Charter Keck Cramer and Precisely Property Podcast respectfully acknowledge the traditional custodians of country throughout Australia. We pay our respects to their elders past, present and emerging.
Richard: Hello, and welcome to another episode of Precisely Property. I’m your host, Richard Temlett, and I’m excited to have you with us today. If you’re here for the first time, thank you for joining us. I encourage you to listen to our previous episodes where we discuss all things property with a focus on dynamic discussions with industry leaders. In this episode, we’re speaking with Anne Flaherty of REA Group. So, sit back, relax, let’s get started.
In this episode, I’ll be speaking with Anne Flaherty of REA Group. Anne is an economist at REA Group, and she examines the macroeconomic and demographic trends that shape Australia’s residential and commercial property markets and has worked in property economics for a decade and regularly provides market commentary across media as well as writing a fortnightly column in The Australian.
Welcome, Anne.
Anne: Thank you for having me.
Richard: Thank you for coming on the show. What I typically like to do and will do it obviously for this one is just set the background and set the scene for the listeners. But in terms of the background, I do like to talk about the connections that we have. I’m incredibly grateful to have met you. It was probably a few years ago now, I think it was JLL that introduced us. We were at a similar event and they introduced you and I, and we both love our data, and we work in a pretty similar space. And so, since then, we’ve been catching up on a quarterly basis, if I’m correct.
We share our datasets, we share our insights, and I just wanted to say, first of all, I really value that relationship, but, also, thank you so much for coming on the show. I read your columns in The Australian and, certainly, for our audience, if you’re not aware of who Anne is, I’d encourage you to follow her. I think she’s, and as you’re here today, she’s got some fantastic insights, not just on residential housing, but also on commercial, and it’s across Australia. So, thank you, Anne, and an I can’t wait to get into our discussion today.
In terms of the agenda, I’d like you, if it’s alright with yourself, to describe a little bit about your background. I think there’s a number of listeners who would look up to you and basically go, well, I’d like to do, or follow a similar path to yourself. And so giving them a bit of inspiration, I think, would be great. The meat and bones for the session today will basically be byer insights. I think that’s a really important topic, especially as it applies to Victoria, where buyer sentiment is probably the weakest I’ve certainly seen, and I’m keen to get your views. And then I’m also keen to talk to you a little bit more about tips for developers and sales agents in the current market for the new stock.
Before we get into that though, setting the scene for the listeners, again, which is what I like to do, Charter Keck Cramer has just completed our State of the Apartment Market reports for all the Australian capital cities. I’d encourage you to jump on our website. You can download that report if that’s of interest. Why I raised that is because some of the people on the ground that I spoke to were both the developers and the sales agents. And particularly in Victoria, it seems to be some of the hardest conditions for poor sales agents that I’ve ever seen, and I can see it in the inquiries and the leads and the conversions.
But speaking to a number of them, they are under significant stress. So, there’s a shout out to them to encourage them to hang in there. It is really, really difficult right now. It’s more positive than some of the other states, and no doubt we’ll get into that. But I’m keen to use today’s session as an education piece on the buyer journey, what’s happening, what product types are in demand or not in demand, but also to educate the developer industry.
Please try not to give the sales agents too hard of a time. I appreciate you’re paying them, obviously, for their services. But when I’m looking at these stats, I think it would be incredibly difficult to be a sales agent right now, and it seems to be across the board, particularly Victoria, those stresses that are happening. Why I got Anne on the show is because REA, and she’s kindly behind the scenes, has shown me some of the data that we have on the customer journey and the buyer insights. And I do like using data and evidence to have forward looking views of the market.
So, I’d now share that view with Anne and given that, Anne, you’re at the coalface, I’m keen to talk to you a little bit more about that. So, let’s jump in. The first, if you could please just provide everyone with a bit of a background and your experience and how you got into your role.
Anne: Right. Well, I have been doing this for quite a while now by, education.
