The most expensive properties are dropping the most in value lately, and are greatly lacking in demand. To cope, many real estate agents are shifting strategy to fit in with the new buying climate packed with bargain hunters. Kit Kadlec reports
A few years ago, words such as "reduced" were considered taboo in the marketing language in advertisements and promotions for top end properties.
In those days, buyers were brimming with confidence and purchase power, and they wanted something more glamorous and luxurious than just a bargain.
"Two years ago, it was a bullish market, people were reaping rewards from the share market, the property market, and just about anywhere else they put their money," says Gary Bylund, who specializes in high-end and waterfront properties for Century 21's Bay Realty near Brisbane. "It was not uncommon to see people paying more for properties than they were actually worth."
Times have changed, of course, and now many of those top-end properties are seeing price dropping dramatically. Owners are also looking to sell, as their share market investments have taken a tumble.
Problem is, there's no longer a pack of buyers eagerly waiting to pay top dollar for these properties. That's made it difficult for those who need to sell, but some real estate agents have been adapting their strategies in an attempt to meet the new mentality of buyers.
After all, there are still buyers. They just have much different expectations now.
"There are certainly still buyers now, but they're looking more for good value," says Bylund.
That meant that properties perceived as overpriced have lagged or had to sell below expectations, whereas some of the properties considered bargains have actually drawn strong demand and exceeded price expectations lately.
"With the boost to the first homeowners grant, the lower end of the market is certainly the sector that's bubbling along and is the bread and butter for real estate agents at the moment," says Sean Green, head of regional management for Raine & Horne. "The higher end properties are only going if there's that perception of value in the property."
One of the keys to finding a buyer now is pricing, says Green.
"As the market conditions have tightened over time, the principle of pricing has become paramount," he says.
Before, there was often a larger difference between what a property was actually worth and the asking price, he says.
"Those days are long gone," says Green. "It's paramount now for the agent to get the price right from day one."
Putting the price too high can put off potential buyers, and possibly force the property to sell for lower than it could have. It's also how the property is presented. Convincing buyers now that they are getting a bargain is crucial.
"There's got to be an air of value," says Bylund. "(Buyers) certainly don't react to any property where they think they'd have to pay a high price to obtain it. We have to come in from the other end and try to give an indication that there is possible value for the money with it."
Using the word "reduced" has also become more commonly seen.
"Nobody would want to be a party to it a couple years ago," says Bylund. "Now (sales agents) are realizing we have to be a bit more creative with what we are doing."
Green agrees, saying the public is "almost expecting" to see such terms for advertised properties.
"Most vendors used to frown upon those terms (such as "reduced"), but they've become more accepted in the current environment," he says.
There's no need to reduce the price, if it's put at the right level from the start, however.
Best price is no price
There are some strategies for those selling high end properties to avoid having to reduce their price immediately or market the home as reduced, however.
One such common approach by real estate agents is to avoid listing any price at all.
"Value wins at the moment, so if you've got a property that's sitting with too high a price on it, obviously it's not going to attract a lot of attention," says Bylund. "No-price marketing is the way to go with high-end property."
That's because it doesn't turn away potential buyers too early with the pricing alone. It's better to get them in for a viewing, get them interested, before talking price, if possible.
"Once we've got people looking, we have a better chance of taking offers," says Bylund. "The golden rule for the top end is always getting someone to fall in love with the property."
When you've got that, achieving a good price is much easier, rather than using price as a starting point.
The problem for many sellers right now is their expectations are much different than that of the buyers. And at the moment, the more powerful force is that of the buyers' expectations.
"In real estate, there are always two sides to the story," says Bylund. "Both buyers and sellers always have different expectations, but currently, the gap is probably wider than it usually is."
If the offers are still lower than expectations, the vendor should always try to put the situation in perspective, says Green.
He says those selling for lower than hoped can also expect to buy their next property for a bargain as well, if the purchase is done around the same time. It works both ways.
"With any given market, if the vendor is selling a property and buying a property in the same market, which ever way they are going (in price), they are not losing," says Green.
Marketing pays off
It may require a little more work, but there still are ways to sell a property at a better price.
That might mean simply fixing up the garden and cleaning up the interior. The agent can also submit a higher quality photo, such as from an aircraft or blimp above, and make sure the inspection times are placed properly.
It all comes down to finding as many potential buyers, and getting a sale as quickly as possible, says Green.
"The more spent on marketing, the greater pool of potential buyers you'll get," he says.
In previous years, top-end properties could always get a good showing, even with minimal marketing. That's no longer true.
"The more marketing, the quicker it will sell, and the quicker it sells, the better price it will get," says Green. "If it stays on the market longer, it will reduce in price."
Bylund says there is no hard and fast rule about how long a property should stay on the market before being pulled off, but rather just that the quicker it can sell, the better the price for the vendor.
"The shorter time frame, the better the result," he says.
Taking time to find the right sales agent, especially one with a long experience level, can also pay off. Green recommends getting a referral or aiming to find an agent with a good reputation.
Advertising is a crucial area as well, and requires a unique approach for top-end properties by agents. Many buyers focus their searches on the Internet, so listing a property there is important. However, these pages are loaded with other properties as well, all equally weighted, even if the price is as low as $200,000 or $300,000.
Buy print media ads that are larger, and get more individual attention.
"The obvious avenues are Internet based, they are our first ports of call," says Bylund. "But certainly we are becoming more reliant on print media again to push our message."
That print media allows the higher paying advertiser to stand out more from the crowd by using larger sized ads.
Renovate only when needed
As the pool of buyers for top-end properties shrinks, so too does it become harder to stand out.
If a property is lacking in size, or perhaps in a poor location, such as being situated on a busy road, buyers might be harder to draw in.
"Buyers have become pickier," says Green. "They are a lot choosier on what they are spending on."
Fixing small things, like a leaking shower recess, can help limit buyers from trying to bargain down the price, as well.
"Those types of things give buyers a lot more power to bargain," says Green.
In some cases, then, adding renovations can be of value. But you need to be sure the work will translate to actual value in the sale price, he says.
Bylund looks at renovations at the moment less favourably.
"Renovations and modifications to property are more for people who are going to stay where they are," he says. "Doing renovations right now can actually have a little bit of a detrimental effect. That's because your tastes might be different form what (potential buyers) had in mind."
Identifying the buyers
From a real estate agent's perspective, identifying what the buyer category is can be crucial beforehand, as well as being able to explain the key points of the property.
Green says the property should never just be broadly marketed to investors as a whole. Finding the core group that might be most interested first can allow for a more focused advertising campaign.
A house with three bedrooms or more and some yard space, for example, is likely to be marketed towards families.
"Instead of just looking to sell to an investor, they can hit that target market from day one," says Green.
Amenities nearby such as a park and schools can be pointed out, as well as swing in the backyard, for example.
There's also a stark difference between apartment buyers and house buyers, says Bylund.
"They are two different kind of people - either low maintenance lifestyle people or family-oriented people," he says.
Bylund, who has been dealing with the top-end market for nearly 10 years, says knowing the product you're selling is crucial.
"I think one of the keys to success is to obviously know your product, know what it has to offer," he says.
Learn what makes it unique, he says, and make that point clear to the potential buyer.
Can you afford to buy in this suburb? Find out how much you can borrow