In the last 10-15 years off plan sales of new build property in the UK have gone mainstream. Previously limited to investors speculating on the property market, it has now become common for UK-based buyers, investors and owner-occupiers to speculate in the same fashion on unfinished schemes. Help-to-Buy has also contributed to this trend.
In order to sell units on developments that don’t exist yet, developers have come to rely on ever more sophisticated marketing technology. A whole cottage industry of computer-generated imagery, fly-throughs, elaborate marketing suites, glossy brochures and animated architectural models now exists to help buyers bridge the gap between what doesn’t exist now and what will in the future.
Partly because of the success of this technology, strong demand and rising capital values, developers have become accustomed to selling a good proportion of units many months, if not years in advance of completion. Before 2016, a developer might reasonably set themselves the goal of selling 40% of the units before the show home is ready to view. Some developers don’t even break ground on the build until 50% of the units are sold off plan.
But uncertainty in the property market, particularly in London and the South East, has all but stalled the market, meaning that buyers for early off plan sales are increasingly rare. So, is it worthwhile pursuing an expensive, technology-driven marketing strategy while the painful progress of Brexit has put the brakes on the London property market?
There are really only two reasons why people buy off plan: first that they will receive a discount and rising capital values will swell their investment further; and second, the property on offer represents a ‘once-in-a-lifetime’ opportunity that they could miss if they wait until the building is completed. I think it is fair to say that most new build property does not fall in to the ‘once-in-a-lifetime’ category! This is a moniker I would reserve for buildings like the Old War Office in Whitehall.
Since most new build property in the capital is unremarkable in both construction and location, it stands to reason that developers will have to accept that few sales will occur off plan until some prospect of capital growth returns. None of the big property consultancies are predicting this will happen soon – Savills believe that London property will bear the brunt of Brexit angst and over the next five years the growth they are predicting will be a measly 5-7%. This will not be attractive enough to justify mainstream buyers risking an off-plan purchase to compensate for that risk. In addition, many investors have already abandoned the UK market thanks to changes in both SDLT and capital gains tax. This means that buyers who are considering taking the plunge in the current market conditions actually need somewhere to live in the short term. Waiting for two years to move in just won’t work!
So where does this leave the developers who desperately need to secure sales in the next quarter? How can buyers be persuaded that buying prior to March 29th is a good idea? To answer this question, we need to return to the second reason that buyers commit to off plan purchases – the ‘once-in-a-lifetime’ opportunity, or what coaching guru Tony Robbins calls the ‘irresistible offer’. That irresistible offer could be a discount, assistance with stamp duty payments or a furniture collection, more favourable terms on a deal or devising a truly compelling brand that lights up buyers’ imaginations. What does that mean in real terms? It means creating a great story that truly animates the bricks and mortar for sale. It means moving away from hackneyed marketing blurb and clichéd London iconography and imagery. It means devising a more authentic way to articulate the real benefits of purchasing in a particular development.
Developers cannot afford to be generic in this market. So many new build properties require an urgent injection of personality to create points of difference. Now is the time for brave use of colour, for differentiation in the interior design of the show home; for creative and innovative thinking on the post-sale service vision and for considering how to create an exciting proposition that will get buyers off the fence and in to their lawyers’ offices. If buyers don’t feel they are missing out an irresistible offer, then they won’t buy now. Sophisticated technology won’t close the sale. But a compelling story of a development with a heart just might. The question developers need to ask is ‘What am I offering in return for my customers’ great leap of faith?’ and, ‘What is my irresistible offer that will encourage them to take this leap? The best advice I can offer developers interested in securing sales in the current climate is to concentrate on delivering a development proposition that is intriguing, personality-driven and different. Fortune favours the brave!