I’m an economist and I studied econometrics. I can’t even say it, but I’ve always loved property. And for about 14 years now, I’ve been in and around the property industry. I absolutely love what I do, just like you. At REA, I’ve been around for around coming up to four years. Before that I was at CBRE. I worked in both the commercial and the residential space there. One of the fascinating things about REA, of course, is that we have a fantastic view of the market because we can see what people are looking for, what kinds of products they’re looking for, the incredible changes we’ve seen over the past few years. So, it’s been an absolutely fascinating time to be doing the kind of work that we are doing.
Richard: Well, first of all, it was about six months ago where I learned what econometrics was. Someone mentioned it to me, and I thought it was a made-up degree. When I looked at it, that’s a very impressive degree to have. I thought it was a basic economics degree, which is not really basic. It’s still a very good degree to have the economics, but your econometrics. That’s a fantastic and a very valuable degree to have.
I did know your background, but it’s good that the listeners are aware of it because you’ve worked across different sectors of the market and also for different companies. And I know how well-regarded REA is. And, certainly, I suspect when we start talking about some of these data points that our listeners will get insights into the rich datasets that you guys have. For today, we’re going to talk about what’s happening across Australia with buyer demand and buyer journey, but I would like to also focus in on Victoria, given there is where the greatest risk. But I also actually feel opportunity lies right now, and I’d like to educate our listeners on what’s occurring on the ground, but also what may happen over the next 12 months.
So, let’s jump into it. In terms of the customer insights, obviously, you’d like to be data led. We can’t just be data led. Of course, we need to speak to as many people as possible. But at an Australia wide level, and I’ll be led by you in terms of what cities you’d like to start with, what are you actually seeing in the data when it comes to prices, product types, locations?
Anne: Well, I think now is absolutely fascinating in that I can’t really remember a time when we were seeing such wide differences between the markets around the country. So, what we’re seeing with prices matches what we’re seeing with buyer demand on the website. For example, markets like Perth, Adelaide and Brisbane, we’re seeing enormous amounts of positivity. We’re still seeing very strong demand. In terms of price growth, those three markets have experienced double digit growth.
Then, of course, if we look at a market like Melbourne, we haven’t really seen prices move over the past year. They’ve come down slightly. And what we’re seeing in Melbourne, which is quite different to a lot of other markets, is that stock is just taking a really long time to move. If we look at listings, new listings are up year on year. But if we look at total listings, which includes those properties that are, you know, spending longer on the market, taking longer to move, they’re up about 20% year on year.
Richard: I appreciate there is an assumed level of knowledge with our listeners, but some of the feedback, and again, I welcome the feedback, I do need to define some of the terms. The two ones I’m keen to unpack a little bit more, the first one, when you say listings, what does that actually mean?
Anne: Properties that are being listed for sale on the realestate.com platform.
Richard: Okay. And then demand, obviously, there’s different forms of demand. So, on your platform, when the property is listed, what are you defining as demand?
Anne: So, there’s different ways that we can look at it. One useful metric is inquiries per listing, but we also have ways of gauging basically the intent of someone visiting the website. For example, if someone is repeatedly looking at properties in a given suburb, if they’re spending a lot of time looking at photos on a specific property, that’s a signal to us that they are a highly engaged buyer and they would feed into our demand metrics.
Richard: Okay. Let’s start with the different cities. We can break it down as our listeners well know by now, there’s different housing typologies in the different submarkets. Once we pick a city, let’s start more positively. Let’s start at Perth. What’s happening in Perth across apartments or townhouses or house and land?
Anne: Well, what we’re seeing is that stock is moving very, very quickly. Demand is well in excess of supply at this point. And what we’re seeing is that in a lot of cases, the speed at which properties are selling is at record speeds, mining boom levels. We’re seeing properties in some suburbs, the median sale time has now hit one week.
Richard: Do you have any idea… I mean that’s incredibly quick. Do you know what a more balanced market is? Is there a rule of thumb that you use? Because, I mean, one week, obviously, that’s incredible.
Anne: Yeah. So, it actually varies very significantly by the market. A few years ago in Perth, for example, it was taking around five weeks for a property to sell. We would think more in the 3-5 week range, typically.
