Tue 11 Mar 2008
Builder's Bazaar
With housing share prices falling quicker than you can say deflation, beating a bear market is proving difficult for some. Natalia Gameson takes a look at builders' own marketing techniques to give those going wrong a gentle push in the right direction.Selling houses this year seems a little like peddling eggs to hens. The roaring nineties and noughties have given way to a market malaise unseen since the 1920s, doomsayers are cautioning.
It's difficult to know what to believe with all activity cloaked in confusion by an opaque market - Knight Frank's latest 2008 predictions alternately say the market remains active, as do so many other reports, so long as housebuilders get competitive and adopt realistic asking prices. This may be a bit on the optimistic side, but let's assume for sanity's sake that it isn't. What can be done in a pessimistic market to perk up sales and share prices?
Money matters: carrots and come-ons
Firstly, says investment journalist Marc Da-Silva, housebuilders should be looking to the overseas market for inspiration on how to reinvigorate the buy-to-let market, where more is called for than jazzy interiors, snazzy kitchens and great views to shift bricks.
"The place to make money is on rental yields. These are generally only guaranteed for the investor for two years at five per cent of the unit's total value, as was the case at a recent investor scheme in Hoxton, Pegaso, by Oracle Residential.
"Compare this with, say, a new scheme currently being marketed by a French developer at the ski resort of Val d'Allos. Here, schemes are marketed as being priced at ten per cent below market value, while they offer the buyer guaranteed fixed rental yields of six per cent of the purchase price for nine years. Should the value of the property double over that nine-year period, the rental yield given to the buyer falls to three per cent as rents double in tandem, giving the developer double the money they were receiving initially, as the buyer is still locked into the initial agreement."
More tried and tested selling techniques have brought incentives aplenty to the marketplace where the first-time buyer apartment market, the units that are hardest to sell, is concerned. Unlike Dubai developer Damac, which is giving away Bentleys with its most expensive flats and BMWs with the cheapest, the British property market is thankfully still playing it cautiously, preferring holidays (a recent Barratt offer at its Aspirations scheme in Lymington offered one at a value of £2,000) to flash car giveaways. For some reason, West Properties in Manchester has kitted out the marketing suite at Origin, its latest scheme, with Agent Provocateur undies to pull in buyers, but that's another story...
I felt the following ploys were more in keeping with this year's grown-up selling ethos, and particularly liked the Birmingham Development Company's move to use a bluetooth system at The Cube in Birmingham, where interested parties were able to download information to their phones to peruse at leisure. Similarly, incentives moghul Barratt Homes is also wooing Brummie buyers with discounted flats in its Skyline development of 50 per cent (translating into one-bedroom flats from £74,975) for anyone who registers with the council's affordable housing list, rather than just purely targeting key workers.
Where such inspiration may be lacking, or inappropriate, creating attractive show home designs is always likely to impress rather than distress, says Jonathon Hooper of interior design company Claude Hooper interiors. "In the current market, we're working with our customers to help them show off units that are proving difficult to sell to their best advantage. We do this by showing potential purchasers that what may seem uninviting can be in fact inviting, and workable, by illustrating room functions and possible furniture layouts. To minimise costs, we don't use paint or wallpaper. This then leaves a neutral palette, so the purchasers can buy, move in and decorate straight away."
Similarly, says Phillippa Hardman, business development and finance director at Raw Corporate Health, you can't go wrong with a decent gym and spa. "Top-end developments must really stand out to generate a wow factor that leads to the highest occupancy rates. A state-of-the-art gym can be very tempting for gym-going buyers, as charges for the use of the services can be as low as £8 a month, offering massive savings on gym membership, which alone can justify a top-end flat price tag."
Old business, new tricks
Most developers are builders, not sales execs, but in the current climate, they need to dust off their selling skills sharpish to stay in the game. New approaches are needed to take the housebuilder away from the industry's "rather pathetic sales gimmicks", says Richard Denny, sales entrepreneur and author of the trading tome for 2008, Winning New Business: Essential Selling Skills for Non-Sales People.
