A look at the property market over the last 25 years At the 2010 IEASA Western Cape Annual General Meeting, Samuel Seeff shared his experiences and provided some insight into the real estate environment over the last 25 years. It has been said that the more things change, the more they stay the same. I would like over the next short while to share with you some of the changes I have seen and experienced in the property market over the last 25 years and where I see the industry challenges and direction moving forward. 1984 seems a long way back and whilst I am probably of a fairly average age in the room at present, for many years I was the youngest person in the room. Did that stop me? Not really. I have never been the recipient of the wisdom that comes with the “saying” it’s best to be thought a fool than to open your mouth and remove all doubt. So despite my lack of years, lack of wisdom and certainly lack of experience there was certainly never for me, a lost opportunity to voice an opinion or to express myself in some form or another. Those of you in the audience, who know me well, will know that nothing has changed despite the passage of time. So in fact it gives me a great pleasure to reminisce with you giving a general overview of ‘how things were’, how things have changed in the industry and perhaps what lies ahead for us in the future. So what was it like in a world without, call-phones, computers, fax machines, the World Wide Web, Facebook, MMS, Blackberrys, BBM’s, emails and all the technology we take for granted today and couldn’t imagine living without. Certainly a lot slower, for one! The style of real estate practiced has not changed dramatically over the years relative to the basics we all know: - sole mandates, dual mandates, show days, OTP’s, etc, but the pace was certainly much slower. An OTP taken from out of town took days to negotiate with frequent trips down to the Post Office to confirm signatures. Our Seeff OTP was 1 page long with some 14 clauses. I knew it off by heart. Today our OTP is some 14 pages long with clauses long enough to confuse even the most up to date conveyancing attorney. Commissions were different then – 5 % on the first R20 000 and 4% on the balance was the order of the day. They grew to 5% on the whole purchase price and then 6, then 7.5%. The competitions commission has now legislated that commissions are now negotiable but clearly percentages earned are industry-wide closer to 5% then 7,5%. What about bond commissions – in the same vein, they are on the downward trend and perhaps if the banks have their way, will be forced down even further. I recall the requirement in those days of having to get matching finance together with a raising fee in order to get a home loan application through, and the reward was a sponsored cake and biscuits now and again by the bank consultant. And we think we have difficulties today… for those of you unaware of the process, this entailed not only having to find and match a buyer and seller, negotiate the deal, and thereafter find someone with money who would ‘match’ the amount requested for the loan investing an equal amount with the bank in a fixed deposit and then negotiate the ‘raising fee’ i.e.an upfront percentage required to be incentive to get the balance invested before a loan was granted… boy we worked hard for our commission fee then! The industry itself has grown dramatically over the period. At the time that I became involved the market leaders – only regionally based, for there were no National players then – were Steers; Maynard Burgoyne; Durr Estates; Pam Golding and ourselves. One of the first innovations I had to face was the introduction of the Multi Listing System in South Africa. Pioneered by Bruce Wilson of Maynard Burgoyne (he was a former Institute Chairman, I think); we began the arduous task of trying to change the habits of South African real estate practitioners. We were relatively successful, especially in the KwaZulu Natal region where a form of MLS, Network Listings is still the order of the day.
If I look back on that experience, subliminally I realize I took on board one of the more important lessons that I could have learned at that age and time of experience. And that was the importance of working with your real estate colleagues for the benefit of all in the industry. When I consider how the industry has changed; that has been one of the hallmarks of my involvement and what I would consider one of my greatest successes - getting real estate people to speak to each other and work together for a common cause. We together, as an industry, have also had a pronounced effect on the advertising world. Especially when we got together and took on the might and strength of the newspapers. It was comment by then Argus editor Fred Collings that made me determined, that we should work together, and some 20 years later I can still quote him to the word. He sneeringly looked down at us during advertising price negotiation (where we were objecting to the second price hike in a year, each over 20%) where some industry members had been summoned to see him and said “you estate agents will never work together, you wouldn’t know how”. Now I know we’re quite a competitive bunch, but at that moment I made up my mind – ‘come hell or high water or both’ we were going to work together and succeed. And we did. If we look at that particular success – I believe it has been the fore-runner for some of the successes that industry has achieved over the years. Mortgage origination being the other notable success that has assisted in the wealth creation for industry members, although the future of this particular element of the industry is very much in question as it faces its sternest test at this particular time. So what are the other factors that have influenced the changes in the industry we see? Brands; brands; brands have become the order of the day! When we started out it was relatively easy to make ones mark. The industry was smaller, less competitive and far more contained. A newcomer had the opportunity to establish themselves and grow at a pace that would allow for greater recognition than could be achieved in the same way the same ‘spend’ now. Regional players grew to be National, but national players are still ‘battling’ to get the critical mass to become truly International i.e. having South African roots and expanding overseas as opposed to bringing in Foreign brands to our shores. Today the equivalent ‘spend’ would almost likely not be sensible nor hardly sustainable. So the barriers to entry are slowly increasing. For many years I have been consistently saying that in the South African real estate sector that ‘the barriers to entry are extremely low, whilst the barriers to success are extremely high’. Well in truth, that refrain may well have to change – not that barriers to achieve success have dropped but rather the barriers to entry are certainly being increased. Not only in the obvious sense of qualifying entrance exams and internship periods but if one takes into account the infrastructure that is required to establish and grow a brand then it is relatively easy to see that the numbers of new entrants on the real estate landscape will be few over the next few years. Brand building requires significant sums spent on generic advertising, building the brand – not just advertising the mandated property; it requires a large sum to be invested into a web-strategy, backing up not only the creation of the website but also the maintenance; enhancements and investment in advertising and search engine optimization. None of this comes cheaply or in fact easily. Choosing the wrong service provider or getting it wrong internally will strain the largest budget, not to mention the time lost. And when one factors in the cost of advertising the brand generically, be it in the newspapers, television, magazines, sponsorships, bill-boards or other – these costs mount up quickly and significantly. So, my prediction is that brands will strengthen over time. The landscape allowing new entrants is becoming more and more difficult. Having said this let me quickly and with certainly add that there will always be a place for the focused local and dedicated agent. The area specialist! The market needs these professionals as an alternative to the bigger brands as they are often more fleet of foot and their local network allows them an opportunity to offer a niche service. If I look at some of the other aspects that have changed over the last two and half decades then perhaps technology is the most significant. A world without cell-phones is almost unthinkable. Their appearance and utilization making agents mobile, more effective in time management and far greater at increasing service levels than one previously would have thought possible.
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