Richard: Okay. So, you’ve got WA. And is there any particular product or bedroom type that is most or least popular?
Anne: Well, what we’re seeing, and we’re seeing the same thing across a lot of the states, is that what people are looking for when it comes to established homes is somewhat different to what they’re looking for when it comes to new homes. Which is surprising to me, but it’s very interesting to see. What we’re seeing is there’s actually very strong demand when it comes to units for one-bedders relative to supply.
Richard: Interesting.
Anne: Which was a surprise to me in the established market. Inquiries for one-bedders are typically less than 10% of the total. They’re now sitting at about one third for the new apartment market.
Richard: Wow. Okay.
Anne: In Perth, I think the rental crisis could be a factor here. Rents are second only to Sydney in Perth, second highest in the country. And I think that some renters might be saying, you know what, I might actually be better paying a mortgage on a more affordable property rather than paying rent at this level.
Richard: I wonder also with Perth, I agree with you, I think that there’s very strong demand. We both look at the stats for interstate migration, also overseas migration. With the industries that employ a lot of people there, I suspect that a lot of the people there are quite transient and maybe a one-bedroom apartment would suit their needs. If there are single people coming over the mining boom, for example, that’s really interesting because in some of the other states we’re seeing, and I suppose even in Perth from a feasibility perspective, it’s quite difficult to feasibly deliver one-bedroom stock. So, you’ve got that mismatch between what people are wanting and what’s actually being delivered. That’s really interesting.
Anne: Yeah. That’s exactly right. And as you said, the feasibility comes into play here, and we have actually seen the supply of one-bedroom apartments, smaller apartments, decrease over the past few years.
Richard: Okay. Let’s jump into both Brisbane and the Gold Coast, or I suppose Southeast Queensland. What’s happening there with buyer demand? How buoyant is it or is it quite stagnant?
Anne: I wouldn’t call it stagnant. I think that the markets there are doing very well, and I think a lot of the new development we’re seeing is really targeting that downsizer market. So, we are seeing a lot of more highly priced apartment stock for sale across Brisbane and, in particular, a lot of those sort of more lifestyle regions. So, the Gold Coast, the Sunshine Coast, those are often being targeted by people moving north from New South Wales, from Victoria.
Richard: Do you track where they’ve actually come from?
Anne: We can see where people are located when they’re doing their searches.
Richard: Sure.
Anne: But, of course, if they’ve already located to a particular area, then we wouldn’t pick that up. We can also look at trends that the ABS give us in terms of interstate migration. And, of course, we had a few very strong years of interstate migration into Queensland during COVID, and it’s still quite strong, though it has come back.
Richard: Well, certainly, when I’ve looked at the apartment market, the new apartment market in Southeast Queensland, there seems to be a lot more pricing elasticity in that higher end downsizer or right size of product as you’ve mentioned, and there still seems to be very strong sales there. It is, however, quite different in the more investor grade segment of the market. I do think that incentives need to be reintroduced to stimulate new supply to get that segment of the market going. I’m interested in your views on Adelaide. Where do you think Adelaide is, how is Adelaide going?
Anne: So, I do have some questions around the performance of Adelaide’s property market. On some levels, I’m a bit surprised that Adelaide is still experiencing such strong price growth. Obviously, demand is exceeding supply in that market, but if we look at the long-run history of Adelaide’s property market, things don’t move that rapidly in Adelaide typically, but what we’ve seen over the past few years is a rapid escalation in prices.
Somewhat I think this has been driven by investors, sometimes from Victoria, who are looking to get into a more affordable state, a place with fewer taxes than Victoria. But I do wonder if we look at net interstate migration, historically that has been negative in Adelaide. And now we had a few years during the pandemic when that switched, and more people were moving into the state. That’s now reversed and we’re seeing that negative net interstate migration again. And given the size of Adelaide’s market, to me, it is strange that we’re seeing Adelaide actually forecast to overtake Melbourne for property prices.
