Projects Review Edition 14. 2018
Builder Selection Within a Challenging Market
Contractual and Practical Steps Following a Builder’s Insolvency
Hotel Development: Behind-the-Scenes
Ever-changing Architecture & Design
Compelling Insights from E&S
Generation Z
Contents
Projects
1 Notes From The Directors
3 Olea
2 Spotlight
3 No.17
uilder Selection Within 6 B a Challenging Market
4 Botanical
8 C ontractual and Practical Steps Following a Builder’s Insolvency
4 Verse
Notes from the Directors
4 Spencer 5 Hotham + Carlisle
10 Hotel Development: Behind-the-Scenes
5 Gardiner
12 E ver-changing Architecture & Design
5 Highgreen
13 Compelling Insights from E&S 14 Generation Z
Past Project Profiles 16 N 818 16 Helm 17 Bespoke 17 Luar
One of the greatest challenges today for an increasingly informed buying public, particularly in areas of Boorondara and Stonnington where there is an abundance of choice, is to identify the individual features and benefits of each separate project, when from the streetscape they all look the same.
o
Contributors Builder Selection Within a Challenging Market - Cavan Wee, Senior Relationship Manager, Property, ANZ Contractual and Practical Steps Following a Builder’s Insolvency – Robert Clarke, General Manager, Point Polaris Hotel Development: Behind-the-Scenes – The Urban Developer Ever-changing Architecture & Design – Shenay Kentish, Marketing & Communications Coordinator
Popular architects have a signature or style designed to enhance a brand and create instant front of mind recognition within fans. This in turn produces a sameness from a crowded list as potential purchasers scroll down the various project profiles on portals such as REA and Domain.
requirements of an administrator, subcontractors and the numerous purchasers who will become justifiably concerned for the progress of their new apartment or town home. Last financial year 43% of the total number of apartments or town houses sold by Marshall White Projects were in excess of $1.25 M specifically catering to the specific and often individual requirements of the empty nester or downsizer. Alarmingly, should this dominant buying group return to hibernation, the knock-on effect will impact significantly towards the final cut a development offers to a marketplace post planning.
Typically, unless a buyer can discern one development from another, they will usually make a buying decision solely based on price.
Interestingly, the volume of apartments and townhouses transacted during the financial 17/18 year by Marshall White Projects was almost identical in comparison to the financial year before (16/17). Signs now for the remainder
The challenge is to present to the market a façade that whilst differentiating itself within its market place, doesn't completely polarise the buyer so that they either love a development or hate it - some architects do it better than others.
of 2018 seem to show similar results, however often with extended days on market.
What's also topical at the moment are builders going into voluntary administration, leaving many of our developer clients in limbo as they tussle with the
As always we invite your call at the earliest possible stage of your development, ensuring that together we can minimise your projects days on market, maximise the gross revenue and get through these challenging milestones with the least amount of stress.
Compelling Insights from E&S – Rob Sinclair, Managing Director, E&S Generation Z – Jodie Walker, Head of Research, Secret Agent
Cover Photo: The Grace Albert Park Lake
Every effort is made to provide accurate and complete information in Marshall White’s (trading as Marshall White Projects) technical and regulatory newsletters. However, Marshall White cannot guarantee that there will be no errors. Marshall White and its contributors to the newsletter make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the contents of the newsletters and expressly disclaims liability for errors and omissions in the contents of this newsletters. Neither does Marshall White and its contributors to the newsletter assume any legal liability for any direct, indirect or any other loss or damage of any kind for the accuracy, completeness, or usefulness of any information, product, or process disclosed herein, and do not represent that use of such information, product, or process would not infringe on privately owned rights.
+ 61 3 9822 9999 1111 High Street, Armadale VIC 3143
Mark Dayman Director
Leonard Teplin Director
T: 03 9832 1193 M: 0409 342 462 mark.dayman@marshallwhite.com.au
T: 03 9832 1191 M: 0402 431 657 leonard.teplin@marshallwhite.com.au
Disclaimer: Information provided is believed to be accurate as at the date of printing, no responsibility is taken for any errors or omissions. It is your responsibility to obtain independent, professional advice.
