In Q1, vendors often had to lower their listing prices to meet current buyer affordability, indicating the market is still struggling to find a balance between sellers’ price expectations and what buyers are prepared to pay.
But it isn’t just reductions that saw a jump in the first quarter of the year…
The rise in price reductions had a direct impact on other areas of the property market, with around 74,000 of Q1 withdrawals having undergone at least one price drop before exiting the market altogether. This indicates that approximately one-third of sellers were open to lowering their property price, yet still found interest low or offers inadequate.
How to thrive in the current market
While increases in reductions and subsequent withdrawals could sound like bad news, they actually present a huge opportunity for agents to win instructions and grow their market share.
That’s because second-instruction vendors are more realistic about both pricing and market conditions, meaning they’re more open to appropriate listing prices and taking agent recommendations onboard.
In fact, second instructions are actually 66% more likely to sell than first instructions. And, listings that switch agents after 8 weeks typically sell at an average of 14% higher than those that reduced after 8 weeks and remained with the same agent.
But how can you effectively win those second instructions?
1. Bolster your core strategy with reactive marketing.
While most agents may be aware of shifts in the market, they might not feel able to quickly adapt their prospecting strategy in line with recent trends, because of the time it takes to write new letters or produce specific campaigns.
Quick content generation is the key here. With tools like Spectre AI, agents now have the freedom to quickly adapt their marketing and refresh their letter content in just minutes to match current market conditions – beating their competitors to the post and, ultimately, securing more instructions.
2. Target motivated vendors when they need it most
The current market movements this year – especially in relation to reductions and withdrawals – present a huge opportunity for agents to win instructions, so long as you’re targeting vendors at the most optimum moments.
Important milestones in a property’s time on the market, as well as key events like a price reduction, are the perfect time to approach vendors who are motivated to sell but struggling, and offer your agency’s support.
With the right prospecting tool, you’ll be able to send relevant, personalised and engaging marketing collateral at moments when vendors are feeling discouraged with their sale.
In Spectre, for example, the most successful agencies are targeting their competitors’ withdrawn and reduced stock. This year so far, our withdrawal letter trigger has been the one of the top performing touch points, along with the triggers sent ‘x’ weeks following a price reduction. Interestingly, the letters sent weeks after a price reduction perform better than those sent straight after a price reduction, presumably as vendors at that point are hopeful that the price reduction will be successful in generating the interest they need. .
3. Nurture withdrawn listings so they’ll relist with you.
On average, almost 50% of withdrawn listings return to the market within 12 months – you have the power to put yourself in prime position to win those instructions by nurturing withdrawals, so when they do decide to relist, it’s with you.
In order to do that, you need a solid marketing strategy. I urge you to check… does your current prospecting supplier allow you to send follow-up letters weeks or months after a withdrawal or reduction? Are these touchpoints turned on in your account? If not, you could be missing out on valuable instructions, because the most successful agents are using the high levels of withdrawals and reductions to grow their market share.
The right prospecting tool will allow you to follow up key activities, like a withdrawal, with a full nurture campaign, meaning your agency can build a rapport with motivated vendors to bring them back to the market and, more importantly, before your competitors get the chance.
The market is always changing, so it’s critical that agents are flexible with their tactics when trying to gain first and second instructions. Not all prospecting tools are built equal, but the best software will help you take advantage of the market’s current pain points to continuously win instructions.
(Bloomberg) — Chinese investors and their creditors are putting up “For Sale” signs on real estate holdings across the globe as the need to raise cash amid a deepening property crisis at home trumps the risks of offloading into a falling market. The prices they get will help finally put hard numbers on just how much trouble the wider industry is in.
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The worldwide slump triggered by borrowing-cost hikes has already wiped more than $1 trillion off office property values alone, Starwood Capital Group Chairman Barry Sternlicht said last week. But the total damage is still unknown because so few assets have been sold, leaving appraisers with little recent data to go on. Completed commercial property deals globally sank to the lowest level in a decade last year, with owners unwilling to sell buildings at steep discounts.
Regulators and the market are nervous that this logjam could be concealing large, unrealized losses, spelling trouble both for banks, who pushed further into bricks and mortar lending during the cheap money era, and asset owners.
