Let’s buy an investment apartment
“Let’s buy an investment apartment” – now I am not really sure how many times I have overheard or been part of a discussion when this suggestion has entered the conversation.
With the financial melt down of 2008 and the current wobbly state of many European economies the notion of any sort of investment has taken on new meaning. It’s reasonable to suggest that in the minds of many private investors it is security, which is the main aspiration. How real estate will emerge over the long-term is not yet clear but I see continued evidence that investing in real estate is still a very popular idea.
Over the next few posts I am going to go over how reaching the private investor fits into the project marketing mix.
There is little doubt that Australian’s are generally attracted to property, and while they are not alone. They like it. They understand it. It fits many lifestyle aspirations and it’s a tangible asset.
The tax system encourages real estate investment and there are lots of options, including some new ideas, like adaptive apartments, to enter the market and with care the track record holds up well.
While individual circumstances will always be diverse for many people after the family home is under control, another financial goal is frequently to own an investment property. This can also be a preference that works in reverse where the acquisition of one or two investment properties can become the leverage to buy your own home.
The fact that the taxation system allows negative gearing, which can allow a tax deduction for investment losses, is frequently seen as a major influence. It’s a policy that is sometimes seen as having a harmful impact on housing affordability.
However while negative gearing is a factor in the property investment market, according to a survey undertaken by the Australian Bureau of Statistics only 15.7% respondents noted negative as a key motivation to invest.
Target Investor a first base understanding
The figures are a little out of date (as last year’s census is yet to be released) but an estimated 28% of Australian households occupy rental accommodation, 22% of which is private investment stock the other 6% being public housing. This current figure indicates are large market for investment properties and the stock is held by approximately 590,000 individual owners.
Investors by any measure play a major part in the housing market and as a result they will always be an important and critical target market that needs to be reflected in the project marketing mix.
However while the appeal of particular projects could either encourage or conversely have limited appeal among investors it is important to have a insightful understanding of the target market. To assume that only owner-occupiers or mainly investors will be attracted to a particular project is too one-dimensional.
This is a particular need for full consideration in ‘transitional areas’ where the demographic mix is in a state of change, such as inner-city, fringe or former industrial areas that are being re-shaped by development activity.
The ABS survey I mentioned earlier noted that investors highlighted the following as key pointers to their property investment evaluation:
– long term investment
– negative gearing
– the generation of income
– a future home
– capital gains
– unable to sell and family reasons.
As the target market is defined it may well be clear that some buyers might also not be long-term investors, they might buy and then hold a property until their individual lifestyle circumstances change as they may have a plan to lease the property and then move into the property in the future.
Clearly what appeals to this target demographic is much more complex than might at first be apparent.
Their aspirations may not become apparent until your marketing team are some way down the sales path.
Projects that are very attractive to the investment community may well have particular needs and in some locations it will be necessary to engage the attention of the investment advisory community.
I think that it is safe to suggest that the appeal of direct property investment is a constant influence that many projects need to take into consideration. As some investors will always have a particular attraction to property despite the ups and downs of prevailing economic conditions.
The question is, is it necessary to undertake highly targeted marketing to reach this group of potential buyers?
In some cases the answer will be yes.
Before looking at what could be done to have direct appeal to investors, it is worth keeping in mind a very simple consideration. And that is, the need for all marketing to be fashioned to appeal to the eventual person who will live in the project being promoted.
At the most fundamental level, why people are attracted to live in a particular property and location will be universal. The services, location, facilities and transport will be more or less of equal appeal.
However what will be different is the cost and the ability to afford a particular property, both as a purchase and as a rental option.
From a marketing perspective, what I suggest is that in very particular cases marketing does not need to be tailored only to appeal to investors.
There are exceptions and this would include the use of highly targeted investment media where the tone of material would need to address the specific environment.
For example if marketing were to be placed in a particular media that only has an investor audience then the value attributed to the specific use of that media needs to be reflected in content.
At a particular stage of the sales path the investor well require specific resources, such as depreciation schedules as one example, to be added to the mix of marketing material.
There may also be some more detailed work devoted to how a particular has grown when it comes to capital gains. However once again this is not only the preserve of investors, almost any buyer will have an eye to past and possible future capital gains.
In any marketing plan, the potential impact of investors should show up in the early demographic assessment. In the next post I will look various ways to engage this audience in the most positive way. In particular, by matching the marketing benefits and messages and the key investor target ‘wish-list’.