TECH­NOL­OGY & CHANGE: THE UK PER­SPEC­TIVE

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

Elite Property Manager - - Contents - Peter Knight

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

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.

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

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.

IN MY MIND, PROP­ERTY MAN­AGE­MENT NEEDS TO BE AT THE HEART OF EV­ERY SIN­GLE BUSI­NESS, BE­CAUSE THAT IS WHERE YOU CAN MAIN­TAIN YOUR LONGTERM RE­LA­TION­SHIP WITH THE CUS­TOMER.

good agents will find ways to deal with what­ever mar­ket they find them­selves in.

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