New York Community Bancorp touched a 27-year low on Tuesday after slashing its dividend and stockpiling reserves in part because of troubled real estate credit. The European Central Bank is concerned that banks in the region have been too slow to mark down the value of loans and the UK’s Financial Conduct Authority is to review valuations in private markets, including real estate.
Now, a new batch of overseas assets acquired in a decade-long Chinese expansion spree are starting to hit the market as landlords and developers decide they want cash now to shore up domestic operations and pay off debts — even if that means taking a financial hit. Beijing’s crackdown on excessive borrowing has left few developers unscathed, even those once considered major players. A unit of Guangzhou-based China Aoyuan Group Ltd., for example, which is in the middle of a $6 billion debt restructuring plan, sold a plot in Toronto at about a 45% discount to the 2021 purchase price late last year, according to data provider Altus Group.
“With motivated sellers, the market freeze could thaw, improving transparency and price discovery,” said Tolu Alamutu, a credit analyst at Bloomberg Intelligence. “Portfolio valuations may have further to fall.”
Starting to move
With every transaction, the market gets more clarity about the capitalization rate — a measure of the return an investor is willing to do a deal at. That data will then be used by appraisers to value other assets, which could trigger wider impairments. As a consequence, landlords may have to inject more money to cure any loan-to-value breaches or risk having the properties seized by lenders.
While so far there has only been a trickle of Chinese-owned sales in Europe — last year a London office building linked to Shimao Group Holdings Ltd. Chairman Wing Mau Hui sold for about a 15% discount to an earlier sale agreed in 2022 that did not close, according to a person with knowledge of the matter — the volume is starting to grow again.
Just this week, distressed developer Guangzhou R&F Properties Co. agreed to sell its stake in a £1.34 billion ($1.69 billion) property project in London’s Nine Elms district in return for some of its dollar bonds and 10 pence, while an office block in Canary Wharf is selling for 60% less than it sold for in 2017 after it was seized by lenders from a Chinese investor. The sales are part of a rebound in disposals after some developers paused for breath last year while working on restructuring plans.
“Price discovery will improve throughout the year,” Carol Hodgson, head of real estate research for Europe at JPMorgan Asset Management, wrote last month. That’s in part due to “a pick-up in distressed assets coming to market,” she added.
Earlier this month, a luxury development in the heart of Mayfair, an upscale area in west London, collapsed into administration after defaulting on its loans. It’s majority owned by two Chinese investment firms, Citic Capital and Cindat, and the homes will continue to be marketed to potential buyers through the administrators.
Further east in the UK capital, a person with knowledge of the matter sees a housing project planned by distressed Chinese developer Country Garden Holdings Co. drawing bids of less than £100 million. The subsidiary took an impairment charge of £10.3 million in 2022, according to a December filing. A unit of Shanghai-based real estate firm Greenland Holdings Corp., meanwhile, extended a loan for a skyscraper project in east London that technically defaulted last year, a filing shows.
Sales are picking-up outside Europe too, including in Australia. Only a few years ago, ambitious Chinese developers were major players in the local market. Now most have largely stopped buying and have pivoted instead to offloading projects. Notable recent disposals include the sale by Country Garden’s Risland unit of a site on the outskirts of Melbourne for A$250 million ($163 million), according to local media. The company has also recently divested a Sydney development asset for about A$240 million, according to another local media report. “Selling of these partial remaining parcels of land is part of Risland’s approach to portfolio optimization,” Guotao Hu, CEO of Risland Australia said in a statement to Bloomberg, without confirming details of the sales or prices.
Representatives for Shimao, Country Garden, R&F, Greenland and Cindat didn’t immediately offer a comment, while calls to Aoyuan’s headquarters went unanswered. Citic referred all questions to the administrator.
To be sure, China is by no means the only source of potential distress in the commercial real estate market. South Korean investors timed a huge bet on offices badly, and higher interest rates have already caused German and Nordic landlords to sell off properties at large discounts. A wave of loans maturing in the US are also expected to lead to foreclosures by regional banks and sales of the underlying assets. But China is the market where perhaps vendors have the most incentive to sell quickly.
The wider impact of such disposals will be determined by just how seriously the market takes the results, said Peter Papadakos, a real estate analyst at Green Street.
“It is debatable whether valuers will take them fully into account given the sellers are ‘motivated,’” said Papadakos. “In my opinion, they should.”
—With assistance from Jack Sidders, Natalie Wong, Erin Hudson, Emma Dong and Amanda Wang.
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