Richard: I still have my parents who live in Adelaide. I spent a few years in Adelaide. I’ve got lots of friends in Adelaide. I’m absolutely astounded, and they pretty much laugh at me going, “what on earth is going on with Melbourne? Is Adelaide overpriced or is Melbourne undervalued?”
Which I suppose is a good segue. Let’s talk about Melbourne. That is always, right now, the white elephant in the room because something is very wrong, or something is occurring in Melbourne where Melbourne’s median house price is actually lower than Perth and Adelaide now. What are you seeing with Melbourne? What’s happening, with listings, with buyer demand, with sentiment?
Anne: Well, if we look at the way things are right now, there’s no question that Melbourne is in a very difficult situation, but I’m actually very optimistic about Melbourne over the longer term. What we’re seeing in Melbourne is that we have very strong population growth again, but I think that a lot of that negative sentiment from the pandemic is still lingering and there’s no question that the high property taxes that we’re seeing in Melbourne are certainly leading a lot of investors to sell off. In our most recent stats around close to 40% of the sales that we were seeing in Melbourne were by property investors, which is above what we’re seeing in the other states. Now, what this means is that the outlook for the rental market is not good. With more investors selling off, we’re going to see rents rise over the medium term.
It hasn’t quite fed into rents yet, but it’s certainly going to head that way. And I think often when we look at people who are looking to buy a new home, if we think about migration, people are typically renters for around the first five or so years when they move to a city before they become buyers. So I think in around five years’ time, we’re going to have a whole lot of people who are looking to buy their first home, add to that population growth. And I think the fact that we’re seeing all of these disincentives to invest in Melbourne, historically, we have been relatively better than the other cities at delivering new supply. But I think with all of these disincentives, that’s very likely to change.
Richard: That’s very concerning, although it’s not surprising because I do read a lot of your work. And the next question can be on student caps. I saw you put out an insight, which I thoroughly enjoyed, and we can put a link to it. What are your views on student caps and particularly the role of students in Melbourne?
Anne: Well, I think that students have historically had a really important role in Melbourne. They are fantastic for our economy. You know, our number plates say it, we are the education state. We’ve got several world class universities. And I think that at the moment, actually, the student caps are probably going to be more problematic for our city than a lot of others. But at the same time, I think, as I wrote in my piece, the student caps actually bring us more into line with historical levels of international students. So, I wouldn’t be too concerned.
Richard: Okay.
Anne: And I think realistically, given the rental crisis, the huge growth that we’ve seen in our population, it’s not sustainable given the way that the supply of housing is moving.
Richard: Well, thank you for that. I have had a couple of discussions with some of the ASX listed developers who do a lot of Build to Sell apartments, particularly in the Docklands. And they’ve asked me for my views, and they are quite concerned with student caps. And we had the discussion, but I thought about it and my views actually mirror yours in the sense that I think the caps are proposed to be about 270,000 students. We had about 325,000 or so last year. Pre pandemic, it was around about 278,000, if I’m quoting your analysis. And that’s important to keep in mind because it’s actually not as dramatic as perhaps some of the Universities would be saying.
That being said, the government must not lose sight of education. Again, going back to your article, I believe it’s our fourth largest export, so it’s absolutely critical. And I think it worries me about the message we’re sending overseas because I think the students could be, quite correctly, quite fickle to turn around and go, well, maybe Australia doesn’t want us. And that’s an absolute disaster because we need those students, especially to revitalise the Melbourne CBD. I think that they work certain jobs, whilst they’re at uni.
They certainly occupy apartments or PBSA, which is student accommodation. I think they’re absolutely critical for our city. And you’re right, I’ve never played to say it. So, it’s interesting. I think it’ll be an election issue, and we’ve got an election either later this year or early next year and, definitely, that will be on the agenda.
Let’s shift gear, if that’s alright with you. Can we talk about, basically, the buyer journey? I’m keen for you to please educate our audience – what is the buyer journey, what are the various phases or steps, how have they changed pre pandemic versus now? I think this is really important and the reason being that when I do a lot of analysis for developers, they keep going, well, we need to get a certain number of sales per month to basically support our projects, to support the financial viability of our projects. And right now, there’s that mismatch between what they are hoping to sell and what’s actually happening on the ground. And so, I’m keen to learn a little bit more about what you’re seeing and what that buyer journey is.
