Buyers and sellers who hesitate in the weeks and months ahead could end up losing out, according to a leading Auckland auctioneer who has experience of New Zealand’s worst economic downturns.
Ross Foreman, who has called auctions for most of the big real estate companies throughout his career, says he learnt a lot about human behaviour years ago when the panic caused by the 1987 stockmarket crash reverberated around the world.
One of his big teachings is get on with it – don’t put off buying and selling to see what will happen down the track.
Covid-19 is a new type of problem, he concedes, but the lessons from 1987 remain.
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“Look, the bottom line of this, I reckon, is the smart money moves quickly. That’s what we found over that period of time and I talk about that period of time as 1987 to 1992,” he says.
It took five years for the real estate market in New Zealand to come right and that’s a long time to put your life on hold, he says.
“It’s interesting times ahead. We would call this facing a shockwave head on - that’s going to be how we’re going to be able to handle things going forward.”
The stockmarket crash created unprecedented falls in stockmarket values worldwide and panic quickly set in.
The stockmarket crash dominated hewspaper headlines in 1987. Artwork / New Zealand Herald
“The story of that has really shaped my life going forward, and many other lives as well I would imagine, but as an auctioneer you’re at the pointy end of things when it comes down to a decision to be made by a buyer or buyers and you can sense the different behaviours going around.”
“10 days of panic”
Foreman hadn’t long been with Bayleys at the time and it was the early days of auctions for the company.
He says one story from the beginning of the crash illustrates his view of not to sit on your hands but to make a strong decision instead.
“We were 10 days out from what was billed as probably Auckland’s most important auction.”
The LJ Fisher Trust was selling a 38-acre property in Pakuranga which had a big homestead on it. The auction was scheduled for late October but then the stockmarket suddenly crashed.
“We were 10 days out and that was 10 days of panic, I can tell you. What would be the effect of the crash? What would be the effect on this property? We could cancel, we could postpone, we could reschedule - all of this was discussed in very great detail. It’s still clear in my mind after all these years.
“But the trustees’ instructions were to proceed, get on with it, that’s what we need to do, so we did, with heart in mouth really.”
Despite the crash, a number of buyers had expressed interest and on auction day a big crowd gathered in the blue and white marquee on site.
“The opening bid was $3m and we got things underway with that and several minutes later the property sold for $8.1m which was a record and probably still is a record for that particular area. It was huge money in those days.”
The property subsequently went on to be subdivided. Foreman says there are similarities now with back then. “Certainly, I would be saying to my sellers, ‘look, the thing about all this is get going’. I think we learnt that very quickly.”
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A challenge then, as now, is people’s mindsets, he says.
Everyone has an opinion and everyone’s opinion is slightly different, but decisions need to be made on facts.
And while there are different ingredients to this crisis, no one knows how it will play out, he says.
“I think personally the quick movers, and they were usually the ones in pretty strong positions in the community, they moved quickly and people that hung on waiting for things to change, you know, there were five years there.
“A lot of big businesses went broke. We did a huge amount of clearance auctions coming into ’92 and around there so that all shaped our world as real estate people.
“The business sector had a different approach to mum and dad house-owners and unfortunately for a lot of those folk, the house owners, they didn’t really react very quickly but the smart people did and you got a fair few sales going on with quality properties.
“I think that will happen again. What we’ll try to get is people to take action quickly, maybe they will, maybe not.
“We learnt from that don’t quibble on marketing. Be very clear with your marketing approach and be very clear with your strategies on how to talk to people.”
Way forward
Some will be cashed up and ready to buy but not everyone. “The other big group of people will wait for the bargains to appear, so they just hang around and hang around. It’s a difficult time for an agent to figure out why they believe what they believe.
“The bottom line is, though, well-presented, sound property close to world class facilities as we have in Auckland will always find buyers so there’ll be no issue there.”
Building a relationship of trust with jittery property owners and not confusing them is important for agents.
“You have to speak to people from a point of authority and hopefully show them the way forward. At the end of the day they have to make the decision but there will be people sitting on their hands and be penalised for that in the long run. I could almost guarantee that people will be worse off in two years’ time or three years’ time, or heaven knows when we get out of it and get into the new world.”
Foreman recalls a fellow agent who recommended taking a glut of vacant commercial space to auction after the stockmarket crash and went on to list 27 properties, 25 of which sold under the hammer, admittedly at a “sharper” price.
“The point that I make is if you had a closed mind on these things you wouldn’t do anything and nothing would happen.”
He advises people to look to their own suburbs, predicting prices in some areas will stay strong while others will fall.
“There will be casualties and that’s why if people would move quickly they could come out in a much better position. They might not think so on the day but time will tell that they made a good decision.”
Read more: The Crash - New Zealand Herald special in-depth report