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Spotlight
Amy Bennison
Ross Hams
Ranko Cvjeticanin
Concierge
Partner
Partner
Armed with a business degree in marketing, Amy is a master of efficiency, bringing a well rounded mindset to her role overseeing purchaser communications for Marshall White Projects. A savvy business sense coupled with an intrinsic ability to foster relationships ensures Amy adequately manages buyer expectations and facilitates a positive experience for her clients.
A new breed of real estate agent, his intellect, market knowledge, passion and dedication impresses both new and existing clients who are rewarded with his uncanny ability to consistently negotiate hundreds of sales a year whether on or off market with local and international clientele.
With over twenty years of real estate experience, Ranko has a proven track record of achieving outstanding sales results in the industry. During this period, Ranko has seen substantial change in the real estate profession but his professional approach to every facet of every transaction hasn’t wavered.
Strong leadership and project management skills are anchored by a diligent and empathetic approach to all her tasks. A drive for continuous improvement has seen Amy implement new, more efficient strategies to ensure the highest level of client satisfaction. Born and raised in Melbourne, Amy’s knowledge of the city’s geographic and cultural diversity is an invaluable resource for clients. Outside of work Amy enjoys spending her time with her two children.
Specialising in projects throughout Melbourne, each year he successfully sells in excess of $100 million worth of property. Ross has managed the sales campaigns for some of Australia’s most successful residential apartment and townhouse developers. Displaying an intimate understanding of consumer trends Ross utilises this knowledge advising clients on how to create a superior product to suit the ever-changing buyer demands. In his spare time, Ross enjoys spending time down the coast with his wife Jo and three kids and supporting his beloved Cleveland Cavaliers and Melbourne United.
Olea 50 Kambrook Road Caulfield North
Part of the project development team at Marshall White, Ranko’s natural positive energy and enthusiasm and ability to relate to people from all walks of life has been invaluable. His genuine integrity and personal service style quickly makes clients feel at ease. Balance has always been and continues to be crucial to Ranko’s consistency throughout his career. Away from the office he spends time with his son and family and he is dedicated to keeping fit and physically active.
No.71 71 Station Street Fairfield
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Current Projects Botanical 16 Spring Road Malvern
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Spencer 185 Rosslyn Street West Melbourne
Hotham & Carlisle
Gardiner
99 Hotham Street St Kilda
1 Glenarm Road Glen Iris
Verse
Highgreen
18 Wilkinson Road Sunshine
1457 High Street Glen Iris
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Builder Selection Within a Challenging Market
How would you define the current market? The current market in Victoria has been challenging over the last twelve months. There have been regulatory changes including stamp duty and GST; tightening of credit for both local and foreign purchasers; capital flow restrictions for Chinese individuals and companies; as well as weaker overall Purchaser sentiment. This is causing a lengthening of timeframes required to achieve financial close. Further, of late the local market has been impacted by Builder fragility - in light of peaking and intense margin competition for contracts in the Melbourne metropolitan residential apartment segment.
In saying that, what's important for a Bank and why? We see our role as a financial partner with the developer together navigating these challenges by providing insights and guidance where necessary, along with funding to help the developer attain their financial and project goals. At the same time, we are obligated to protect shareholder’s equity and abide by Government regulatory and capital controls.
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It can be a fine balance at times, but working with a developer from initial planning, through to walking a completed project, is a very rewarding outcome.
