What Homebuyers Want In A Fluctuating Market
It is little surprise to most that over the past year or so we have seen a reduction in buyer activity across various property types. This can likely be explained by multiple factors including the Banking Royal Commission, upcoming election and continued negative press regarding the overall state of the property market.
A report released last week by REA Group, The Developer Insights Series, has revealed the primary needs and concerns of property buyers across three key owner-occupier groups – First Home Buyers, Downsizers and Upsizers.
Speaking to 10,000 buyers across Australia who are currently in the market for House & Land packages, the research was undertaken in an attempt to ensure brands can adapt in a changing market. The general consensus was that the sense of urgency to purchase wasn’t as strong at the present time, and with plenty of choice and developers offering incentives, home buyers felt like they could be a bit more patient and were less inclined to commit straight away.
However, the data also showed many other influencing factors and concerns about building a home which can be highlighted as follows by segment.
First Home Buyers
First home buyers continue to be the primary driver of the off-the-plan buyer market in Australia, with 17.9% of properties financed to first home buyers in January of this year (Australian Bureau of Statistics, January 2019).
In terms of overall sentiment, the research revealed that first home-buyers are generally optimistic about the property market over the next year, with 38% expecting an improvement and another 38% expecting little or no change.
When surveyed about advantages, the majority of respondents acknowledged the importance of modern features, cost saving and the flexibility to choose their own floor plans.
Their worries surrounded unexpected costs and additional stress caused by the challenging home building process and lack of open communication with developers and builders.
Finally, the data also showed that in New South Wales and Victoria alone, that 54% and 46% respectively have a budget of 600,000+ and 34% and 39% respectively, would be prepared to build over 20km from their current location.
Downsizers
The downsizer segment continues to be one of the strongest in the residential market, remaining active and free of the financial restrictions associated with borrowing to buy. Almost 82% of downsizers said that changes in interest rates had zero impact on their decision to build a new property, with a further 56% confirming that potential future builds would be self-funded.
Furthermore, although taking longer than any other segment on the buying journey with an average of seven months, research shows more and more Australians are downsizing these days, especially with the added government incentives such as tax concessions now in place for those who deposit proceeds into superannuation.
In terms of appeal, it appears that downsizers are geared towards modern customised fittings, with almost half preferring to invest in new builds over existing ones. Additionally, most wouldn’t consider modular homes but were very enthusiastic about solar packages, free upgrades and price discounts.
The biggest concern however amongst downsizers buying off the plan was going over budget, with over half of respondents worried about unexpected costs that might pop up during the process.
Upsizers
Upsizers tend to have the most challenging time in a rising market but see relief in a falling market, especially if the changes are across all market segments.
Positively, often it is seen that the buyers ideal property has decreased in value more than their current home or alternatively, that their budget may now allow them to afford a better property than previously thought.
Upsizers do however remain the most apprehensive of all segments about the property market, with 34% expecting the market to improve over the next twelve months; 35% expecting no change and 31% predicting expecting it to worsen.
Modern features, flexible floor plans and living somewhere brand new were the most idealistic conditions for building a property amongst Upsizers. Notwithstanding special offers and discounts which also proved to be a major deciding factor in the process, with 65% of respondents actively looking for free upgrades and 61% for discounts of $5,000 or more.
Finally and unsurprisingly, 40% of those surveyed revealed they had set aside between $5,000 and $20,000 for both external and internal upgrades.
All Segments
In a challenging market, special offers and incentives are pivotal to home buyers final decisions, with 78% highlighting the importance of these.
The most popular special offers across all groups were:
- 60 per cent — Additional upgrades for free
• 56 per cent — Solar package included in build price
• 54 per cent — Price discount (e.g. $5,000 off)
• 46 per cent — Free site costs
• 46 per cent — Additional upgrades for a discounted price
The property market like every other investment market is cyclical. We’ve known this slowdown has been coming through leading economic indicators for some time now, but now buyers and sellers need to get their “minds” around the new property environment. Property buying and selling is all about psychology. Those who understand the new environment will be the ones who benefit the most.
Traffic works closely with its clients to develop industry first ideas based on market conditions, targeting affordability issues to help restore confidence amongst buyers across all segments.
Two recent examples of this can be illustrated by our work with Jubilee Wyndhamvale, Victoria on the Price Protection Initiative and the up to $25,000 in savings campaign for Menangle Park, Sydney.
Jubilee Wyndham Vale Price Protection Initiative
Ref: Insight and foresight into new home buyers, REA Group, March 2019