"The media are hellbent on convincing us that a recession is looming, and that the housing market will be tough," Denny states. "If you don't want your business to catch recessionitis, be more pro-active. Spend a little more on marketing and promotion. Get some good PR stories into the press. But above all else, keep yourself positive, enthusiastic and motivated."
Similarly, says Steve Husband, managing director of London-based creative agency DKA, a lot of time is being wasted pondering what to do while waiting for the market to correct itself. "Discounting heavily in the open market is likely to do lasting damage to perceptions of your products," Husband asserts. "Each brand needs to take the direction they feel is most appropriate in protecting brand value in the long-term. Decisions made need to be thought through with a full understanding of what the consequences of a change in strategy may deliver. Budgets need to reflect the expected return, while customers need a reason to buy now."
"We recently experienced this positively with one of our West London clients, Howarth Homes in Uxbridge. In a recent scheme, the units were pitched to target middle England savers trying to put something away for the future, whose details sit on the databases of local agents. By giving the agents our marketing material, and targeting these buyers carefully to make them feel exclusive - all the customer literature that was sent out suggested the sale was private - the weekend launch yielded 20 sales, and produced more ongoing leads for the developer to work with."
With buyers (investors) more reluctant to buy off-plan in this country, as the chances of yielding big price rises during the construction period are slim, presentation is key to avoid price reductions, says Julian Lane, managing director of marketing suite provider Lane Modular. "Tough market conditions bring a need for more show units - as all sales staff can confirm, it's much easier to get a customer to commit to a purchase if they can see what they're getting. There is actually a very strong argument to delay launching a new scheme until the show units are ready," he explains. "When we approach the design of a sales area, we treat it as a retail environment and analyse the fine detail of the customer's journey through the visiting/buying process - from the moment they see the main entrance through to when they pick out their options and extras on reservation."Useful Structures, meanwhile, has come up with a relocatable marketing suite that comes in a range of eight, ten or 12 metre widths and one-, two- and three-storey heights to cater for the top end of the market. Moving away from the typical 24- or 32-feet cabin design, the Landmark system aims to stand out as a sales tool in its flexibility - clients can specify external colours and internal layouts, as well as the type and position of light fittings and switches.
Quids pro quo
In a market in which banks seem loathe to fulfill their primary role in funding mortgages, part exchange can seem the ideal way to tempt buyers to empty the pounds, shillings and pence out of their old abode to put into their new. Delightful as it is to score sale after sale on this basis, the stark reality of being left with 60 resale properties in say, Doncaster, a market of which it is reasonable to assume you have no knowledge, takes the sheen off those figures you've worked so hard to secure. Most of the properties that come up for auction - those that haven't been repossessed - belong to housebuilders who simply don't know what to do with their surplus units.
Enter the part exchange merchant. A number of companies now exist that will buy properties from perspective purchasers and take sole responsibility for these units, leaving the developer to invest the precious funds gained from the new-build sale elsewhere. ARC Properties, which operates specifically around the M4 region, offer not only a part exchange service, which gives the purchaser 90 per cent of their home's value, but also topnotch market advice.
"For developers, the key to sales is getting buyers into the show home," says Kate Faulkner, the firm's business development manager and author of several Which? guides on buying, selling and renting property. "Once this is achieved and reservations are discussed, developers will need to have a range of offers and dealers to stay competitive, which should be bespoke to individuals walking through the door. Is the issue, as with six out of every seven people in the average chain, that they own a home but haven't secured a buyer in time to reserve?
"Thus, part exchange will really come into its own this year - but working with a separate company which buys-in properties with its own funds will ensure you can offer the scheme sitewide. In our case, we invest time and effort visiting all properties, treating all potential sellers with respect and compassion if necessary, as well as carefully choosing the right agents."