What are the different types of Development Risks? Broadly, we can classify the following as different types of development risks: Planning Risk: Achieving the desired planning outcome within a targeted timeframe; Market Risk: Market movements with respect to price, product mix, location and regulation throughout the project life cycle, including during planning, presales, construction and settlements; Construction/ Delivery Risk: The ability of the Developer and his team (including Builder) to complete the project within budget and contractual timeframe; Settlement Risk: Realisation of the project profit/debt clearance via successful sales settlements prior to sunset dates from both local and foreign purchasers. Satisfactory Valuation outcomes and regulatory compliance achieved.
unforeseen cost overruns; as well as the number and size of concurrent projects being undertaken at the same time. Environmental Risk: Known and unknown Cost and Time effects for any sites encumbered by historical or existing contaminating uses.
How would you define Construction/ Delivery Risk? I would define 'Delivery Risk' in relation to the Builders responsibilities as the ability of the selected builder to prepare, manage, cash flow and deliver the project in accordance with to the building contract; consultants specifications; and statutory building requirements - both within the contracted timeframe and contract sum. This should also be completed within the relevant jurisdictional occupational health and safety requirements.
What are some of your selection criteria for Builders?
Capability: Proven capability to execute, as evidenced via 3-4 comparable, recently completed similar projects. For example, five- level residential apartments with double basement. Financial Capacity: Relevant financial ratios are tested to confirm historical profitability, liquidity and strength of the balance sheet. These include, but are not limited to: Quick Ratio; Net Profit Margin; Turnover to Net Tangible Assets; and Debt to EBITDA ratio. Cashflow Forecast and Bank Guarantee: Review of the Builders Cash-flow Forecast including all current and forecast jobs for the next twelve months. Review of Bank Guarantee limits and usage within approved limits. Site Visits: Site visits of recently completed projects are critical. As is review of the key personnel within the Builder's team allocated to the specific project, eg. Builders-side project manager and contract administrator.
Cavan Wee Senior Relationship Manager, Property, ANZ PH: +613 9956 2932
Experience/Reputation: Ideally, previous knowledge and experience working with the Builder on prior projects - preferably first hand, otherwise as recommended.
Sponsor Risk: Understanding a developers background, experience and asset position including the ability to meet
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Contractual and Practical Steps Following a Builder's Insolvency
One of the worst things that can happen to a property development is when a Builder becomes insolvent or is liquidated partway through construction of the project. Not only does it have a huge impact on the Builder's staff, subcontractors and suppliers, it can have huge ramifications for the Developer, Financiers and Purchasers (or Tenants as the case may be). There are often some early warning signs that a Builder is in trouble. This could include subcontractors and suppliers not being paid, a reduced workforce on site, the project falling behind schedule, or a drop off in communications from the Builder's management. Here we outline a number of contractual and practical steps that all Developers should follow should they suffer the setback of a Builder going into liquidation.
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Understand the Construction Contract
Assess the Works
Project Documents
Under most construction contracts if a Builder become insolvent then the Developer (as Principal) can terminate the contract, suspend the works or take the works out of the contractor's hands. Legal advice is highly recommended.
Arrange for the Project Manage or Superintendent and Bank's Quantity Surveyor to assess the work completed up to the point of the Builder becoming insolvent. Including photographic records of the site. marked up plans. a survey of the building by a land surveyor (if applicable). It's import ant to get a financial snapshot of the status of the project - the project stage, the amount spent, the scope of works to complete and cost to complete the project.
Most projects use document management systems such as Aconex to manage the distributions of drawings, specifications and reports which is typically managed by the Builder. These documents should be recovered as quickly as possible so the project can move forward.
Bank Guarantees & Cash Retentions Cash all bank guarantee's as soon as possible to prevent this from being caught up in any administration, winding down of the Builder's company or possible legal proceedings. Notify the Bank
From a practical perspective the Developer needs to act quickly and prudently on a number of fronts when a Builder becomes insolvent:
In most circumstances a bank will be involved in funding the construction works. In these circumstances the bank has step in right s in the event the Builder becomes insolvent. It's critical the Developer and Bank work cooperatively to agree on the best way forward for the project which will be largely dependent on how far construction has progressed.
