Pandemic impacts off-the-plan sales for units as market shifts

As immigration and travel dries up, developers face a new world of demanding customers moving away from off-the-plan buying.

COVID-19 will force housing developers to adapt to the move away from “off-the-plan” apartment sales, according to Mirvac residential head Stuart Penklis.

COVID-19 will force housing developers to adapt to the move away from “off-the-plan” apartment sales, according to Mirvac residential head Stuart Penklis.

“The days of selling a project over a weekend and then delivering in three years’ time have gone and we will move back to a more normalised market where you will sell some product prior to construction, some during construction and a proportion post-completion,” he said.

Mr Penklis said the impact of reduced immigration and travel bans because of the pandemic were having a significant effect on the unit market but there would still be a shortage of supply in the next 12 to 18 months. Mirvac planned to leverage its scale to begin a number of shovel-ready, approved projects in Sydney, Melbourne and Brisbane to meet demand.

The pandemic’s impact can be seen in the decline in unit construction in NSW, where Mr Penklis estimates 5000 units will be built this year compared with a peak of around 40,000 a year in 2017 and 2018. He said while investors were cautious, there was still demand from owner-occupiers who were upgrading, downsizing and moving to areas with high amenities. But the “frenzied” buying at the peak of the market — when offshore Chinese buyers would buy units sight unseen — would not be seen for a while.

Mirvac says with the shift to buying completed properties, customers are demanding better design and paying more attention to detail and quality. Its regular surveys during the pandemic revealed demands for changes to the layout of homes because people were working from home.

Mr Penklis has had a live lesson in those changes: he has been working in Sydney’s high-density Green Square area, where Mirvac is doing major construction, and he has seen it evolve into a “very local” precinct.

“What was normally the case, in the morning there would be a massive exodus from to the train station to the city and in the evening that same population would come back through the streets of Green Square,” he said. “Now there is not a morning peak or an afternoon peak. We are seeing a steady flow of foot traffic all day with people exercising, going for a walk, going back to jump on a Zoom meeting.

“Three or four months ago, I would not have said there was a thriving daytime environment, now I could name three cafes with a flow of customers all day because people are working from home.

“COVID-19 has redefined the way in which people think about community and the whole shop-local, hyper-local approach, with people really gravitating to the local cafe and the local grocer. The whole concept of the high street, the town centre, is becoming more and more important.”

COVID was reinforcing trends that had emerged before the pandemic. Privacy and soundproofing were important, along with access to outdoor spaces such as enclosed balconies that could also be opened up. These “Sydney winter gardens” could be closed off from the elements and also from the rest of an apartment so the area could be used for work and recreation. Similar tweaks were needed for study nooks that had been incorporated into living spaces in recent years but now were being used for videoconferencing so had to be adapted. And people working from home wanted more power points in apartments as well as kitchens that could really be used for cooking.

Mr Penklis said he was not noticing any fear of buying units for health reasons but Mirvac was adjusting the design of apartment blocks to minimise touch points in shared areas, for example.