By John McGrath
A significant off-market sales trend has emerged in Australian prestige property due to an undersupplied market, better use of database marketing, the rise of the buyers’ agent and increased opportunity for wealthy clients to maintain total privacy.
Most popular in East Coast capital city markets, off-market selling is where a property is sold without any public advertising. Instead, owners quietly list with a trusted professional who then introduces their home to pre-selected clients without ads or open homes.
In our recently released McGrath Report 2017, we discussed how off-market selling is happening across all price brackets but particularly the prestige sector, where privacy is a priority for high profile clientele.
Impressive record prices have been set off-market, none more so than the $70 million Australian record for a single residence set in 2015 when Chinese-Australian developer, Dr Chau Chak Wing purchased James and Erica Packer’s former home in Vaucluse, Sydney.
This year, suburban records have also been set off-market in Sydney’s Longueville ($11.88 million) and Rozelle ($4 million); in Melbourne’s Northcote ($4.3 million); and in Brisbane’s New Farm ($10.5 million) – the city’s highest sale in 2016.
Lack of stock has been a major contributor to stronger off-market selling in 2016. Frustrated buyers are asking agents for early notice of new listings and making premium offers to snap them up and avoid open market competition.
Agents are approaching home owners directly off the back of clients’ requests for a particular street or a home with very specific criteria. This proactivity has given many owners the chance to sell for a premium, avoid marketing costs and remain off the radar.
In Brisbane, off-market selling is occurring more so because vendors are worried they won’t achieve their price in this current market. They don’t want to pay for marketing then potentially face the risk of not selling. So agents are orchestrating deals using their databases to match listings to buyers in a far more discreet and personalised way.
Database marketing has also facilitated the rise in off-market selling. In terms of sales strategy, database marketing is nothing new, but today’s technology is enabling agents to do it better.
The size of agents’ databases, built up over many years as our industry has shifted to a more personalised style of marketing as part of the mix, means agents can create real competition and achieve solid prices while also meeting their vendors’ desire for privacy.
Agents are dedicating more time to developing personal relationships with buyers, especially in the high-end market, as our industry evolves from a largely transactional to relationships-based business.
Some agencies in Sydney and Melbourne have introduced password-protected online platforms that allow pre-qualified buyers to log in and view properties not advertised on the major portals.
The proliferation of buyers’ agents has also led to more off-market selling. Clients of buyers’ agents are time-poor and looking for a more efficient way of finding a new home. Selling agents often introduce new listings to buyers’ agents first and quick sales can ensue.
Chinese social media, particularly the Facebook-equivalent WeChat is also enabling effective international marketing to buyers willing to move quickly to secure the best homes on offer.
We believe prestige property will be the next growth story in Australian real estate. This sector did not move as much during the boom and price growth is overdue.
Demand for prestige property improved this year, with Chinese buyers continuing to move here for lifestyle and expats purchasing future homes in suburbs delivering solid rental yields until they relocate back home.
Growing demand from foreign buyers, expats and local upgraders should move prestige prices forward, as long as the global economy remains stable.
Volatility in the share market, which is directly and immediately hit by events such as Brexit and acts of terrorism, might also attract more investment into Australian real estate over coming years.
It also wouldn’t be surprising to see more people investing greater capital into their homes due to changes to superannuation and the opportunity for tax-free capital gains.