Secure the Site
Notify the Insurers
Make sure all hoardings are secure, change the locks to prevent the Builder's staff, subcontractors or suppliers from accessing the site and put in place 24-hour security. This is to prevent theft or sabotage of the site by unpaid subcontractors or suppliers. It also prevents any public safety risks by unwanted break-ins to the site.
All insurers that have provided various forms of insurance cover for the project should be notified and the project manager should conduct a review of the currency and scope of indemnity of all insurances that pertain to the project.
Temporary Works In some situations when a Builder becomes insolvent the site may sit dormant for a long period of time. It may be necessary to temporarily protect those works to prevent damage from inclement weather. As a minimum the work completed should be inspected as quickly as possible by the Registered Building Surveyor and a condition report prepared. Subcontractors and Suppliers Determine what warranties (if any) the subcontractors and suppliers who have completed the works to date can provide, and determine if they would be able to complete the works under a new builder.
Find a New Builder This sounds easier than it often is - finding a builder that is prepared to take on a partly built project is not straightforward. Ideally the balance of the work will be completed under a fixed price contract and the new builder will be prepared to warrant the workmanship of the entire works at project completion. Apart from that it's critical the Developer seeks the necessary legal advice in enforcing their rights under the Building Contract which is often complicated where an Administrator or Receiver has been appointed to wind up the company or where there is a scheme of arrangement in place that could prevent the Developer from implementing some or all of the initiatives above.
Robert Clarke General Manager, Point Polaris PH: +613 8866 8809
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Hotel Development: Behind-the-Scenes As the residential market continues to cool across Australia, developers are looking at ways to diversify their portfolios by moving into hotel projects. But many developers are underestimating the intense undertaking required from a furniture, fixtures and equipment (FFE) point of view. The FFE process is crucial to a hotel development's success, and it can be the difference between a project that operates seamlessly upon completion, or one that experiences numerous operational issues.
However, the entire process can take a developer as long as 18-24 months to complete from concept design right through to installation. According to Marc Conias, managing director and founder at PPS Tailored Furniture Solutions, developers need to understand that the FFE undertaking for hotel projects is large, but manageable - especially with the right contractors, manufacturers and management company assisting throughout the project.
For developers looking at undertaking a large-scale hotel development, this is the entire FFE process that they need to be prepared for: 1. Preliminary Design Concept 24 Months Prior to Installation
The initial step is for architects to develop a preliminary design concept and scope of works. This will guide the FFE process throughout the development phases, and ensure that the desired visual aesthetic is maintained in the hotel upon completion. 2. Create Mock Up Room & Build Inventory 24-21 Months Prior to Installation
Once the preliminary design concept has been completed,
7. Design Changes Finalised
a mock up hotel room will be completed to give the project team a visual representation of the FFE requirements.
13-11 Months Prior to Installation
From this, the FFE team will be able to begin building an inventory of what items will need to be built and installed.
If there are any design changes to any products, or changes to the required manufacturing - these will need to be resolved and finalised with the architect and the relevant factories before proceeding to mass production.
3. Tendering Process 21-18 Months Prior to Installation
Managed by the project's FFE dedicated company, the tendering process is a crucial step to identifying the best factories, products and warehouses for the project - both on and off shore. The process could involve up to 10 suppliers and factories for the one project, and the FFE management company will need to secure tenders from each supplier in order to meet project requirements. At this stage, the suppliers will also identify any required design changes as well as providing alternate cost saving methods when it comes to manufacturing the inventory. 4. Manufacturing Pricing & Identifying Difficulties
8. Mass Production Commences 8-3 Months Prior to Installation
At this stage, all designs have been finalised and mass production commences in order to produce all goods and inventory required for the project. This stage should also include full quality assurance inspections and reports throughout the entire manufacturing process. 9. Freight & Importation of Goods 12-6 Weeks Prior to Installation
When all inventory has been manufactured, the goods are freighted from off-shore to a local storage facility - where they will be ready for installation.
