The future of real estate

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Manos Findikakis is CEO & co-founder of the Eview Group, Australia’s first multi-brand real estate network which was established in 2006. A Xero partner and customer, The Eview Group’s unique business model, titled ‘quasi-franchising,’ represents a shift in thinking for the real estate industry. The model allows its members to retain their own boutique identity, whilst being provided with the corporate support often missed when going it alone.

Editor’s note: As we gear up for 2019, we wanted to get your thoughts on what to expect in the year ahead. So we’ve asked some of the most influential voices in accounting, bookkeeping, technology and public policy to weigh in. Today, we hear from real estate expert and Xero customer, Manos Findikakis, who shares the performance predictions that could shape the state of the wider economy in 2019.

Where is real estate headed this year?

2018 was one of the most turbulent years in the real estate market on record (or at least that I have seen in my 15 years in the industry), many questions are being asked as to where we are headed and what the future of real estate is likely to hold.

It’s funny how often a downturn in the market brings out the punters who have been predicting a crash for some time. There’s no denying that the property market on the east coast has been overheated, and the predicted correction was overdue. Property prices reached record levels, as they always have when we are in the seller’s phase of the property cycle. Now, we are in a buyer’s phase.

So, what happened to bring about one of the biggest and fastest downturns on record in the property market, why couldn’t the property boom continue, and what does it mean for 2019 and beyond?

The law of supply and demand

The property market is affected by the law of supply and demand. In 2018, the supply of listed properties for sale has increased, whilst the demand side has decrease – in other words, buyers have all but evaporated. That’s according to us real estate agents! The truth of the matter is that there has been an average drop in property sales volumes of 30% to 35%, and in some niche markets we’ve seen this fall in volume reach over 50% year-on-year. That’s on top of an overall drop of 20% since 2015. The oversupply of properties for sale and the lack of buyers resulted in a drop in property prices which has ranged from 5% right up to 20% in some rare cases. Have we seen the bottom of the fall? Probably not.

The perfect storm

The number one factor that put the brakes on property is the Reserve Bank and APRA (the Australian Prudential Regulation Authority). Since 2015, we’ve seen these two government bodies bring about policies which effectively put a chokehold on credit. Our understanding is that they were concerned about an overheating market and to avoid a major crash, the regulatory bodies put measures in place to make it more difficult to obtain finance, which of course slowed the market and resulted in the fall of property prices.

Added to the credit squeeze, the Royal Commission into Banking Practices has put the microscope over lending practices, putting more pressure and regulation on the market.

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