Peter Knight, Chairman of The Property Academy in the United Kingdom, is one of the leading voices driving innovation in the real estate industry in both the UK and Europe. We caught up with him during his recent visit to Australia and asked him how real estate property managers and leasing agents in Britain are dealing with disruption – and what Australian agents can learn from the British example.
Can you give us some insight into the differences between property management in the UK and Australia?
There are way more similarities than differences; we’re more similar to Australia than we are to the US. In the UK we offer a three-tier service, starting with ‘let only’, meaning we will let the property but not manage it. The next level of service is rental collection and processing of payments, and then there is what you traditionally call property management. So in some cases the agent will find a tenant but have nothing to do with managing the property. This means that the rental collection is separate from the property management – so if there’s anything wrong, like a broken shower, the tenant contacts the landlord directly to sort it out.
The Australian system has a lot going for it because you can just ‘sell property management’. For us it’s all a bundle – let, then sell rental collection, then full property management. About 50 per cent of properties are managed like this in the UK.
The other difference is in fees – we charge a lot more than the norm in Australia. For let only we charge 10 per cent; when there’s management we charge 15 per cent.
Purplebricks, a UK based disruptor, has just arrived in Australia. What has been the impact to date?
The jury is still out regarding the impact of non-traditional real estate models like Purplebricks. In some locations their impact has been marginal; in other areas more considerable. If they took a one per cent market share in every territory they will build a phenomenal business. In a handful of locations they have already achieved a 10 per cent market share, which is significant.
I think you have to be careful when a completely new business model comes along. I see the internet-only model taking around 10 per cent in the middle and lower tier. Top end – I’m not sure they are going to get the same traction. I think they’ll take it from the bigger, more corporate-style real estate firms; smaller, better independent firms have nothing to worry about – except those that claim to offer a premium personal service and don’t are probably in trouble.
In the absence of clear differentiation, people will buy on price. If the agents genuinely offer exceptional service then they’ll be able to charge a premium and still succeed.
I’ve had personal experience of a very large agency in the UK taking 48 hours to provide information on pricing. Those using new technology platforms can come back in 48 minutes, or even 4.8 seconds. Who’s going to win the battle for hearts and minds? Traditional companies need to deliver.
What is happening in the property sector at the moment as a result of ‘Brexit’?
‘Every market makes a market’ – it’s one of my favourite expressions. If you’re going to be a good agent, it’s about knowing the market you are in and when the next market is coming, and adapting to that. I think most thought the vote would be to remain in the European Union. As to what impact it’s going to have, that’s debatable.
In certain areas transaction numbers have fallen. There’s a lack of confidence: people sitting on the fence and not knowing which way to go. So for real estate businesses, property management has actually benefitted in the short term from the leave vote because of this uncertainty.
I think that market fundamentals remain the same. Central London prices were sky high – we’re going to have to see whether that’s affected by Brexit – but I think that using Brexit as an excuse for a market correction or the wrong business model is something that will happen in any case. Property has performed well over a longer term period like ten, twenty, thirty years. People feel comfortable about that. I remain optimistic.
Real estate is kind of driven by the four Ds: death, divorce, debt and departure. Those four things will continue, right? Again, the good agents will find ways to deal with whatever market they find themselves in.
You spoke about some really great ideas from firms in the UK at ARPM; are there any in particular that stand out for you?
The concierge idea is a great one, for both sales and lettings. For years the only time an agent has contacted the client is when they’re motivated by self-interest. At other times the client just sits in a database. What companies like Portico have done with owner-occupiers is to say ‘actually we can help people who are property owners because our property management operation has access to contractors’. That’s attractive to property owners.
I’ve got a broken window at home that I know I’m going to get nagged about until I do something. If I could call up my agent and say, ‘Can you fix it for me?’ that changes the relationship dynamic. It also gives the agents a genuine excuse to call the client up to say, ‘Hi, it’s Steve from the XYZ Company. Just wondered how you’re doing with your property? If you need some help, if your fence falls down, or you’ve got a leaky shower, or a kookaburra on the roof – whatever it might be, we can help you out.’
If you can use that as a reason for contact, it maintains an ongoing relationship, and you can earn. You have to be transparent and disclose the fact that you’re making a commission on the fees, but you could earn on the back of the contractors. You can secure the contractors because you’re providing them more work. This is a wheel that just goes round.
At ARPM you also said property management should be number one in a business.
Yes, in my mind, property management needs to be at the heart of every single business, because that is where you can maintain your long-term relationship with the customer.
Property management is what’s best for the agent because the property management business is where the true asset value is. A sales-only business in the UK has really limited value. A mixed business that’s got property management and sales has value, and the key is the property management piece. That’s where the real value lies because it’s regular, it’s consistent.
Typically in the UK, 10 per cent of landlords will sell their properties annually, but ninety per cent don’t. If you provided a good service and your landlord is happy, the seller is happy, you’ve got a ninety per cent chance you’re going to hold onto that. Effectively that’s a 10-year relationship. That’s significant. Your fees might be lower than, say, a sales agent’s fees, but multiply that over 10 years and the fact that it’s guaranteed and it becomes very attractive.
A lot of agents just see the big-dollar cheque from a seller and that’s what gets them excited. The smart agents, the really smart ones, get that solid base of income coming in. When your cash flows are looked after, you’re covering all your overheads, then you can go out and hunt the big ones. Have all the little ones in place first. That’s where the security comes from.
But you’ve also got all these different areas where the agent should be, or could be, at the centre. Some agents do refinancing, but that might include remodelling, upgrading, expanding or maintenance. The message to all our clients is that some people are thinking about property from different financial perspectives. Start looking at your database, and when you’re slicing and dicing try to look at it as a single database that you can market to and work with. Then find legitimate reasons to call people, as I’ve already mentioned.
I’m a tenant at the moment who is looking to buy a property. I’ve also got a property that I’d sell if the right person came along, and I’m a landlord, so basically I’m sitting across a whole lot of markets. I get treated differently at the agency office depending on how I turn up, which is ridiculous.
Do you think that the relationship between tenants and agents is changing?
I think that if agents want to move into being trusted advisors it has to, and it has to become more proactive. Again technology is playing a role. A tenant might be going on Facebook and saying, ‘These agents have treated me badly,’ for whatever reason. One of the key things I’m encouraging our clients to do is to think about how they can remove the more common obstacles, complaints and issues, and then reinvest that time in proactive relationship building, rather than reactive.
In my opinion, for agents to succeed they need to move from being a transactional agent to becoming a trusted advisor.
If I do that and use new technology to enable a time dividend I can then be adding value to our property management relationship. The current scenario, where ninety per cent of our time spent together, agent and client, is spent in a reactive way on problems and issues, doesn’t foster a highly beneficial, long-term relationship.
It’s a mindset change from transactional to trusted. That’s what we’re working on with our clients, it’s paying dividends, and technology is a big part of that.
