advice on current market trends - rural agency


The rural agent should be well versed in the current trends of the real estate market so that they can provide accurate advice to both the seller and buyer. The agent should be aware of global (state/national) trends as well as local market trends.

Global market trends

State, and to a lesser extent, national market trends will have an affect on your local market. This may not be apparent directly but it is affected through a trickle down effect.

EXAMPLE

Many buyers from Sydney and large regional centres buy small rural blocks for a lifestyle change. They are attracted to the idea of escaping the “hustle and bustle” of city life. For example, a strong real estate market developed on the outskirts of Sydney (eg Dural and Annangrove) for small hobby farms of 2ha-10ha in size. The change was financed by the sale of highly valued inner city houses. A family could sell their city house and buy a “hobby farm” further out sometimes with money left over.

The market became so strong that soon hobby farms on the outskirts of Sydney, Blue Mountains and central tablelands (Bowral region) became too expensive. People looking for a lifestyle change were forced further out into regional centres such as Gosford, Illawarra Region, Lithgow and Bathurst.

The desire for a “seachange” (coastal) or “treechange” (Central Division) hobby farms has remained unabated. The market for “treechange” hobby farms has become more stronger as a “seachange” can no longer be afforded because of the high prices of costal properties.

The trickle down effect is shown by the high prices being achieved by hobby farms near Goulburn, Tamworth and Orange. All towns and cities within 3-4 hours drive of Sydney have been affected by this demand.

The above example shows how the rural agent should be up to date with market trends at least, state level because the trickle down effect will ultimately affect their local market. This requires the agent to be properly informed, to read and analyse the rural real estate market at both state and national levels. The following newspapers and periodicals are compulsory reading for the rural agent:



LOCAL MARKET TRENDS

The local market is the market of most immediate interest of the rural agent. The market can be described according to 3 general trends:

The market has shown strong growth over the last 6-12 months. Growth in real estate is known as “capital gains” or “appreciation”. Buyers and seller are affected by this trend. The seller has to decide whether to sell now or wait for further capital gains. The buyer may be reluctant to buy now, hoping for a fall in prices in the immediate future.

The real estate market is cyclical (similar to the business cycle) and the seller in the seller’s market will try to sell at the top of the cycle.

Real estate prices generally, are showing no discernable trend in real trends (after accounting for inflation). This may indicate that the market is on the cusp of a downward trend or in the trough of an upward trend.

Property prices are falling with losses in value. In such a market the seller will try to sell as quickly as possible if they have to sell or otherwise wait for a rise in the market. Although a buyer’s market the buyer still has to decide whether or not to wait for further price falls or buy now avoiding a market rise.

The professional rural agent should prepare periodical or ad hoc reports on market conditions to show either buyer or seller. A professional report on the market is an important part of the presentation package.

To determine market trends the agent should be abreast of sales in their market area. Sources of sales that the agent can utilise are as follows:

The most reliable source of sale information are the sales of properties by the rural agent themselves. The advantage of using these sales is that they are up to date and the agent knows the background of the sales. This knowledge allows the agent to assess the sale’s reliability. For example, the sale was to an adjoining owner therefore, above market value. If the agency has a large number of sales then a good market report is possible using only this information. However typically, the agent will not have enough sales nor sales outside their operating area so that they will have to obtain information on other sales.

Usually in a country town there is good rapport between agents. Therefore, the rural agent should have little trouble ascertaining sales from other agents. Other agents may publish a list of properties sold so that this can be used to supplement your own sales information.

The agent can get immediate information by attending auctions held by other agents.

The local council will have transfers or a list of recent sales that the agent can refer to. The advantage of using transfers is that the information is accurate (the transfer is a legal document) but the disadvantage is that the sales will be 2-3 months old. This last factor is less important in a remote country town as the market trends are much slower than near an expanding regional centre.

The rural agent should track all real estate advertisements advertised in the local and regional newspapers. This not only tells you how the opposition is performing but newspaper are underrated as good sources of property information. A great deal of information is available from perusing the real estate advertisements and also from special features on properties sold. The special feature is often detailed and includes valuable background information.

The newspaper is also a good of information that will affect the real estate market. This includes changes in town planning, the state of the local economy (eg shops closing or opening), industry that may come to the town or near the town (eg mines at Orange and Parkes, Gaol at Wellington) and, general statements and opinion that will affect the local economy.

LOCAL KNOWLEDGE

The use of local knowledge cannot be overstated for a rural agency. An agent by nature is a person that talks to and communicates with a large range of people in, or influential to, the property market. Communication with sellers and buyers will provide the agent with the latest opinions and attitudes on the market. If there is a change in the market, the agent through local knowledge should be the first to know.

EXAMPLE

The agent has found that there has been little interest or enquiry about a rural property they have for sale. Upon investigation the agent finds out that this is because of plans to build noisy motor racetrack nearby. This is not general knowledge but locals know through contact with the seller of the land to the racetrack.



THE MARKET REPORT

The agent armed with the latest sales and economic factors outlined above can now prepare a market report. This can be a dedicated report or part of the agency’s newsletter. Typically, the report is for buyers and sellers who are not interested in detail and statistics but require a clear and simple statement of trend. A list of recent sales is “newsy” and compulsory reading. Therefore, the report should state trends in simple terms as described above, using percentage figures and supported by recent sales.

On the other hand, if the report is part of a presentation to a professional investor or investment manager then it can be more detailed and informative. The agent should include statistical descriptions and analyse and make liberal use of pie diagrams and graphs.

DO NOT FORECAST

It is important not to make or forecast claims about rural trade, activities and future capital gains in real estate. If the forecast proves to be widely “off the mark” you may be sued for negligence and be in breach of the Trade Practices Act. If a buyer or seller requires a forecast then you can include reports prepared by bodies such as the Australian Bureau of Agriculture and Resource Economics (ABARE).Such a report will add professional gloss to your report.