Taylor Wimpey, a firm that has been making the headlines for all the wrong reasons after the collapse of its share prices, is also taking up part exchange with online company movewithus.co.uk. The group's Easymover Secure scheme purchases buyers' properties for 100 per cent of the market value, and recoups a fee from the developer for its troubles.
"This new product was the natural next step for our company," said Robin King, one of the firm's founders. "Over the last few years, our buying and marketing strategies have been applied to 8,000 property transactions on behalf of housebuilders and lenders, and now we can buy properties to remove the risk and responsibility completely from developers. We're delighted to be working with Taylor Wimpey on this scheme, which gives today's homebuyer an innovative integrated sale and part-exchange service."
Fancy pieces
Smart bits of kit to turn show home browsers into buyers are also being adopted by the top players in a bid to retain sales, says John Lloyd, chief executive of the Mortgage Advice Centre.
"The builder market is characterised by its lack of IT services at the point of sale, but only a few have taken the step of utilising computers," states Lloyd, whose biggest client is Barratt. "Even fewer use it as a sales and marketing tool. Perversely, the only place where a buyer can't access brand information via the web is in the show home. This spurred my onto develop the 17-inch MAC online touch screen sales and marketing system to bring technology to the site."
The tool, which can be purchased by the builder for a small fee or rented, is basically a computer kiosk, which can engage the browser if the sales exec on site is busy by offering site information and price valuations from Hometrack. Advertising can also be put onto the site, to help the developer generate extra revenue, while potential purchasers can sign up on site if they wish to be emailed by a sales rep later in the day.
Synchronik's PlotFinder Console works on the same basis, but is more geared towards generating off-plan sales. Here, viewers can check out an interactive 3D model of the development on the LCD 42-inch screen, in searching for individual house or flat types, plots and floor plans by type, price and availability, while interactive local area explorer guides should also prove popular with buyers. This imagery can then be cleverly downloaded via Bluetooth onto browsers' phones, while high-res pictures of floor plans and specification can be loaded onto laptops and computers. Make a home a hamlet: Facebook for flats
Housebuilders are not renowned for being paternalistic figures concerned with creating a bit of community joie de vivre in a neighbourhood near you. Most would prefer it if their residents never mixed at all to stop them swopping stories on anything and everything ranging from snagging to surfaces.
CABE rattled on at length in 2007 about how most new developments lack that all-important and elusive 'sense of place' - but creating this may require nothing more than using online tools to create a feeling of community.
For as little as £6,000, LifeAt can devise a simple website to generate an online neighbourhood, which is particularly ideal for flats, and works well with high density developments. Pioneered in America, the system is probably more relevant for top-end schemes, although the firm is having some success with students' halls of residence here in the UK. "It's great for promoting eco credentials on site, car sharing schemes, for example, but it works overall for fitting the nuts and bolts into a sense of community," says Scott Shields, managing director of LifeAt UK.
"By talking to local businesses, you can set up an intranet to create a neighbourhood guide, listing, say, all the area's available services - users can then rate these on their forum pages. Advertising can also be used on site to generate a bit of extra income for the developer."
A similar service called ResidentsHQ has also recently launched in the UK. Aiming to make it easy for residents to interact with each other, as well as enabling developers to connect more easily with their residents, particularly useful when it comes to issues on flats and service charges, which can be traumatic and unclear for both parties. "The point is to increase end-user satisfaction, as advised in John Calcutt's review," says Rebecca English, the firm's communications manager. "Sustainable developments aren't just about the physical environment, but how we live our lives within them. We want to utilise the recent popularity of internet networking sites to help people break the ice and connect with their neighbours."
First published in Show House Magazine March 2008.
The greatest care has been taken to ensure accuracy but some information contained within this article may have changed since it was first published.
Posted by Natalia Gameson
in ARC Property Group, Claude Hooper Interiors, DKA, Features, Lane Modular, LifeAt, Mortgage Advice Centre, Movewithus, Raw Corporate Health, ResidentsHQ, Synchronik, Useful Structures on Tue 11 Mar 2008
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