Having spent the last 8 years in off the plan sales, Nihal has earnt a reputation as a genuine, caring salesman who goes over and above to ensure the best possible outcomes for his Developers and Clients. After joining Three Sixty Property Group in 2019, Nihal has built great relationships with Developers such as Citiplan, Platinum and PACE and has worked on medium to high end exclusive projects like The Park Residences Caulfield North, Park Lane Elsternwick and Hampton Quarter.
Selling off-the-plan (OTP) has always been heavily reliant on the established home and apartment market. Since the beginning of 2022, we have witnessed a combination of unprecedented events that has required us to re-assess our market and adapt to this everchanging real estate environment.
An indication of the impact on our market, REA Group reported a 40% drop in enquiries for new residential projects since May 2021.
When the residential market is strong and established housing stock is commanding high prices, downsizers tend to drive the demand for OTP product. With real estate agents knocking on household doors promoting the local market strength, comfortable vendors are tempted to explore the possibilities of selling; this subsequently increases the volume of enquiries into our display suites.
Data from the 2021 Census of Population and Housing shows that Millennials (25-39 years old) are now on par with Baby Boomers (55-74 years old) in terms of demographic size, representing the largest generational group in the nation.
Baby Boomers and Millennials each have over 5.4 million people, with only 5,662 more Baby Boomers than Millennials counted on 10 August 2021. Over the last ten years, Millennials have increased from 20.4 per cent of the population in 2011 to 21.5 per cent in 2021. In the same time, Baby Boomers have decreased from 25.4 per cent in 2011 to 21.5 per cent in 2021. In the 1966 Census, Baby Boomers accounted for 38.5% of the population.
As the increasing population of Millennials scale the workforce and move into the next phase of their lives, they will become the primary purchasers of Baby Boomer homes.
As a population, Boomers typically have strong travel aspirations, free time and financial capacity; this makes the concept of ‘lock up and leave’ residences very appealing. Additionally, Boomers are more likely to have outright purchasing ability
in comparison to their Millennial counterparts. Despite economic volatility (which is exacerbated by rate-rise anxiety), Boomers are still booking in to visit our display suites. Their key concerns articulated to us is depreciating home values relative to 2021 prices. However, considering that the increase in values over the last few years is significant even with softening prices (we are still one of the world’s least affordable housing markets), we can still expect to see Boomers seeking opportunities to buy OTP.
Downsizers have consistently been the most significant buyer cohort for OTP apartments that I sell in Melbourne’s south-eastern ring. They have lived in their homes for anywhere between 20-60 years and are motivated to move for a multitude of factors; security, changing needs, low maintenance, location - and their most significant asset providing them substantial equity (often with little or no mortgage). This is a strong motivator to purchase an apartment which might cost just 50-60% of the price of their existing home, leaving the rest to their SMSF or their families. Interestingly, many grandparents I meet support their kids with babysitting their grandchildren and often need 3 bedrooms for sleepovers.
I believe we are witnessing the most challenging OTP market since the Stamp Duty concession changes of 2017; this policy required investors to pay full stamp duty for off-the-plan purchases, while owner occupiers still receiving the heavily discounted concession. However we have learned to adapt to the changing market and this has resulted in a collaborative process that actively engages our clients at several stages of the sale (and now design) process. This can only happen when we work with quality developers, who fully understand their market and are respectful of their purchasers. Also, have a strong developer/builder relationship is crucial.
After eight years of selling OTP, I know that a downsizer client really knows what they want, and don’t want. Therefore we work with our experienced developers to facilitate a bespoke engagement process. We provide our clients the ability to customise their apartments, ensuring that it meets their exact requirements; this is important as our clients view their purchase as their forever-home.
Interestingly, often the most difficult part of the OTP process is educating Baby Boomers on how to embrace new technology and smart homes.
The biggest difference between established and OTP selling is that existing dwellings provide a material experience. Buyers are able to see, feel and walk through the space and envisage themselves living there. With OTP sales it is important to provide a visual narrative, which is crucial to illustrating creative potential and to assist our clients determine the perfect final product.
Most buyers have a strong sense of what they want, which makes the co-design process appealing. Involving buyers in meetings with architects, consultants, and interior designers assists them become emotionally invested in bringing the final product to life. We also find that having a longer settlement period, typically between one to two years, provides buyers with more time to scale down, without feeling rushed to leave their home which has provided much sentimental value over their time living there.
With so much noise and negative reporting in the media, it is more important than ever to be proactive in both educating and listening to buyers. At the same time, we know that buyers have greater access to information and will research all aspects of the project. They will vet everyone from the salesperson to the developer, so for our sector it must be a trust-driven process.
As construction costs and interest rates rise we are seeing projects being shelved. This will ultimately see supply diminish and demand for boutique developments increase. Baby boomers will still want (or have to) to scale down, as the stairs in their homes give their knees grief and large homes and gardens require constant care and maintenance.
We can only stay true to course and trust in the RBA’s foresight and the quality of the builders and developers we work with - so that we can be optimistic about the rest of 2022.