Rent.com.au is shining a light on how Australia’s property management industry has been adapting to the changing working environment throughout the COVID-19 pandemic.
This series will feature key property managers and agency principals across the country in a bid to see precisely how COVID-19 has impacted their business, the strategic changes made to operate in a new environment and the positive change that has come about as a result.
This week, we talk to Simon Fung, Licensed Estate Agent, Department Manager at Victorian-based Woodards Real Estate.
Q: Since the start of COVID-19, what are three significant changes you made to your business?
Woodards was well along the path to full digital systems when COVID-19 hit. Our paperless transactions, sign on glass systems and remote operations had been in place for years, however there were still a few gaps in our tech stack that proved to be limitations when we were forced into full lockdown.
Being nimble in business is difficult at the best of times, so when we had to make some of our final transitions with days of notice, they turned out to be bigger changes than we had anticipated.
Whilst we are a people-focused business and deliver dozens of training sessions to our teams every year, the COVID-19 crisis has increased the need for training and communication two-fold.
The ever-shifting sands of legislation has us updating and training the team once or even twice a week to keep them fully abreast of developments and in a position to offer the best advice to our clients.
Q: Thinking about rental pricing and demand, what impact/trends have you experienced?
Like most other agents in Melbourne, we have seen negative pressure on rental prices in all of our key markets. With our portfolios centred around Melbourne’s CBD, the demand from prospective tenants has fallen off a cliff, whilst the supply of rental properties has more than doubled. This has presented a very complex market situation for our landlords seeking tenants to fill their properties.
The market is significantly segmented. Apartments are oversupplied, while free-standing or semi-detached dwellings are receiving moderate levels of enquiry. This has led to some clients being forced to reduce prices to attract the few tenants who are seeking to move. Others have been able to find replacement tenants quickly and at similar prices that they were achieving.
Now, more than ever, agents need to find solutions to their client’s problems. There are tenants who need to move, even in lockdown. There are landlords who desperately need their properties leased to avoid financial hardship. Suggestion for landlords: Go with an agent who can deliver solutions like 3D tour technology and contactless transactions for a higher chance of success.
Q: What is your office’s process for managing rent reduction requests?
What we are seeing suggests that the best approach to manage rent reduction requests is structure. Break the process down and assign portions based on who is the best to manage each step.
We have our property managers dealing with the tenant’s requests. They collect data and encourage tenants to complete our hardship form. The PM then collates and summarises the information into a standard format before passing on to a team leader to negotiate the request with the owner directly.
These negotiations have proven to be incredibly difficult and our team leaders have been specifically trained in how best to approach this often-sensitive matter. Should the request not reach a conclusion easily, then the department head or director take over and manage the process through mediation and VCAT if necessary. We found that this highest and best use approach ensures a good result for the owner, the tenants and the business.
Q: What aspect of your team’s property management procedures is most impacted by COVID-19?
Our ability to allow the public to view rental properties has been the biggest challenge. As Melbourne has lurched in and out of various restrictions, we have seen the inspection landscape go from hard, to very difficult, to non-functional.
In any given month our office attracts over 4,000 enquiries from prospective tenants with over a quarter of them physically inspecting at least one property.
The move from the open house inspection format to a private inspection format has made it incredibly challenging to service the needs of our market. The logistics of conducting 1,000+ private inspections per month is mind-boggling and simply not catered for in the current fee structures that our industry charges.
Q: What major COVID-19 changes will you continue with as restrictions are eased, and why?
Woodards will continue to provide our suite of contactless transactions platforms and processes post-COVID-19, which has always been a major part of our plan to deliver a seamless customer journey. The truth is that our customers have been demanding these user-friendly processes for years.
Our industry has been quite resistant to adopt customer-friendly transactions over the past 5-10 years, whilst large industries that people interact with every day such as transport, home food delivery and banks have all changed the way we think about transparent and seamless transactions.
Hundreds of agents continue to use outdated processes to serve their customers; many Melbourne agents still ask new tenants to provide a bank cheque for their bond!
Q: What are the benefits you have found from the use of virtual tours?
We use Matterport 3D. We commenced offering 3D virtual tours for rental properties in 2015 and have never looked back. All the major property listing platforms report the heaviest usage from prospective tenants between 6pm and 10pm, which is when most agencies are closed.
This means that prospects need as much self-serve information available as possible because they cannot reach out to the agent when they do have the time to search for their next home.
If a picture can tell a thousand words, 3D tours can tell 100,000 words. Typical engagement times for 3D tours exceed 2.5 minutes, whilst a normal rental advertisement is lucky to hold a prospect’s attention for 30 seconds!
The built-in floor plan measurement tool allows 3D tour users to measure any part of a property live, and from their couch. This means they can see if their fridge fits the cavity, or how their couch will work in the living room. This saves countless hours of inspecting properties that ultimately don’t suit their needs. If you ask me, 3D technology is the future. Physical inspections will only serve to confirm a tenant’s interest to move forward in the future.
Q: Are you planning to continue its use after lockdown eases, and under what circumstances?
This is an interesting question. We anticipate some continuing resistance from tenants to allow access for physical routine inspections even after restrictions are eased. Routine inspections are viewed as an inconvenience by the average tenant; therefore, some may rely on health concerns as a reason to limit physical inspections by agents in the future.
The reality is that whilst remote inspection tools are easy to use for both tenant and agent, nothing can substitute for a physical inspection from a veteran property manager. Remote inspections rely on the tenant to take photos and make comments about the condition of a property, which they typically do well. However, the other primary purpose of a routine inspection is to assess the manner in which a tenant is treating the rental premises. A tenant cannot assess their own performance objectively and therefore this commentary must come from the agent, who is viewing the property via photos the tenant chose to take!
Our landlord clients have been pleased that we have been able to deliver a solution, but in the long term, I doubt that we’ll see this “self-inspect” process to continue unless it is part of a low fee management solution.
Q: What things has your office/staff done to help tenants during lockdown?
The Woodards Foundation has been a fundamental part of our business for many years now. Each Woodards office makes a donation to the foundation for every sale or lease we transact and this has provided the Foundation with a substantial war chest to help the community during these challenging times.
The foundation has fought homelessness head-on for many years now and works closely with Vinnies and McAuley Community Services for Women to do so. We have connected many tenants in need with these services over the past months and continue to provide funding to make a difference to people’s lives.
Q: With the Victorian government having announced the extension of the COVID rental eviction moratorium, what do you see as the major impact for your business, and your landlords?
The impacts are manyfold on our landlords and our business,
- Increased vacancy rates;
- Reduced rents;
- Negative price pressure on rental yields; and
- Increased arrears rates will all have an impact on our landlord’s bottom lines.
The huge volumes of time going into advising our clients, negotiating rental reductions, attending mediations and VCAT hearings will only continue under the extension of the COVID-19 Omnibus (Emergency Measures) Bill 2020 to 31 March 2021.
We continue to believe that the state government needs to do more to support both landlords and agents in dealing with these unprecedented times. Tenants, it appears, have been provided with the vast majority of support mechanisms whilst residential landlords and agents have been left to fend for themselves.
The industry has been crying out for some genuine rules to negotiate rent reductions but our calls have gone unanswered. The recent REIV call for a strike on all negotiations until some support is received clearly shows what its members are feeling.
Even the land tax reduction program aimed to support landlords is a misfire in my view. Many of our landlords pay just a few hundred dollars in land tax each year. How does a 25% reduction in a $400 land tax charge support a landlord who is forced to reduce an average rent of $400/week by 30% for 6 months?
How has your team managed during COVID-19? If you would like to be featured in our series, email email@example.com