KEY POINTS:
The market you're in is heading south. And the market you want to join has just been buffeted by one of its toughest months in years.
On the face of it, surely a good argument for pulling back and sitting tight for a while. But not for upstart
fixed-fee real estate newcomer The Joneses, which says its plans for listing on the alternative exchange of the New Zealand Stock Exchange are proceeding apace.
While sales numbers are falling, new stats released this week show that new building consents are also going through the floor, falling to their lowest level in six years.
Council authorisations were given to build 25,544 new houses last year, the lowest number since 2002 and nearly 6000 houses down on the peak of 2004.
Chris Taylor, head of the agency which charges a fixed fee rather than a commission structure, says a slowing market is good for The Joneses.
Currently in Auckland, Wellington, Christchurch and Dunedin, The Joneses is expected to have a market capitalisaton of about $17 million when it lists later this month.
Founding shareholders in the business hold 60 per cent of the firm and the remaining 40 per cent of the company was held by private investors.
The Joneses' fixed fee is, "less than half" the average commission paid to other real estate agents, Taylor says.
"It's all on track and going ahead," says Taylor about his plans to debut on the stock exchange. "Yes, the property market has softened over the past year in terms of volume and value. That's good for The Joneses, because the market is becoming more akin to a buyer's market."
This means people selling their home are becoming "a lot more discerning" about the value for money they get when selling.
"What we're finding is that people are no longer getting that instant rampant value growth in their houses when they're coming to sell them. They're getting more discerning. That's lead to a lot of growth for us."
Taylor says he expects the property market to be "relatively flat" through this year.
"I don't think you'll find too many who will be taking a a punt the other way."
The Joneses operation is still small, and has huge growth opportunity. As prices start to tighten, the amount of money sellers pay to real estate agents will come under the microscope more.
"It hasn't been in those recent years, where they [home owners] were getting massive capital growth.
"People were getting $80,000 to $100,000 capital growth on a half-million-dollar home.
"It blinded people to the cost, because they didn't physically write a cheque.
"If they had done, they would have questioned it," says Taylor.
"We feel it will change the market forever. There will be another up-cycle in the property market.
"I'm not going to try and pick when that might be, but there will be - there has been for the past 100 years - and when that comes, I don't think people are going to be willingly forking out 4 per cent commissions."
Taylor says The Joneses has already changed the market and should continue to enjoy a "first mover advantage" over rivals which may adopt the same methods.
"There will be somewhere in the vicinity of 100,000 homes sold in New Zealand every year. It's all just about getting a share of that, because our fees are flat, regardless."
The small size of The Joneses meant the company was "holding off" taking new listings in some areas.
"We could have taken more listings over the past couple of months, but we weren't prepared to because we couldn't offer the kind of service we wanted," says Taylor.
When it comes to the tough times on world stock markets this year, Taylor says it's not a problem, especially since there's no big marketing push to raise money from the public.
"We don't see that as directly affecting us," says Taylor. "We are not the same as your typical IPO [Initial Public Offering]. This is not an IPO. We are not aiming at rasing capital from the public."
The Joneses is making its debut on the NZX's alternative exchange for smaller companies, by way of a "reverse" or "backdoor" listing.
Currently owned by 25 shareholders, Joneses will be "backed into" RLV - a holding company listed on the NZAX. Around 1600 RLV shareholders are being offered the opportunity to subscribe for up to $5000 of shares in Joneses.
"The success of the listing is not dependent on prevailing market conditions," says Taylor.
"This business and its fundamentals and its growth opportunities haven't changed. Accordingly, it's coming on to the market at what we believe is a very fair and reasonable price.
"Unlike most IPOs, which are mostly aimed at raising capital from the public, our primary purpose in listing is to give us a structure that will enable us, as a company, to continue to transform the way real estate is sold in New Zealand in the years to come."
A share placement of up to $4m is also being sold through brokers to private investors.
Shareholders in RLV will meet to approve the deal on February 23.
Taylor says that trading in its shares on the NZAX should start before the end of the month.
Story at a glance
* The Joneses announced last month it had entered into an agreement with RLV No.3 Limited (RLV) that would see RLV acquire all the shares in TJRE Holdings Limited (TJRE Holdings), the holding company for The Joneses residential real estate business, for $13.75 million. Following this, the directors of RLV would resign and be replaced by representatives to be nominated by TJRE Holdings.
* As a part of a capital raise before the listing, RLV shareholders can subscribe for up to $5000 shares each, at an issue price of 2.25 cents each. A further placement is being made via brokers to private investors prior to the listing.
* The Joneses says it is has been "experiencing high growth as the market slows and we expect this to continue as our proposition becomes even more widely known".