Anne: We’ve seen some very interesting shifts in the buyer journey and certainly in buyer sentiment. Two years ago, the buyer journey, so from exploration phase to having an offer accepted was around 23 weeks. Last year, it went up to 34 weeks. It’s now sitting at 44 weeks.
What this means is that people are taking longer to make a decision about purchasing a home. One of the reasons I think we’re seeing this is that buyer sentiment is quite negative at the moment. Some really interesting research we looked at recently was looking at expectations around interest rates. Now most market pundits think that interest rates have peaked and that the next move will probably be down, but actually 45% of consumers think that we will see another interest rate rise over the next six months.
Richard: Oh okay. Well, that already feeds into that sentiment. Okay. Great.
Anne: Yeah, which is quite surprising to uncover. But I think if you look at the speed at which interest rates rose over the past few years and the fact that we had very consistent messaging a few years back that interest rates wouldn’t move, I think, people’s trust in what they’re reading has probably been eroded and people are nervous and they’re hesitant and they’re being very cautious.
Richard: So, let’s just think that through. Alright? Interest rates, why would they be worried about interest rates rising? Can you explain to the listeners, the buyer, when do they go and get pre-approved for finance? Are they worried about the amount of money that they can take out, the volume of their deposits? Why is interest rates where it’s at and where it’s going relevant to them?
Anne: I think that households are incredibly squeezed at the moment and I think that the average household savings rate is now sitting at 0.6%, which is astonishingly low, in historic context. What that means is that there are a lot of households that, you know, one more interest rate rise is going to have a really big impact. And, whether you’re a first home buyer looking to purchase your first property, or whether you’re someone who’s looking to upsize or sell and move into a different property, I think the level at which interest rates sit with those savings so low right now, with that cost of living so high, it’s actually making a more significant difference than it would have done in the past.
Richard: Makes sense. Okay. Let’s talk a little bit more about the buyer journey. You basically said that, I’ve seen some of your really great slides, you have a bit of a timeline. What are some of the main milestone dates or milestone events – you’ve got inquiries to, purchase and then to settlement? Do you have any more insights on what’s potentially taking longer? So, for example, are people jumping on the internet looking at various projects, but stopping there versus historically, they jump on, they’d look at a project, they’d make an inquiry, they’d get floor plans, they’d cover an inspection. What is happening now?
Anne: Well, we sort of identify five main stages in that buyer journey. The first stage being exploration, which is the longest stage. Then the next phase we look at is prioritising that search criteria. So honing in on specific locations, how much you’re willing to spend. And then the next phase is that more direct search. So, looking specifically for those homes that you’re going to put an offer in.
It’s really only that last 10 weeks of the buyer journey that we start to see people putting in offers and depending on the state of the market that takes longer or shorter. In a market like Perth, where we’re seeing a lot of competition, someone like a first home buyer who’s now having to compete against a lot of investors, that’s taking a bit longer. In a market like Melbourne, if you’re at the pointy end of your buyer journey, you’re probably in a good position to get a property.
Richard: In terms of those, just really the weeks taking for that journey, you’ve quoted them and they’re up to 44 weeks now. Is that Australia wide? Is it Melbourne? Or what does that relate to?
Anne: That is Australia wide. So, obviously, that’s going to differ by market, and it’s going to differ by byer type.
Richard: Well, that’s interesting to hear it is Australia wide because we’ve just discussed that certain markets like Perth or Brisbane or Adelaide are actually going incredibly strongly. And what I hear on the ground from a lot of the sales agents is that there is a lot of buyer inquiry. It’s much more if it’s new product, it’s getting builders on board and then actually building out the projects. And it’s in certain states, I think it’s just a shortage of actual stock listed on the market. Obviously or not obviously, but that’s quite different with Melbourne as you’ve correctly said. There seems to be a huge amount of investors putting their stock on the market and that is definitely a direct result of all the taxes and charges where it’s just not financially viable to continue to afford to have a rental.
