Examining down trader motivations and needs

ScreenHunter_968 Jan. 22 14.24

By Martin North, cross-posted from the Digital Finance Analytics blog.

Today we examine the motivations of Down Traders, a household segment which we identified in our household survey. They are people looking to sell their current property and buy smaller, so releasing capital to add to their savings. We have looked further at the data from our surveys, and can paint an interesting picture, which varies across the main urban centres which we feature in this post. More than half of these households are between 50 and 70 years. As some are planning to move interstate, we use their intended destination to define their location.

DownT5We asked about their plans in terms of what type of property they planned to buy. In Sydney and Perth for example, more were looking for an apartment, whereas in Hobart and Adelaide a smaller house was preferred. Some were undecided, others considering a retirement village or residential care.

DownT1Average price varied by location. In Sydney the planned median spend was in excess of $1m. Hobart was cheaper.

DownT2We asked about the factors which would influence their decision about where and what to buy. Households in different areas had different priorities. In Sydney, convenience and life style were important, in Hobart the community rated, whereas in Perth facilities were less important.

DownT3We unpacked the convenience driver. Sports facilities were most important in Melbourne, Access to public transport varied, with Melbourne rating lower, because they have better transport. Access to shops rated in Adelaide, but was less important in Perth. Availability of high speed internet was a factor in the decision matrix.

DownT4So, we find that within the Down Traders, there are considerable variations between locations, and accurate sub-segmentation is required to really pull out the insights. We see, for example, high demand in Sydney for convenient and well appointed apartments, close to public transport and shops, with good technology. There, Down Traders will be competing with property investors for similar properties. Elsewhere, they will be looking at property which would normally be attractive to first time buyers, who are being frozen out of the market. Planners and builders would do well to understand the variations, and focus on meeting the needs of Down Traders, an important and motivated group.

8 Responses to “ “Examining down trader motivations and needs”

  1. flawse says:

    Holy moley! The median price the downtraders are going to pay for a house in Brisbane is around $1M????
    How can that be DOWN trading? Something is really nuts!

  2. Jordan@ABC says:

    this is not surprising – but good to have data to back up common sense analysis

    of course down traders are going to between 50-70

    and it’s not surprising they’ll ‘down trade’ to units or houses that are still above market medians.

    This is by and large the demographic that has captured/earned (lets not debate that point today) the housing and stock market wealth of the nation – so even when they downsize, they’ll be living large relative to the rest of the population.

    The bigger point i guess is what price they’ll fetch when selling existing property. There’ll be precious few people willing and able to buy them

    • flawse says:

      Jordan I’ve been trying to buy a bit of acreage on teh Sunshine Coast. (Note I’m a 65 year old idiot trying to buy from people of around or lesser age that are packing up! So I’m not sure abnout my brain function!)
      Late last year i bid at four auctions where i was the only bidder. Typically i am 20 % less than the asking prices. At the end of the (the three ringed circus) auction it is announced that there are plenty of buyers who want the property who could just not bid on the day. All the properties are still on the market two to five months later.

      Perhaps, as per your post, the planned median downsize price might get influenced by the intrusion of reality as to how much they’ll get for what they now have.

      • Jordan@ABC says:

        great comment/observation flawse

        imagine the dent to lifestyle expectations (and future discretionary spend) that comes with the realisation your house is only worth $200-$300k less than what you thought.

        And then you are going to lose $30-$50k in sales fees plus stamp duty on your ‘down-sized’ place.

        to paraphrase Johnny Cash

        “i hear a train-wreck coming, it’s rolling down the bend. Our houses have been too expensive, since, i don’t know when”

      • flawse says:

        :) I’m a Johnny Cash fan!
        Australia = fantasyland!

      • Wasted Opportunities says:

        +1

        “When I was just a young boy, my mother told me, son,
        Just invest in houses, the price will not go down,
        I outbid a first home buyer, just to watch him cry,
        When I think about their future, I wonder, why oh why.”

  3. Free_Market_Delusion says:

    On a side note our bank manager mentioned that loan applications are down at their branch. It was mentioned that there is a lot of down sizing happening within the age groups identified. .

    I might add that where I live are lots of people in the age brackets mentioned.

  4. Explorer says:

    A few comments,

    1. Most down sizers move less than 5 km
    2. Most apartments in an area are not that much cheaper than houses after you allow for transaction costs but often the apartment is newer, with new paint and appliances.
    3. The big motivation metric for most people for destination is actually friends and family which is why most move only reasonably locally.
    4. when you look at the demographics (both population growth and age bracket growth) you see that there will still be need for some more houses for families, but the growth in dwelling numbers will be more for apartments. It is not likely that there will be a significant price fall in houses compared to apartments. If there was a forecast decline in raw population numbers in the 35 to 55 age group, then there might be more concern about house prices compared to unit prices, but even then, some proportion of houses are lost for rebuilds and for apartments, thus causing some potential for reduction in supply over time. There are relatively few apartments destroyed for new apartments of rebuilds so less hedwind for grwoth in numbers.