Apartment buyers settled on presales 17 per cent faster in 2020 than the year before, according to fresh data from Westpac Banking Group. Westpac’s national general manager of property finance, Martin Green, shares some insights.
Westpac Banking Group supports residential markets right across Australia and its business banking division has monitored its high-rise residential development project presale settlement performance for around five years.
With four brands – Westpac, Bank SA, Bank of Melbourne and St George – all actively supporting the sector, Green says the Group has unique insights into how Australia’s major city residential development markets are functioning.
“Our multi-brand strategy means we have four different data sources to draw from, rather than just one. Our unique platform gives us access to intelligence that is not readily available in the marketplace. While everyone is interested in understanding settlement data, no one has access to this information at any scale other than the banks,” Green says.
Westpac currently tracks settlement performance and other vital statistics for larger projects valued at more than $20 million – which typically captures projects with 30-plus apartments.
For the 2020 calendar year, presale settlement performance by the required settlement date was up 17 per cent on 2019. Looking forward, the project data for the 2021 calendar year is so far around 25 per cent of 2020 volumes and also confirms strengthening trends in presale performance, back to around 2018 levels.
“Purchasers are eager to settle. It is encouraging to see that the market is coping really well through COVID. In fact, COVID has improved consumer sentiment to settle apartments,” Green notes.
Why are we seeing this increase in presale settlement performance rates?
“Some projects have been delayed. Some purchasers are more anxious to get into their apartment than they would have been pre-COVID,” Green notes.
“There are less investors as a percentage of buyers and we know owner occupiers are more emotionally attached to their purchase. First home buyers are in a better position to settle thanks to government incentives, and valuations have shifted which gives purchasers extra confidence. And then, of course, there is the lack of supply coming through.”
How developers manage the dialogue with a purchaser has evolved too. “Developers are far more organised and active in how they keep their purchasers informed of a project’s progress,” he says. Gone are the days when a buyer signed on the dotted line and was sent away with a brochure and a promise. “This just doesn’t happen anymore.”
Green offers a clear ‘call to arms’ for developers: “More developers have a laser-sharp focus on the customer – and this pays off at settlement time.”
“The intelligence is clear. We have seen the evidence through the last 18 months. Settlement repayment performance has lifted by about 17 per cent on 2019. Leaning in to COVID, we’d expect the opposite. But in fact, the performance of Australia’s residential development markets has been stronger.
“The approach of developers is far more focussed on the customers’ needs and quality dialogue. The same can also be said for purchasers who are now more organised and prepared than they were pre-pandemic,” Green concludes.
Westpac is the principal partner of the Property Council’s new National Mentoring Program.