I hope the government listeners appreciate that whilst rents have increased a lot, interest rates have increased commensurately more. And then with the taxes and charges, it means that the landlord is in a much, much worse position. And then having further regulation on top of increasing rents means that it’s just not financially viable. So, you’re right that rental pool will shrink, for Victoria, for Melbourne, which is not good news for housing affordability.
In terms of the buyer journey, are there any other emerging trends that you’ve seen, any particular product types or bedroom types or search criteria, like solar panels or things like that that you’ve identified recently that you’d like our listeners to know of?
Anne: Absolutely. Bedrooms are a really, really interesting one. During the pandemic, we saw some very significant shifts, but now we’re also continuing to see the result of Australia’s changing demographic. I think it’s around 55% of Australian homes were built more than 30 years ago. And if you think about the average household size 30 years ago, there were more people per dwelling.
Now we’re at about 2.5 on average people per dwelling, and that is actually forecast to decline to about two by the end of the century. Lone or single person households are actually the fastest growing household type right now. And actually, over half of households do have fewer than two people. So, what we’re seeing is when it comes to houses, there’s a massive excess of supply of four-bedroom homes.
Now, this isn’t just the established stock. When we look at the new houses being developed, four-bedroom houses are still the most common. We’re seeing more engagement, more inquiries per listing for properties that have two-bedrooms compared to four-bedrooms. So, there are actually more people out there looking for two-bedroom houses than four-bedroom houses. Three-bedrooms remain the most in demand, but it’s really interesting to see this shift towards smaller houses.
Units, the story is a bit different. As I mentioned earlier, we’re seeing a big increase in people looking for one-bedroom units, but we’re also seeing a big increase in people looking for three-bedrooms. And if we think about the three-bedroom demand, a lot of that has to do with affordability. So, young families who need additional space, a lot of them have been priced out of the house market. So, they’re looking for larger units to occupy and raise their families.
Richard: Very interesting. I was going to ask you, but you obviously answered it as to why. And I definitely do think it is affordability. I think, unfortunately, and we’ve described it as the tradeoff where people trade off dwelling type or location, and they make a decision about where they’re going to live or what type of dwelling they’re going to live in. And, certainly, we’ve seen that at different points in the cycle play out between houses or units or apartments and then also, the number of bedrooms.
Can I ask, with these houses, are these mainly… I appreciate established houses are across all the different areas of the cities? Are houses you’re talking about in the Greenfield estates still those four-bedrooms being extremely popular? But are you saying that even in those Greenfield estates, there’s more demand for two-bedroom houses?
Anne: Yes. Even in the Greenfields, we are seeing more people search for two and three. We don’t actually see very many people search for four because that’s the stock that’s being built. That’s what people are buying. But I think it’s interesting that we are seeing people are having fewer children. A couple with two children, they only need three bedrooms. So, it’s quite interesting to see this shift away from those larger houses. And I think affordability, of course, is a factor too because it shows that people are more willing to compromise that extra bedroom to buy a house. It’s become a nice to have, not a need to have.
Richard: Very interesting. Before we get onto tips for developers and sales agents in the current market for new products, I’d like to just close off with your search criteria. Are you able to track whether buyers are interested in things like sustainability, solar panels, green seems to certainly be a trend in the new stock. What are you seeing on the ground with that?
Anne: Absolutely. We do have that within our search criteria. We have options for things like solar panels. We also look at the keywords that people are searching for. We also do a lot of market research around sustainability, so asking people how much they value certain features. And every year that we do research and look at the data, sustainability is becoming more and more important. Now, when we deep dive and ask people why they value sustainability, the number one reason that comes up is to do with cost saving. Reducing your electricity bills, particularly at the moment with this cost of living crisis we’re having, is becoming increasingly important to people.
