A Flight to Quality
Every homebuyer in today’s market has two very big concerns, finance and quality. This week I will focus on quality as this continues a central theme from my market overview published here in December, when I suggested that quality of development would be a big concern for homebuyers in 2019.
Quality has always been an important part of the housing market however, as some buyers were perhaps driven by FOMO over the past few years, the focus on quality may have slipped a little. Recently that focus has returned sharper than ever and currently market conditions are driving a flight to quality, that is also firmly aligned to value for money.
I’d suggest that every potential buyer in today’s property market has a keen sense of what a quality property and development need to deliver.
The flight to quality will be central in 2019 and it was already a clear concern among homebuyers. Government planning authorities have also been grappling for the best way to define quality.
The NSW Planning & Environment’s Apartment Design Guide that cover pages is just one example of government’s attempts to sustain an improvement in apartment quality and planning.
However, it is buyers who will force the flight to quality.
One example is the reality that quality is also very much linked to product diversity, a factor that will be key in driving new developments over the next few years. There will be no room for a ‘one-size-fits-all’ approach to any aspect of new developments.
However, it has to be acknowledged that quality is now a strong influence in every aspect of the market and will more deeply impact prices and demand across all sectors and price brackets.
A majority of buyers will not be willing to sacrifice quality in order to secure a bargain price. These two dynamics, will in part, be driven by the focus on finance as buyers take an exacting view to every aspect of their purchase.
FOMO has been replaced by a cautious considered approach where aspects of poor quality or high prices will not be masked by runaway price growth or excessive demand.
The Main Elements of Quality
As I suggested in predicting key market trends for 2019, quality has become a basic requirement for all homebuyers in today’s market and the ‘quick-flip’ and if you like quick-profit buyer is now extinct.
The more complex level of competition between developments to attract buyers has seen quality come into even sharper focus. This is both in terms of the built form but, also in the level of project/development amenity and quality.
Location will also play an even bigger role in defining quality as different areas, down to individual neighbourhoods and the building, establish varied criteria for prices and the type of property that will attract qualified buyers.
While another related factor, and one that has always contributed to buyers’ perceptions of quality is the track record, if you like the brand reputation of everyone involved; developer, builder, architect, marketing agents, building planners and in fact everyone involved with a project, including down to the local council’s reputation.
This same focus will also see the role of building and strata managers more heavily scrutinised. This aspect of quality will apply equally to existing properties but even more so to new projects.
Trust among buyers is being tested perhaps more than ever. This is not just a reality for the property market, buyers in-fact all consumers, have become hypersensitive. ‘Trust me’ is no longer good enough.
Part of what the current debate about quality is also tied into is the reality that apartments are being purchased as long term homes, not some sort of temporary or short-term housing solution, or short-term investment ‘quick-flip’ opportunity and this naturally puts more focus on quality.
I can well remember that only a few years ago we could sell a property and even before it was settled in some cases speculative buyers would have properties back on the market within days and at inflated process. That sort of market volatility was never welcome or healthy.
However, most factors driving an improvement in quality are not this negative, and one of the main factors is the unstoppable trend towards apartment living.
The more general focus on quality will however continue to evolve and be driven in part by the shift in buyer demographic that will tend to be propelled more by families and right-size (down-size) buyers and long-term private and professional investors. Quality will also be important to singles living alone but looking for quality accommodation, not matter how compact.
How Do Buyers Judge Quality?
It’s a common lament that we are all familiar with, and it goes something like the idea that they don’t make cars and appliances like they used to, or shoes wear out quickly these days and even ice cream isn’t as creamy any more. Not surprisingly the same is often said about property, that houses, and apartment buildings aren’t as durable or well-built today as they once were.
Like all industries, builders, architects and developers have always had to adapt to change. It’s worth taking a few minutes to place some context around how change has broadly impacted building, with a natural flow-on to the development and construction across all styles of housing, not just apartments.
History shows us that in order to compensate for the growing expense, high demand and limited supply of building materials new, more economical building materials have always been developed and used.
While postwar developments in building technology, like insulation and acoustical, services like air-conditioning and fire engineering, made new homes and buildings quieter, warmer, less prone to fire and safer.
Stricter building codes, standards, laws, and regulations, that are sometimes partly blamed for reducing affordability, have with very few if notable exceptions, succeeded in making new buildings safer, more energy efficient, and more appealing to residents.
In December last year I also made several detailed references to buyer motivation. All of the varied circumstances and fundamentals which have always driven house prices; economic stability, population growth and household formation were all being turned up-side down.
All of this is true, but when it comes to quality, homebuyers and indeed governments are now more diligent and less forgiving around issues of quality and the question is how are developments keeping pace?
While I think the industry has kept pace and even gone beyond what’s required, the reality is that homebuyers are now more alert to quality. Today there’s much more focus on what really goes to make-up the solid reliable quality that buyers expect.
Quality A key to Success
In today’s property climate it’s inevitable that the challenges for all new developments and those with ready to occupy stock is further compounded by the lack of confidence in the market among potential homebuyers.
Buyers are cautious to commit, and a watertight assurance of quality will be central in helping to overcome buyer resistance and caution.
Additionally, there’s also the challenge developers face in presenting a solid and reliable track-record, a solid brand to the market because, without this attracting homebuyers and investors is big hurdle in today’s market.
Homebuyers and investors want to see a successful track record of property developments that’s clearly demonstrated by the entire project team. There’s no shortage of clear evidence that local property markets have changed and a flight to quality is now a central part of market dynamics.