Market Update April 2017

The first quarter of this year saw as expected a slow start to January with a sharp increase in activity as soon as school went back beginning of February. 2016 was an up and down year with normal succession sales or retirees and small agencies selling off due to competing market pressures.

We noticed a predictable increase in enquiry levels for retiring principals as well as agencies feeling the pinch from a declining sales market across Sydney metro. Whilst agencies still achieve and maintain high house and apartments prices, however there is a remarkable decrease in sales volumes (30% - 40%) with lack of stock. What impact has this made on rent rolls and agencies in general?

1. Tightening of cash flow - banks are aware of reduced cash flow across agencies with lower FCCR (fixed cost coverage ratio) and more sales focused agencies. Hence, banks are monitoring these clients more closely and asking more questions for rent roll acquisitions, especially new to bank clients.

2. Focus on quality of rent rolls - principals are being more involved in the property management department and expecting more from their people. Focus is on increasing rents through small renovations to owners' properties in order to improve overall quality of portfolios, as well as scrutinising loss leading properties/owners with lower commissions and lower or non-existent letting fees and sundry fees.

This is the busiest in 2 years with more rent roll listings at any given time. There's definitely a flight to sell for retiring principals, agencies under financial strain and partnerships being tested in a tough sales market. Multipliers are holding in Sydney metro $3.60 - $3.90 and $3.00 - $3.30 in Western Sydney.

There has also been an increase in strata roll opportunities, however at this stage we see this as natural attrition of principals leaving the market place or retiring.