Richard: That’s very interesting. I get a query from a lot of both well, it’s for new apartments, townhouses, or houses or Build to Rent, and the query relates or it really goes to, will buyers or renters actually pay for sustainability? And I’ve seen in certain areas, mainly in Melbourne where I’ve done the research, in the Southeast where prices are a little bit higher, buyers are very interested in sustainability, but they cannot pay for it. Whereas in the North and the West, where prices are a little bit lower, the buyers, and it’s normally the millennials, are very interested in it and they can pay for it. So, my question to you is it’s interesting they obviously want to reduce their costs over the longer term. Is it actually getting capitalised into the purchase price or the rents that you’re seeing?
I appreciate that it’s a hard thing to potentially answer, but are you actually seeing in the data, or if you’re not yet please keep an eye out because maybe that’s the next insight for you. The industry is asking is the buyer or renter market prepared to actually pay for sustainability, and what are those features that they will actually pay for?
Anne: I am just going to say what you said, and it’s going to depend on the area, and I think the price point. And I think that those areas where buyers are already squeezed on price, we’re not seeing as much of the ability to pay for that premium. But we are seeing in also different pockets, and it’s not just necessarily the more affordable areas, but sometimes, areas that might politically have a different leaning. You might see more people in those specific neighbourhoods willing to pay extra.
Richard: Look, I agree with you. I’ve done a bunch of the mapping where we look at what political affiliations really are there and it’s quite remarkable. I have to do that for the new stock to say, well, you need to know your target market and target your target market. And certain people living in those areas or wanting to get in those areas, bring with them their own living preferences and their demands. So that is very important, and it’s great that you obviously have that data. So, listeners, I encourage you, please reach out to Anne. And I’ve seen some of this data, so I’m asking her. They are quite loaded questions because I’ve seen some of it. I really feel that you should speak with her because you can segment that data in pretty important ways to go – new people moving into an area or new stock being sought after by people in an area. Two-bedroom apartments, for example, these are what buyers are looking to potentially pay for in addition to the actual product. So that’s really important.
Final theme just for today, I’ve spoken, especially in Melbourne, to a lot of developers and sales agents and they’re struggling to move new stock. The feedback that I’ve had from a lot of sales agents is, and this is for the developers, make sure you spend a lot of money on display suites because right now or gone are the days for new product, whether it’s houses, townhouses, or apartments, gone are the days of basically just having like a building paddock or a farm and saying, are we going to put all these houses there, you need to buy. The buyers need to go through and not only be committed and convinced that construction is going to commence, but they want to touch, see, feel the fixtures, the fittings, and so spending a lot of money to actually sell the dream or the image of the project is absolutely critical. In addition to that, what other tips or things are you seeing on the ground either to avoid or to definitely do?
Anne: Well, I think recognising that the fact that we’ve seen the buyer journey expand so much and the fact that buyers are more nervous at the moment, I think it really is about giving them that reassurance. And like you said, a display suite where they can actually see the product they’re buying, but also that reassurance that the development will go ahead, that it is going to be finished in the timeline promised. I think that there’s so much uncertainty out there at the moment, we’re seeing a lot of builders who are becoming insolvent. There’s a lot of issues in the construction sector at the moment, which are hitting media headlines pretty constantly, and that has definitely dented people’s confidence in buying off the plan or undertaking a new build. So, I think that reassurance is absolutely critical if you’re going to get the buyer.
Richard: Well, Anne, before I wrap up, because I know we’re almost out of time, no doubt we could do another whole session and I’m inviting you back in due course to come along. But just for today, and I know you did a huge amount of research, and I thank you for that, is there anything else that jumps out right now that you think listeners ought to be aware of?
Anne: I think just to recognise that what we’re seeing in Australia at the moment, it’s so different in every different market. And I think to understand the conditions of the market you’re operating in, and in a market like Melbourne, or we’ve seen a few other markets like Canberra and Hobart, where things aren’t moving very quickly at the moment, it’s taking a long time to move stock, to recognise that that’s the way it is right now. But I think to have that optimism that if we look at the fundamentals of particularly a market like Melbourne, they are really, really strong.