18-16 Months Prior to Installation
The FFE team will receive pricing from various manufacturers, who will also identify and advise on any potential difficulties that can be expected with the design or finishes. The developer can then address these issues with the architect to resolve these issues and re-design what's required. 5. Final Design Agreement 16-15 Months Prior to Installation
All parties involved in the project approve the final designs and all required inventory to be manufactured is sent to the relevant factories. The factories will then provide final pricing for their tenders. "It's important that a developer doesn't underestimate the FFE timeline or just how complex the process can be. From design concepts, to choosing the right factories to manufacture the inventory, it's a big undertaking for a project team." - Marc Conias, Managing Director and Founder PPS Tailored Furniture Solutions
6. Sample Selection 15-13 Months Prior to Installation
Prior to commencing mass production, samples for all products will be specified and chosen for manufacturing and inspection.
10. Installation 6 Weeks Prior to Completion
Once the project is ready for installation, all products will be installed in one line or in a staged process - depending on the completion program for the development. 11. Project Completion & Hotel Operational All products are successfully installed, and ready for the hotel to begin operations. Developers who are looking at diversifying into hotel developments need to be aware of the arduous nature of the FFE process, and be willing to take the time needed to ensure that every step is completed in order to deliver a successful end-product. Despite the lengthy time commitment required, the assistance of a dedicated FFE team can make the entire process operate seamlessly - resulting in an entire inventory of products that are onbrand, highÂŹ quality and are going to be enjoyed by future visitors. Article originally posted at: https://theurbandeveloper.com/ articles/hotel-development-behind-the-scenes-
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Ever-changing Architecture & Design
Formally CHT Interiors, Sora is an interior architecture and design company that creates spaces for people and with people. The team of twelve passionate women collaborate in an innovative workplace. Currently Sora Interior Architecture and Design are ahead of the curve with their latest projects. The trends are leaning towards a design which encompasses large apartments that are predominately owner-occupier. Their designs complement the typography of Australian living. These new larger apartments reflect the experience of a typical home. The new style of home may look different but encases homely elements such as a grand sense of entry. These apartments feature the kitchen as the focal point, similar to that of a classic home. Interestingly, for developers, buyers are leaning towards owneroccupier properties. Due to the influx in focus of owner-occupier, these type of apartments are designed to suit downsizers that don't need a large home and empty nesters but also on the flip side: families. Young families are leaning towards the 'big city' style of living like that of New York or London where proximity to work and metropolitan lifestyle is high on the property list. Such as closeness to the city, entertainment and restaurant and cafes. There has been a shift in the Melbourne market which has allowed for apartments for cater for family living. The trend is very much location based. The Ringwood apartment complex featuring three main apartment buildings and a section of townhouses. This project has a lot to offer, it's almost like a 'mini city'; moments away from the Eastland Shopping Centre, jump on the Eastlink and you could be in the city in under 40 minutes. This type of living ticks a lot of boxes for prospective buyers and is more affordable than a typical family home. Sora's designs are focused on large communal spaces representing the sense of neighbourhood, community and space. A heavy focus on high end communal spaces such as; lounges, wine bars, sky decks, gyms, terraces and media theatres. The combination of apartments and townhouses on the site appeals to a large demographic. The three apartment buildings: Eden Square, Valley Square and Garden Square. The latest addition to the Ringwood community invites a sense of community, amenities such as a communal cafe and bike path invite the local community to share in the experience at Ringwood. The collective vibrant hub has created common spaces
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Compelling Insights from E&S
that encourages physical wellbeing and mindfulness to flourish. A wellbeing centre features prominently boasting a yoga studio and gymnasium. Each building features larger style apartments with open-plan living areas that flow into large balconies, blurring the lines between inside and out. Large windows throughout the design allows for natural light filled spaces. The interiors reflect the light of the natural surrounds which are radiant and peaceful. This setting is tranquil with the Mullum Mullum creek as the perfect back drop for stunning views, walks and bike rides. This dynamic community encapsulates the Melbournian lifestyle and what trends we're starting to see. This project in Ringwood has set records for sales prices. This is believed to be due to the fact that this particular part of the market, hasn't previously been catered for. This new trend in interior architecture, currently involves a homelike floorplan that caters to owner-occupier's needs. The site at Ringwood has been transformed into an urban sanctuary that marries design, sustainability, technology and amenities to create a precinct that residents and their families never need to leave. The perception of apartment living has gradually evolved over the last few years, multi residential buildings are more family focused, community feel, larger style open living.
