Market Comment Nov 2020

The argument has been well made by those with more learning than we have, that the primary long term impact of QE (money printing) is increasing asset prices. Well meaning as the concept is, to increase economic activity by pumping more money into a struggling economy, the reality is that a significant portion ends up invested in assets – and a large chunk of that is property.

When you combine money looking for a home, and the clear message that interest rates will remain low (and lower) for some years, then the option of leaving money in a bank account doesn’t stack up for most.

All of which has fuelled the ongoing scramble for investment properties  - and at falling yields. We are seeing increasing demand for investment properties, with yields, for prime properties, in the mid 4’s very common.

Confidence is returning in some sectors, as the doom and gloom predictions have yet to play out. This, plus the lowering interest rates, is fuelling renewed activity in the owner-occupier market – particularly sub $2 M.

However, very often the dampener to all this activity is the question would-be vendors typically ask – “If I sell, what do I do with the money?” To which there is no easy answer.

As a result of these various market factors we are seeing several emerging aspects from our interactions from agents:

There are numbers of agents who are finding the tight market an incentive to knock on doors and make calls. There are others who are sitting back and waiting for the phone to ring. We can only remind the latter group that in the GFC over one third of industrial agents decided they would prefer careers as cruise ship gigilos, circus clowns or train conductors. We will continue to support those who are prepared to work hard and find the opportunities.

There are some agents who are attempting to buy agencies for properties by making unsustainable promises. Whilst promising what cannot be achieved, and then having to “condition” the vendor, may work once, it doesn’t wash with serial investors.

There are some agents who offer a reduced commission to make up for a lack of skills. Discounting is the start of a race to the bottom. And we hear anecdotes of agents engaging in discounting wars to win agencies. Our view is that hard work, diligence and skill should be rewarded with a reasonable (but not excessive!) payday. Expedio wants good agents to be rewarded adequately so that they will continue to sell and lease our properties, and also that they will continue to bring opportunities to us.