’t. As a kid I grew up in a Victorian terraced house in a close-knit community in central London. You could easily argue that the strong relationships we had with our neighbours was shaped by the closeness of the housing in which we lived; the highs and lows of family life were dimly audible through the thick brick walls, burglaries were quickly noticed and reported to the police, we spent long summer evenings playing and barbecuing in each other’s gardens and most Sundays we took turns hosting lunch and killer poker tournaments. In my mind those days are a big jumble of arms and legs, laughter and tears, kindness and quarrels and as a family, we’re still in touch with many of those neighbours all these decades later.

A well executed terraced house is the perfect answer to the modern day requirement for compact, centrally-located housing and to my mind, the townhouses on Napier Street in Freemans Bay are the best example of townhouse design in this country. These houses were designed and built in the 1980s by the well renowned architect Marshall Cook who is known for his ability to marry pragmatism with experimentation.

The block stretches the length of one side of Napier Street and sits tucked behind Franklin Road, shielded from the city which tumbles down Victoria Street West behind them. With their colourful facades, the block previously known as the Fruit Bowl is the defining characteristic of the street (although as the years go by, subsequent paint jobs have seen the exterior colour schemes become more muted.)

Cook’s simple and practical design can be seen throughout these properties. The kitchen windows jut out onto the street, filling the space with natural light and making it easier to get rid of cooking steam and smells. Floor-to-ceiling windows and doors extend across the rear of the houses and look out onto secluded north facing gardens, warming the interior of these homes naturally with the sun. Parking is tucked away off the street in garages behind the houses with access to each property coming directly in from the back garden so there’s no interruption to the façade of the block and late night revelers can’t disturb the people sleeping inside when they come home. A procession of mature trees along the street filter the light throughout the day and buffer the noise of the city behind and the spacious interior floor area includes a separate laundry and a guest loo. Ownership is on individual Unit Titles with equitable and neatly defined boundaries and the annual Body Corporate fee is entirely reasonable.

These tough but chic little properties are made of robust and durable materials and their skillful use of light and climate is a signature theme in Marshall Cook’s work. The columns, arched doorways and sliding shutters that adorn the front of the properties help to create a bustling street atmosphere and reflect the intensity and liveliness of the area. An aerial view of the block reveals a jaunty tangle of houses, gardens and garages that complements the slightly dotty exterior.

It’s clear that I’m not alone in my love for these properties; when my colleague James and I sold one of these townhouses a few months back, we were flattened by the number of buyers who wanted to have a look through and we had presented our client with the first of several offers only a few hours after the sign had gone up. The only two open homes we held were over-run with buyers, many of whom lingered in the sunshine spilling across the living room long after closing time.

No doubt Marshall Cook’s Napier Street townhouses will continue to increase in popularity as they are every bit as enduring as they are endearing. And with the average Freemans Bay sale price exceeding its CV by around $115,000, they will no doubt continue to increase in value as well. The new developments rolling out at Victoria Park Market and Rhubarb Lane and the rejuvenation of historic local landmarks like the Campbell Free Kindergarten building and the Rob Roy Hotel are set to make Freemans Bay one of the most exciting suburbs in central Auckland. Mr Cook’s perfect townhouses will finally be in good company.

October sales stats for Ponsonby

Friday, November 25th, 2011

A look at the unsettled Ponsonby stats for October so far reveals just 13 sales – 4 by auction and 7 by negotiation. The bulk of sales was for 3 and 4 bedroom properties on a freehold title and only one apartment sold in the month. The lowest sale price was $250,000 for a leasehold property on Hepburn Street and the highest sale price was $1,795,000 for a 4 bedroom property on Trinity Street and with sales taking on average 45 days, the rate of sale has slowed slightly showing that the RWC really did distract buyers.

Is the good old auction process going, going, gone?

Friday, November 25th, 2011

We recently did some analysis on the effectiveness of auctions in the current market in the past 3 months. In Grey Lynn, Herne Bay and St Marys Bay, properties on average achieved a higher sale price above their CV when sold by negotiation than those sold by auction. Westmere was still the stand-out winner for selling by auction but for most other suburbs in the central city, sale prices under the hammer had dropped from the second quarter of the year.

So does this mean the market is returning to the good old days of transacting properties by negotiating for them rather than bidding for them? The current lack of properties on the market means there is some volatility in the numbers but it’s certainly fair to say that the low cost of borrowing is producing such high numbers of buyers that there should be enough competition to provide a good sale price without the expense and hassle of an auction.

It’s also fair to say that the up-front cost of legal fees, registered valuations and building inspections can make placing a bid prohibitive. We’ve had purchasers tell us they’re spending up to $5,000 in their search for a new home which is not only soul-destroying for them, it’s also detrimental to sellers as this investment is ultimately cutting into the purchase price.

For many vendors in the current market, there is every argument to suggest that a sale by negotiation could produce a better or equivalent price than an auction and we now factor this analysis into our method of sale recommendations to our clients. As with any sale process, the aim is to deploy a method of sale that is relevant to the buying conditions and makes the property available to the widest possible pool of purchasers.

Snapshot of residential property sales in Grey Lynn

Friday, November 25th, 2011

The October sale data is starting to filter through and so far it shows 23 sales in the month (5 apartments, one home and income and 17 properties on fee simple titles) which is up around 9% on October last year. The bulk of these properties were sold by negotiation and the lowest sale price was $265,000 for an apartment on Grey North Road while the highest sale price was $1,706,000 for a fully renovated house on Sussex Street. The average sale price for the properties sold last month is $861,850.