1. What kitchen appliances are "on trend" for apartment buyers? New ovens from Siemens, Miele and V-ZUG that have steam and microwave functionality in a single 60cm oven. They are the perfect size for an apartment kitchen and perform multiple purposes all in one unit.
Buyers are looking for the experience of a home, but in the form of an apartment which is the current trend we're experiencing at the moment. The intricate details and level of sophistication in the interior architecture and design, show that Sora is a force to be reckoned with. The marketplace is forever changing, therefore so are the trends, it is important to predict these trends and design accordingly for what the marketplace demands.
5. Is it worth upgrading to top-flight appliances in an average grade apartment?
Yes - Australians love the latest technology. The automatic and inbuilt cooking programs in ovens especially are a huge hit with the empty nesters, acting as another helping hand in the kitchen. Whether your baking a cake or roasting meat, there is a setting for almost everything and the best part is the oven does it all including setting the temperature and duration of cooking.
Yes, we believe top-flight appliances will add to the resale value of any apartment. Appliances are one of the fittings that buyers take note of and appreciate when they are better than average.
3. What's the future for appliances and who is doing this really well? Connectivity of appliances to wi-fi and smart devices is definitely the future. Miele, Smeg and Bosch are developing great
Shenay Kentish Marketing & Communications Coordinator PH: +61 3 9417 1944
Miele, Smeg and Gaggenau resonate very well with the marketplace. They all offer a quality appliance and a great range to suit any needs and are also seen as prestige.
2. Do "tech smart" innovations really resonate with the empty nester?
Pyrolytic ovens are also great as they require minimal effort when cleaning your oven. In short, pyrolytic ovens turn any residue in an oven to ash using high temperatures making it easy to clean out.
Sora Interior Architecture and Design will continue to produce high end designs that adapt to the ever-changing marketplace.
4. What brands best resonate with the marketplace and what does the market see as "prestige"?
Investing in quality appliances also means they last longer and you're not having to replace them as often. 6. What gadgets are the latest "must haves" in apartments and townhouses? The V10 Absolute Plus cordless Dyson vacuum is perfect for smaller homes and apartments.
Rob Sinclair Managing Director, E&S PH: +61 3 9811 5300
applications for this. The apps allow you to keep an eye on your appliances with program status updates and start programs as well.
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Generation Z They are the latest generation to enter our property market. Generation Z, or those born between 1995 and 2010, are coming of age and many of them will begin their property experience as renters, investors and home owners over the next few years. For this report Secret Agent decided to take a look at this particular generation in order to get a better idea of their preferences and what this may mean for other buyers and sellers alike.
for the shop to open. Unlike previous generations who have had to learn how to adapt to this way of life, Generation Z have known no other way. This will influence their expectations and desires when it comes to buying and selling property as well as in other parts of their life like how they work and the types of careers they choose. It is estimated that Generation Z will be a highly mobile generation, having up to 5 careers and 15 homes in their lifetime. (McCrindle, 2018) This means that they may be in the property market for a long time to come and it is worthwhile paying attention to their consumer behaviours. The impact all of this may have on the real estate industry is very interesting. For example, property transactions usually rely on exchange of a cheque yet many members of Generation Z wouldn’t even know what a cheque looks like. It is likely that the way people interact and exchange property in the real estate market will further evolve as a result. The Buying Experience It is important to consider characteristics of different generations because in doing so you can optimise how to market and sell to them.
