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Year of the digitally-savvy owner occupier

13-Dec-2017


For one of Australia’s biggest residential agents the numbers are in, confirming a definite shift in market demand and sales from investors to owner occupiers. 

Presenting his popular annual end of year update, Managing Director of CBRE Residential Projects David Milton talked through the challenges in the investor market caused by increased FIRB taxes, yet the upside trend of more first home buyers and owner occupiers buying apartments in Sydney. While investors accounted for a significant 39% of sales, owner occupiers bought the rest – with first home buyers increasing from 9% to 14% of CBRE Residential Projects’ sales in 2017.

In a year where mixed media reports of the local market ranged from overpriced and undersupplied to oversupplied and slowing, CBRE saw inbound enquiries increase from 49,071 last year to 52,808 in 2017 (up 8 per cent) and sales revenue grow by 9 per cent, but lower sales volumes (down 22 per cent). Proving the solid state of the local market when it comes to high quality and well-located developments, CBRE successfully settled 35 projects in Sydney in the last 12 month period with a 99.7 per cent settlement rate. 

While two-bedroom apartments continue to dominate CBRE inquiries and sales, Mr Milton highlighted the rise in three-bedroom apartment sales from 10 per cent in 2016 to 17 per cent this year, suggesting more family owner occupier buyers. 

With affordability an ongoing issue in the Sydney market, first home buyers were drawn to apartments in Western Sydney, where infrastructure is also improving and increasing housing values. In Kellyville for example, first home buyers accounted for 60% of CBRE sales. Citing Australian Bureau of Statistics (ABS) figures on population growth to be 261,000 in Sydney, including 140,000 in outer Sydney over the next five years, Mr Milton touched on the residential undersupply and slowing approvals process impacting Sydney. (link to Tom Goode article).

According to ABS NSW apartment dwelling approvals have dipped by 10,000 from 2016 showing there isn’t sufficient dwelling approvals to accommodate for population growth. APRA imposed cooling measures have also limited the number of new apartment projects being funded, further contributing to undersupply. 

At the top end of the market, high profile landmark developments including King & Phillip, Castle Residences, Loftus Lane and 1788 set new standards in design and price records for Sydney’s luxury market. In Castle Residences, Sydney’s first five star “aparthotel”, a penthouse sold for a record 18 million [link to TPA article on Castle] while in nearby Circular Quay development Loftus Lane 106 apartments sold out at launch within three hours to the value of $380 million.

In terms of marketing and sales, new digital channels continue to grow in importance and effectiveness. CBRE’s new digital display suite allows prospective buyers to take a virtual interactive tour of new apartments, at minimal cost to developers. As Mr Milton pointed out, virtual display suites can also help solve the issue of actual display suites having to be dismantled once construction commences. 

A point of pride for the agency this year has been the growth and nurturing of their database so that sales from this channel now account for over half of all sales during the 2017 period, with property portals (Realestate, Domain etc.) coming in second at 14 per cent of sales. 

Summing what this year delivered and what we can expect in 2018, Mr Milton forecast continuing strong demand from downsizers and families for larger units into 2018, the luxury market continuing to grow, and while FIRB buyers are hamstrung by high taxes, investors will remain a core market segment. 

“Buyers have more choice and as a result there is the perception of more time to make a decision, only exceptional select projects will sell out at launch,” Mr Milton concluded. 

“Successful projects will be those that are best designed to meet the target market needs – they need to be fairly priced and well presented – and developer reputation for delivery will be more important than ever for future purchasers ,” he said. 

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