Who is your Customer?
As the drag of lockdown 3.0, the end of the UK stamp duty holiday, three and a half years of inaction to resolve the issues with cladding and the economic reality of COVID-19 all start to bite it is hardly surprising that the first cracks are starting to appear in the UK housing market. We have been here before.
In the wake of the 2008 Financial Crisis, the UK government introduced a 12-month Stamp Duty holiday to prop-up the market, it simply delayed the inevitable. Annual transactions in the UK collapsed - from 1.47 m in the 2007/8 financial year to 892,930 in the 2009/10 financial year (40% reduction).
In the past buy-to-let landlords came to the rescue and purchased much of the new build stock which helped maintain the supply of new housing. Today a raft of new taxes mean that most domestic buy-to-let investors would be better off expatriating there capital elsewhere.
Take for example a UK based buy-to-let investor, additional SDLT, changes to the way that interest costs are treated for tax as well as capital gains tax and future wealth taxes means there is now virtually no opportunity for them to make back their original investment let alone make a return on their investment. By contrast if the same investor purchased an investment property in New Zealand, they would pay no SDLT, be able to offset 100% of their interest costs against taxable income and pay 0 capital gains tax when the investment is sold.
The reality is, as we move into our new post-COVID era, the market will be far more polarised. Those participants who were there before are unlikely to be around. Sales and marketing campaigns will essentially only be effective at two points in the cycle:
· Pre-construction – investors are looking to purchase to achieve ‘value’, no doubt these will be PRS investors, international buyers and RP’s looking to purchase additionality
· Close to Completion – in the 12 months pre-completion where owner occupiers can commit to purchase
The issue is that these are crowded markets. There were 1,500 property exhibitions in Hong Kong last year alone and no shortage of large domestic investors looking to purchase at huge discounts. And at the other end of the spectrum, a lot of buyers looking for Help to Buy opportunities. But perhaps not many in between.
The problem in a crowded market is that it’s not enough to have a ‘catch all’ approach to marketing. We spoke to a developer recently who defined their customer as someone between 28 – 65+ who was looking to own their own home… The reality is that these broad generalist ideas of who the buyer is will no longer cut it in a crowded marketplace where you simply just have something for sale.
Those who want to make an impact will need to have a clear understanding of:
· Who their buyer is?
· How they contact them?
· What message it is which will resonate with them, and most importantly
· What is the customer journey they go on from the day they first engage to the point they complete a purchase?
At Du Val, we are focused on early-stage investors we track a number of clear and specific customer profiles. We would welcome an opportunity to talk to you about what our 800,000 offshore investors in Asia are saying….