I think one of the reasons we are seeing such challenging conditions in Melbourne is if we look at the price point of a lot of new apartments being developed, they’re still a lot higher than the established apartment market. Now, that will eventually change, but at this point in time, it’s going to be more difficult, I think, to move that kind of stock when you can purchase a similar property in the established market today at a lower price.
Richard: Look, I mirror your views and perhaps also because we were discussing some of this offline before we started today’s session. Well, look, I’ll leave it there for now. Just to conclude, and typically what I do is I have a couple of key learnings that I’d like our listeners to just leave with, in addition, obviously, to just relistening to this podcast if you find it useful.
The first one is, in my mind, there’s no substitute for having good and reliable data and evidence. So certainly, reach out to Anne or you could reach out to myself at Charter Keck Cramer and use data and evidence as one of your decision-making tools. Right now, especially in Victoria and in Melbourne, demand is very, very slow. Anne quoted some stats about how those timelines have blown out from 23 weeks a few years ago up to 44 weeks. That’s huge. And I ask everyone to just be patient. I know it’s very hard to be patient, but that’s the reality of where we’re at.
I’m astounded to hear that a lot of the buyers, so this is our target market, 45% feel that there’s going to be a rate rise. That ultimately impacts their purchasing decisions. They’re not going to do anything until there’s more stability that rates have stabilised and hopefully be cut. In my mind, when that happens, that’s when market momentum will start to turn. It’s going to take more than a couple of rate cuts to get supply stimulated. Government needs to incentivise the market. But for the new stocks to reprice upwards, rates need to stabilise and they need to be cut. And if 45% of these buyers that are actually looking that you’ve surveyed still feel rates are going to increase, there in itself is one of the reasons why demand is just so slow. It’s stagnant. It’s not gone. It’s just sitting on the sidelines waiting for more positive and stable market signals to flow through.
Another finding definitely was that the concept of trade off that we discuss all the time. People are trading dwelling types, so going from a house to a townhouse or to an apartment, and also bedroom types, four-bedrooms, three-bedrooms, or two-bedrooms. Again, reach out to Anne. I’ve seen some of her data. I believe she can also do it by age groups and things like that. Or certainly marrying it up with the census data. You can start seeing what age groups are targeting, what product types. It’s absolutely critical to understand your target market, what they can afford, where they’re coming from. You heard Anne’s comments about they have some of that data, so I’d encourage you do that as part of your due diligence.
The final thing, for new products, and this is across all projects, house and land, townhouses, apartments, display suites. I can’t emphasise how important that is. Show the buyers the quality of the fixtures and the fittings. If you’re asking buyers to pay 30% more for apartments, compared to a few years ago, you really need to explain to them why. I know there’s going to be a lot of pushback, but part of taking them on that journey is actually showing what these things cost now, educating them, telling them that costs are not going to go backwards because they’re not. I know there’s a lot of buyers out there that have the misperception or misunderstanding thinking that prices are going to fall back to normal. The reality is that’s not going to occur, and I think taking them on that journey, explaining that will be very confronting to them, but also showing them the current quality of what is going to be delivered, I think will go at least part of the way to take them on that journey and hopefully get them across the line.
That’s all I needed to say for today. I hope that you enjoyed hearing what Anne had to say. I will put links both to her profile and also contacts at REA Group. And as I said, I’d encourage you to reach out to her. She’s always very kind with her time, and her and the team have fantastic data across Australia to help with both the established market and the new market. So, thanks very much for coming on the show, Anne.
Anne: Thank you for having me.
Richard: Thank you very much for listening to this podcast. If you enjoyed the episode, please make sure to subscribe to our podcast so you never miss an episode as we’ve got more exciting content coming. We’d love to hear your thoughts. Please leave us a review on either Spotify or Apple Podcasts as it really helps us to grow. Also, follow us on Instagram at Precisely Property for updates and join the conversation.
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Precisely Property is a podcast presented by Charter Keck Cramer and is for educational purposes only. Nothing in this podcast should be taken as investment or financial advice. Please engage the services of an appropriate professional adviser to provide advice suitable to your personal circumstances. The views expressed by our podcast guests may not represent those of Charter Keck Cramer.
