Don’t underestimate the power and presence of desperation.
Intending first home buyers are overcoming fears and concerns about mortgage stress, rent increases, low vacancy rates, rising interest rates, cost-of-living expenses, and lack of job security to seek out, sign-up and apply for loans to secure their own residences. Demand seems to be unabated.
Interstate, overseas and cruise holidays are enjoying similar sentiments, revenues, and growth. Indeed, in relative percentage terms, it is the fastest growing sector of the Australian national economy. People are seemingly “desperate” to get out of the home and reward themselves after three years of COVID lockdown. There is a seismic shift from discretionary to essential outlays and purchases.
Underlying the prevailing dynamics of the marketplace are emotions. Triggering that perception-set is an artform and is well rewarded.
Clearly some consumers have withdrawn from the marketplace. Others have consciously reduced expenditure and consumption. However, these are largely limiting constraints rather than impregnable barriers.
Unrecognised opportunities exist, unfulfilled.
Accordingly, the content, context and desired outcomes or communications, selling, marketing and promotional strategies and tactics need to be refined. In some instances, those changes will be substantial.
That will take investments of time, money and resources, heightened tolerance of risk, a projection of confidence and a willingness to endorse and celebrate the decisions made by clients and customers.
DAY OF RECKONING
Opportunistic initiatives typically do not need or are justified by rational thought. The key objective is to generate interest, demand, revenue and profits. You can bank on that.
The current scenario will doubtlessly lapse. By Christmas 2023 some 880,000 fixed-interest home loans will have expired. Most will be replaced by variable-interest lending, with interest rates doubling in some cases.
Financial consequences in official interest rates will impact those with mortgages, the consequences will cascade through society.
Therefore, financial prudence has immediate and future virtues. Liquidity will cushion the inevitable future blows. Get ready. That is not a discretionary option.
It is advisable to pause, contemplate and assume a detached, objective perspective.
THE PATH TAKEN
Mortgage-stress is an interesting case study. It has traditionally been an influential force in the economy.
Subsequent to the Whitlam ALP government (1972-75) housing mortgage interest rates rose to around 18% per annum. At that time families and property owners reported feeling stress when mortgage payments represented 18% or more of gross incomes.
In the early 1980’s the entry-point for mortgage stress was considered to be 23%. Society was in transition.
During the ensuing years Australia experienced the recession it had to have (from 1992), the Dot Com crash occurred in April 2000, The Global Financial Crisis (GFC) arose in 2008 and the mining commodity prices collapsed in the second decade of the new millennium. Finance structures varied over time.
In late 2019, on the eve of the COVID pandemic mortgage stress evolved at around 35-40% of gross income.
The latest available official statistics reveal that for the average homeowners with a mortgage (around 35% of the overall sector) 60%+ of gross incomes is allocated to servicing the charges associated with home mortgages.
Notwithstanding that eyewatering percentage, demand for new homes remains relatively strong, as local first home buyers compete with overseas and interstate residential property investors, newly arrived immigrants and full-time tertiary level global students. Some are simply driven by the desperation to break-free from being renters. Power to them.
It is not for property developers, home builders, financiers, real estate consultants and marketers to assign their own values on the needs and wants of a strategic target audience… that is, those who are desperate to own their own homes.
Therein, lies opportunity to sell, service and satisfy. Another example of different strokes for different folks.
Barry Urquhart
Market Analyst
Marketing Focus
M: 041 983 5555
E: urquhart@marketingfocus.net.au