Home buyers have begun to identify the opportunities available to them in the new weakened pricing landscape.
The Australian property market, which currently sits at values last seen in September 2016, has affected the construction industry from top to bottom with property developers struggling to secure financing and a growing number of new builds being delayed or abandoned altogether.
Over the course of the housing downturn many developers have narrowed their focus to set their sights on the three owner-occupier groups — first homebuyers, downsizers and upsizers.
A new report released by the REA Group, The Developer Insights Series, has delved into the numbers behind the needs and concerns of property buyers in an attempt to ensure brands can adapt in a changing market.
The figures look at consumers entering the market looking at house and land packages.
According to REA, 38 per cent of consumers enter the build journey acquiring the house and land package first with 34 per cent just purchasing the land and 28 per cent conceiving the project with an architect or builder.
Property Market Sentiment
The data from the REA has come from a survey of 10,000 homebuyers from across Australia who are currently in the market.
It has found that first home buyers continue to be the key driver of the off-the-plan buyer market in Australia.
Recent data from the Australian Bureau of Statistics revealed the percentage of first home owners in the market currently is higher than the historical average with 17.9 per cent of properties financed to first home owners in January of this year, slightly higher than the 10-year average of 17.6 per cent.
First home buyers have particularly sparked growth of over 50 per cent in new apartments in Queensland, South Australia and Western Australia.
First home buyers remain optimistic about the property market over the next 12 months with 38 per cent of respondents expecting the market to improve and 38 per cent predicting it will stay the same.
When asked about benefits, the majority of survey respondents identified the importance of modern features, cost saving and the flexibility to choose the properties floor plan.
First Home Buyers also expressed their major barriers to buying off the plan resided with unexpected costs, added stress throughout the process caused by the convoluted process and a lack of open communication with developers and builders.
Thirty per cent of first home buyers said they would consider a modular home while a quarter of buyers underscoring they were unable to set aside funds for internal and external extra costs.
Budget and Location
The downsizer market remains one of the strongest demographics of residential buyers.
Downsizers remain an active market segment, free of the need to borrow to buy and enjoy a wide selection of property options facing reduced competition compared to last year.
As the population ages, more and more Australians are downsizing to townhouses, and it’s a trend the government is eager to spur along through incentives such as tax concessions for retirees who place the proceeds of downsizing their home into their superannuation.
Money doesn't seem to be an issue with nearly 82 per cent of downsizers surveyed highlighting that changes in interest rates had no impact on their decision to build a new property and 56 per cent acknowledging that potential future builds would be self-funded.
Nearly half of downsizers surveyed expressed high interest in customised fittings and finishes with 40 per cent interested to invest new builds that hadn't been lived in before.
Major barriers pushing downsizers away from buying off the plan came from concerns around going over budget with half of survey respondents sensitive to unexpected costs.
Nearly a quarter of survey respondents identified they wouldn't consider modular homes instead leading towards solar packages, free upgrades and price discounts.
Research also revealed that downsizers journey from consideration to buying was longer than any other demographic at approximately seven months.
The NAB Residential Property Index recently tipped South East Queensland to be the prime beneficiary of Sydney and Melbourne’s property slowdown, marking it as Australia’s number one destination for downsizers looking to cash-in on a new lifestyle.
Block Size Preferences
For those upgrading, it has normally been difficult in a rising market, but easier in a downswing, especially if falls are across all market segments.
Buyers looking to trade up may find their desired property has decreased in value more than their current home.
Alternatively, their budget may now stretch to afford a better property than was previously possible with intentions to occupy putting added requirements on the property.
Upsizers remain apprehensive about the current state of the market with 34 per cent expecting the market to better within 12 months while 35 per cent expect the market to remain the same and 31 per cent predicting it to worsen.
When looking for new potential properties, upsizers identified modern features and flexible floor plans as the major benefits to building, while also excited at the prospect of a property no one else had lived in.
Special offers remained a key driver in the decision process with 65 per cent of respondents looking for free upgrades, while 61 per cent search for pricing discounts of $5,000 or more.
Unsurprisingly, 40 per cent of respondents revealed they had set aside between $5,000 and $20,000 for external upgrades with 41 per cent placing the same amount aside for internal upgrades.
Of the total survey pool, 78 per cent of buyers highlighted the importance of special offers, which played an important role in their final decision.
The incentives prove pivotal at this point in the downturn with lending for homes down by more than 20 per cent in the last year, the biggest annual decline since 2008.
Most popular special offers
• 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
Other surveyed segments included property investors and knock-down rebuilders.
REA found that property investors were most concerned about going over budget while 28 per cent described the amount of decisions during the buying off-the-plan process as overwhelming.
Thirty eight per cent of known-down rebuilders said barriers to buying off the plan included council approval while 37 per cent were concerned about the time to complete the project and move in.