Finance is now driving marketing – Mark Percy, Cbus Property
Marketing strategy has changed a great deal and according to Mark Percy, it is now partly driven by the lending requirements of the providers of development finance. The level of developer equity required to be invested in the project has typically, greatly increased. This factor is dictating the need to generate early pre-sales to obtain debt funding -this requirement is now more important than ever.
“Clearly, the link between funding and pre-sales is dictating how marketing campaigns are focused and so yes, it’s an area where big changes are taking place.”
“It used to be common that most projects were sold at or near completion or when the construction was well underway and buyers were not commonly being asked to primarily buy off-the-plan.”
“Now it’s very different, many projects are being forced to pre-sell the majority of their product (typically sufficient to cover the finance facility) to get the required finance facility. This has required a big lift in project marketing skills and has also involved many projects being taken off-shore as part of the sales path.
“It is now common that large projects are being launched to the local market and off-shore at the same time and for some projects, we are all starting to look at a global market, in particular for major CBD projects.
“The leading project marketing groups now have the resources and ability to create a real hype and buzz at a project release, the sales room can really deliver hype and contribute to the potential purchaser committing to the purchase in a very short time. There’s a catch to this because it’s a one-shot only environment, get it right, it’s great, get it wrong, it takes a long time to make up that lost opportunity. So the planning, in particular how buyers are targeted, is critical, the finance options are creating little room for error.”
Mark also points to another major change in the market as technology makes information more available at the touch of a screen and I agree this trend will only get stronger. Mark continues:
“There is also a need to work within a market where buyers have an increased level of market and product knowledge. The market knowledge of purchasers is rapidly increasing – in almost every case the potential purchaser is reasonably market savvy – more so than in the past. They do a lot of homework and much of this is done before they even look at a single property or visit a sales and display centre.”
Mark also suggests that as buyer demographic profiles shift and in some cases become multi-lingual, the business model is now changing.
The requirement for early pre-sales to satisfy the terms of finance also means that the selling costs are often higher and a greater up-front investment in marketing is required to secure pre-sales.
“Much of what we are discussing is driven by the current lending policies of the finance institutions. The GFC has forced the banks to impose these presales conditions. Overall funding for property development is being restricted and the number of pre-sales required as a condition precedent to advancing debt funding is high and where there a high level of off-shore purchasers, the presales requirements can be even higher.
“As a result of the need to get the presales required to give certainty to be able to secure the required finance facility, there is often a need to launch projects to the market quickly as possible but when we are also dealing with a much more informed market there are new hurdles involved. When these same highly informed buyers that are being asked to buy and exchange quickly on a purchase, at times over one to two weeks, there is a critical need to have a depth of experience and a depth of project specific knowledge within the sales team to attend to the issues and questions raised by the informed potential purchasers.
“Our Dominion project in Darlinghurst is one example where the stock we now have to sell is at a starting price of $1.2million. We are looking at a high price point in an inner-city location, we already know that the potential buyers we are dealing with are attuned to the market. While I understand that’s not uncommon but still a challenge, our buyers come prepared – they usually know a lot about market conditions, what they want and have a good idea of prevailing values.
“For Dominion, we come back to quality and design as our foundation. We have the combination of a scarce supply of new housing in this area, it’s a sough-after location, and has a good level of local amenity. The location ticks all of the boxes. Our aim is to leverage all of these advantages and, likewise with other projects, we must continue to build the ‘brand value’ of a Cbus Property project – brand value and trust are central.
“Mirvac was one of the early developers to recognise the importance of it’s brand and the benefits that can flow from having a well regarded brand. Now across the industry, enhancing the brand value is up there as a core outcome that each project seeks to derive from the project. We fully appreciate that each project helps build our brand. It has always been important but the engagement level of today’s consumer has accelerated and so brand recognition has moved to top of mind awareness, in the property market, is as important as it is in any consumer market.
“A leading project and developer’s brand can be as powerful as the cache of any leading and sought after suburb where buyers want to live and will pay a premium to do so.”