Who are Generation Z? Generation Z are the Generation born after Generation Y (the Millenials). Every generation has their own unique characteristics based on the major events they experienced growing up. Generation Z for example, are the first generation to be born into a world based on technology. The internet is mainstream, smart phones are no big deal, and social media is omnipresent. Being connected is easier than ever before and so is searching for information. Googling something to find out more enables this generation to figure a lot out by themselves. Unlike Generation Y, most of those in the Generation Z demographic have grown up post September 11, into a less secure world. The Global Financial crisis was a key event in their lifetime and they value collaboration and flexibility. (McCrindle, 2018) They are also very entrepreneurial with many turning to freelancing as a career path rather than traditional employment. This could be due to seeing older siblings struggle to find work after school and also due to the rise of online businesses. (Cobalt, 2017)
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Generation Z is especially interesting because of the way that they have grown up with technology and social media. Many don’t watch traditional TV or read newspapers. Instead they come home from school and watch videos on Youtube on their phones. Generations before them would be used to seeing huge sign boards located outside a house and listings posted in paper media to advertise a property. More recently online internet listings on sites like realestate.com have become the norm to advertise. Thanks to this social generation, we could see more changes in the way property is marketed. It could be more common to see listings on social media sites like Facebook and Instagram. The traditional cheque used to pay for a deposit could also be replaced with other means like cryptocurrencies. One study in the UK found that 90% of Generation Z respondents would consider buying a house online. (Cobalt, 2017) Virtual reality is an exciting new way to market a home and may be particularly useful for Generation Z. Engaging visually with their short attention spans is best achieved through ‘try and see’ methods and virtual reality would enable this to be done from the convenience of their computer screen. (McCrindle, 2017) “With virtual reality set to become an innovative tool for buying and selling property, it’s likely that Generation Z members will naturally require both a digital view and a physical visit of their desired home.” (Cobalt, 2017)
Growing up in the digital age, Generation Z doesn’t have a distinction between online and in person like generations before them. They have always had both. They have short attention spans but are good at multi tasking. They are used to scanning through social media and google to find what they want and need.
Another interesting aspect of Generation Z is that they value the whole buying experience, not just the end result. They will be likely to document the entire buying experience on social media, from the initial stages of walking through a property virtually in an online listing, to the moment when they pick up the keys to their new home.
The internet means that they are used to a world where they can do things on demand; they can watch what they want when they want, they can order food from their phone whenever they get hungry and they can buy whatever they want without the need
The due diligence process will be more stringent thanks to the internet and availability of free information. Asking Google for advice is second nature to Generation Z. They are likely to do
their own research as well as ask the advice of friends and family before making a firm decision. (Fitch, 2018) Their skepticism of the industry at large may mean they look for other more direct ways to buy and sell property without third party agents. Services such as Next Address, a website which matches buyers and sellers without the involvement of real estate agents, may become more and more popular. When you sign up for the site you create your ideal property profile and are then sent matching properties. You can use their inbuilt negotiation tool and offer to purchase sheets to finalise the purchase. If third parties are involved they will need to offer more of a seamless experience between the online world and reality. They will need to focus on ways to make the gap between seeing and buying property as efficient as possible. The Type of Home The type of house Generation Z will occupy is largely dependent on what they can afford. They are in the early stages of their career or still finishing their education, so it is likely that they will need to start small and then as they progress throughout their career and life they will be able to upsize into larger accommodation. For this reason, apartments will be a popular choice for many Generation Z buyers to start with. Unlike generations before them who prioritised their home and slotted in work around this, Generation Z prioritises work and lifestyle first, with their home coming second. This means that they will be looking for places to live that are close to their work and in areas that are well connected. According to a survey conducted by Zillow group in America, 40% of Generation Z responders valued being close to work when choosing where to live, and 36% said that the suburb had no influence on their decision. (Zillow, 2018) It seems urban areas will remain popular since the majority of workplaces are located in city cores. A survey by Neilson (2015) found that 52% of Generation Z respondents wanted to live in a big city. Lifestyle is important to Generation Z. They don’t want long commute times to work. They have an appreciation for the environment and so apartment buildings which emphasise green space and bike culture will do well. Overall they will be less picky about the actual house characteristics like layout, floorspace and number of bedrooms so long as the location suits. Reasons for Purchasing a Home According to a survey conducted in America, the majority of Generation Z value home ownership and would like to purchase their own home one day. (Zillow, 2017) They are entering the property market at a time when interest rates are still low but housing affordability, including buying a house or renting one, is high. Being able to afford their own house at their current life stage may not be possible so they will have to consider smaller accommodation options such as apartments and townhouses. For many, it may make sense to stay at home as long as possible to save money and put that towards purchasing a smaller property as an investment first rather than waiting to buy a house they can live in.
