12 February 2021
Paul Stevens, CEO of Just Property, looks at the current state of the property industry, and the changing face of franchising.
In their Residential Property Index, published in November 2020, Lightstone reported that “national house price inflation was 2.2% at the end of October 2020. Among our major municipalities, the coastal municipalities are generally performing better than those inland and this relationship extends to all coastal and inland properties as shown by their respective indices. The low- and mid-value segments continue to buck the market trend by growing at more than 4% annually while the high and luxury segments are inflating at rates below 2%.”
This sluggishness is echoed in the rental market. In PayProp South Africa’s Q3 2020 Rental Index Johette Smuts, Head of Data and Analytics, reports that “it is not at all surprising to see low rental growth continuing and high levels of arrears (both tenants in arrears and quantum of arrears) due to the impact of national restrictions on tenants’ pockets. If we consider rental price growth and tenant arrears together, it’s clear that while the worst might be over, it will take some time for the market and economy as a whole to recover.”
While house price inflation and rental growth may be low, the volume of residential sales transactions has been a pleasant surprise to many. The Just Property franchise network achieved record sales months following the easing of the initial hard lockdown and ended the year with sales turnover up 27.24% on 2019.
Fortunately, Just Property has long been established as the rental expert in the South African property market and our business model has proven to be extremely resilient, standing us in good stead during a time that other property groups are finding challenging. We opened 10 new franchise offices in 2020 and, from a sales point of view, we are securing more and more opportunities to market developments. Just Property’s strong rentals and sales abilities, paired with our national footprint, mean that we can serve a wide audience and the brand has thrived.
The challenges in the residential sector
Unfortunately, predictions for 2021 are pessimistic for the rental sector and the full, downstream impact of lockdown remains to be seen. Industry data indicates that, generally, 35% of residential tenants are at risk or paying their rent late, in part or not at all. Now, more than ever, players in this sector need to demonstrate value and risk management.
The current economic climate notwithstanding, financial constraints are always a factor; real estate transactions are usually the biggest financial commitments people make, whether they are buying, selling, renting or letting. Long-term affordability is difficult to predict and landlords or their managing agents need to be rigorous in their approach to vetting or pre-qualifying clients. Just Property excels in this area, as evidenced by the brand’s ability to offer insurance products like RENTSECURE at a reduced rate, exclusive to Just Property landlords.
Landlords use deposits to mitigate losses resulting from property damage or absconding tenants. However, this can be a barrier to entry; a deposit equivalent to two months’ rent plus a month’s rent in advance can mean a significant outlay for prospective tenants. Just Property is focused on addressing challenges like this responsibly: our aim is to facilitate ways that bridge any financial gap between landlord and tenant. This is just one of many service areas designed to give our clients peace of mind.
In terms of sales, once South Africa exited the hard lockdown, demand from buyers increased dramatically, in particular in the sub-R1,5 million price bracket. Such properties come onto the market and sell within days of being listed. While we have been in a buyers’ market with property prices averaging very low growth rates, the upswing in demand for homes will create stock shortages. I predict we will see the emergence of a sellers’ market in the second half of 2021 where property prices will once again start to climb.
The imperative of improving customer service
What customers seem to want most right now is respite. Agencies are increasingly under pressure to reduce their fee structures and to build efficiencies into their ways of working. This is where the opportunity lies: agencies that are able to pivot quickly and align with their clients’ wants and needs will be the ones that survive.
Buyers, sellers, landlords and tenants expect more value in the services that are offered to them. For many clients, their property transactions are the largest investments they will ever make. For the person selling, buying, or renting a home, it's far more than a transaction; it is very, very personal. Sadly, service levels in our industry are generally very low: practitioners have to become customer-obsessed.
The customer experience is a key strategic imperative for Just Property. We know who our customer is and what s/he wants at a granular level; we have initiatives in place to deliver on our customer-experience goals. Just Property uses various independent online tools to test sentiment and gain a deep understanding of customer experiences across our network. Using this information, our Head Office team, franchisees and agents adapt our ways of working to better serve our clients.
The changing face of franchising
Franchisors in the real estate industry face risks never previously encountered, such as being jointly named in legal action against their franchisees. Consumers no longer recognise a boundary between franchisor and franchisee. The legal fraternity, too, seems to view the division of accountability as more porous than previously.
As such, we take more responsibility than ever before for facilitating excellent relationships between clients and our franchisees, while still respecting their independence. In this new age of “extended enterprise”, our approach to talent, risk, training and relationships has changed completely.
For property practitioners, maintaining investor confidence will always be a priority and a challenge. Data analytics provides us with an objective way to advise clients. We are therefore restructuring our franchise offering and strengthening our partnerships with service providers who understand and are geared towards this common goal.
The challenges in the prevailing environment have seen some franchising consolidation, with the bigger agencies taking up the smaller ones. Just Property has identified ways to ensure greater efficiency, sustainability and improved ways of working. These draw on the agile innovation that has been a hallmark of our success to date as exemplified in our customer-experience goals, marketing, technology and regulatory focus.
We actively draw on the power of our network to drive inter-franchisee engagement, for example by hosting best-practice webinars where franchisees share challenges and success stories and can learn from each other.
Our Head Office team proactively shares best practices too. They are a conduit for ideas and suggestions that come in from the network of 88 franchise offices and over 560 agents. We proactively and efficiently meet the needs of our network’s franchisees and agents and the brand’s corporate values provide the framework for delivering on this focus: optimism, integrity, excellence, equality, innovation, collaboration, personal development, loyalty and gratitude.
Our newly articulated value proposition provides the end goal: peace of mind. If our clients can say that we give them peace of mind in an otherwise chaotic world, we will know that we have delivered on our value proposition.
Franchising still offers entrepreneurs a “business in a box”, an operating model that has been proven and an infrastructure to get off the ground quickly. Besides the advantages of collaboration, support and a broader range of technological tools, we offer an association with a recognised brand that lends instant credibility and negotiating clout.
For more information on Just Property please visit www.just.property or call (087) 550 2258.
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