Whilst we do not expect the market to crash, it will be increasingly difficult to make new sales.
People will, of course, purchase new property, but the property on offer will need to be better tailored for, and marketed to them.
The development industry has become quite sloppy in recent times. Sales down south (Victoria largely) have been too easy and the attention to service/detail limited at best.
Things are now changing. Melbourne is past its peak and is at 1 o’clock on the property clock. The Victorian market is now oversupplied with both new and existing stock; confidence is low and there are fewer jobs being created today than in the recent past.
End prices are also high and somewhat unaffordable. Rental growth, whilst still positive, is now sluggish and is likely to remain so, with the city having the highest vacancy rate of any Australian capital, at over 4%.
Brisbane, my home town, in contrast is at the bottom of the cycle and is about to experience a recovery. As noted above, Brisbane was in the same position as Melbourne was in mid-2007.
It has taken four years – last year’s flood did delay Brisbane’s upturn by about a year – for Brisbane to start showing signs of improvement. It could take Melbourne this long too – at best two to three years – to recover. History – as well as Mr Twain – supports our claim.
There are several things that the development community can do to improve sales.
- Make their projects look different. Buyers tell us that they are all too generic.
- Provide a lot more detail about future development, in their project itself and in the local area. Detail is expected regarding the citing of homes and such things as outside entertainment areas, bedrooms and air-conditioning. In a perfect world, developers would be best to sell built stock.
- Don’t hide anything from the public, including full price lists and dwelling designs. They know much more about the project and the competition than sales people give them credit for.
- Implement a loyalty system. Repeat customers should be treated as such.
- Match sales staff (demographic, experience) and the décor, interiors and furnishings (the actual product design of course) to the demographic. A 25-year old single selling to a middle-aged couple doesn’t work too well.
- Make much more of your brand and development pedigree. Buyers want to know more about who you are.
- Relax at the launch. Don’t put too much pressure on potential buyers then…the time to close is much later in the sales process.
- Follow-up constantly and not just before settlement. Buyers want to be informed.
On a final note – people buy something new because it should be less hassle than buying second-hand and fixing it up. Developers need to ensure that the buying experience is hassle-free too.
New developments meet today’s strict environmental compliances, which help save buyers money and also give them peace of mind when it comes to resale.
For investors, buying something new often provides a better return. This is due to the attractive depreciation allowances that come with buying new over old – something that too few investors understand – and that new property, on average, has 15% to 20% more value in it than an older property in the same area. Think about the true cost of a new kitchen, bathrooms, carpeting, painting, landscaping and again all the ESD stuff.