Written by Truong Mai
Many industries (namely tourism and higher education) in Australia are badly hit by the Covid19 pandemic. Similarly, the real estate services are also getting an adverse impact on their revenue and growth, and thus need a new avenue for growth through data and technology.
The industry with key products and services like property sales, property management, and property leasing, though performing quite well in 2019-2020 with the number of housing transfers and price rise, is forecasted to fall due to the break of Covid19. The revenue for this industry, which, last year, stood at approximately AU$ 28.8 billion and was up by 5,89% from a year earlier, but is projected to fall 8.1% this year 2020-2021 (Thomson Reuters Refinitiv).
Profitability of the industry is not any better! Competition from online (and new) listing services internally and externally the industry has reduced the profit margin of the industry. The online listing companies are employing a disruptive business model based on technology and data to add on more and more features on their core listing services such as booking property inspection, maps which show local school catchment areas and attractions and video tours or virtual inspection on their platforms. Also, with big data (listing) on their platforms, they can provide services like quick valuation and neighborhood amenities and development. These make the competition more and more fierce, making sale expenses higher for existing players and lower profit margin of the whole industry.
On the macroeconomic side, signals are still mixed. Australia had 2 consecutive quarterly growth with the quarter ending in June, the country’s output shrank approximately 7% though the Australian government has thrown into the economy sizable stimulus packages at federal and state levels (over AU$150 billion), in lending support from the RBA (over AU$ 66 billion) and lowering interest rate (RBA current cash rate is 0.25% is forecasted to remain the same for the next few quarters) to save the economy which officially entered a recession in nearly 30 years . Although these could fuel the demand in the industry given an increase in urbanization and population growth, unemployment and weak consumer sentiment could make demand weak.
To survive in this new normal, operators in this industry, whichever markets they are in, including, residential, retail, office or industrial properties, need a new avenue to maintain revenue and growth. Traditional competitive strategies such as extensive marketing and promotional activities which then can provide the benefits of referrals and a wide client database, should not be used alone. Rather, market research and deep understanding of markets based on subtle data of interest to clients would help competitors to strengthen sales revenue and property management activities and thus increase their rental yield.
Consumers, especially buyers, also need to have or to get access to data on not just price and price trend, but also on other factors such as the culture, education, employment and income of the suburbs or local areas they are going to spend a big amount of money to buy a residential place in. They could also need a more helicopter view in making their decision i.e a comparison of potential areas with key indicators of high interest such as income, housing, and people and culture, etc to choose the best home to buy. With this kind of data, it would help players in the real estate services to effectively communicate and negotiate with clients to help them make better decisions thus maintaining clients’ loyalty and building long-term leasing revenue.