Mobility is important for Generation Z. They have a desire of home ownership but it doesn’t necessarily mean that they want to live in it straight away, or forever. Gone are the days where you would finish school, get married and settle down in your dream home. Technology and the increased mobility it allows for may mean that the new norm for Generation Z will be to purchase an investment that they rent out whilst they continue to rent themselves (or live at their family home). They then get the best of both worlds; being home owners but also being able to move around to different locations as their work and lifestyle changes. This is not to say that generations before them haven’t done this, however it will become more common place. As Generation Z become more prominent figures in the housing market, it will be interesting to see how they impact current buyers. At the moment it seems that they may compete with the downsizing market for apartment stock, however many won't have the resources to compete with them. Generation Z perhaps will have the greatest impact on the rental market which will be good news for current investors who own rental accommodation in inner city Melbourne.
Jodie Walker Head of Research at Secret Agent PH: +61 3 9349 4333
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Past Project Profile
Past Project Profile
No 818 818 Glen Huntly Road Caufield
Helm 1 Cook Street Hawthorn
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Type
% of Total
Average Size per m2
Average Price per m2
Average Price
2 Bed, 2 Bath
11
82.8
$8,912
$737,500
3 Bed, 2 Bath
89
117.3
$9,155
$1,070,938
Bespoke 1394 Malvern Road Glen Iris
Luar
Type
% of Total
Average Size per m2
Average Price per m2
Average Price
1 Bed, 1 Bath
25
63.7
$9,194
$585,000
2 Bed, 2 Bath
33
79.5
$10,009
$795,625
3 Bed, 2 Bath
42
118.0
$10,180
$1,204,900
Type
% of Total
Average Size per m2
Average Price per m2
Average Price
Type
% of Total
Average Size per m2
Average Price per m2
Average Price
1 Bed, 1 Bath
24
51.2
$10,354
$530,200
1 Bed + Flexi, 1 Bath
6
57.0
$8,991
$512,500
2 Bed, 2 Bath
52
79.8
$10,734
$857,909
2 Bed, 2 Bath
85
76.9
$9,356
$719,161
3 Bed, 2 Bath
5
130.0
$10,308
$1,340,000
3 Bed, 2 Bath
9
101.3
$9,543
$961,333
3 Bed, 3 Bath
19
154.5
$13,964
$2,157,500
22-24 Pakington Street St Kilda
17
Boutique. Local. Competitive. With a rich history as Worrell’s, Mercedes-Benz Toorak is your local trusted retailer. Offering two convenient locations in the heart of Melbourne, we hold an appreciation for timeless design and attention to detail. You will receive first class service when purchasing a Mercedes-Benz from the team at Mercedes-Benz Toorak.
/mbtoorak
Mercedes-Benz Toorak
New Car Sales 11 Carters Avenue, Toorak (03) 8825 5000 29 Madden Grove, Richmond (03) 8199 7100
www.mbtoorak.com.au enquiry@mbtoorak.com.au
LMCT 11545
/mbtoorak