Predicting the Future – How Developers Approach Property Development

The media often focuses on property indicators and past events to provide a snapshot of the market. However, for developers, the key to successful projects lies in predicting the future. This future prediction relies on understanding market drivers, the underlying forces that shape market movement.

Ditching the Generic View: Instead of adhering to the broad media perspective, developers should focus on their specific city, suburb, and development strategy. Analyzing market trends for different dwelling types helps identify potential oversupply or undersupply issues that could impact prices. It’s crucial to remember that neighboring suburbs might experience entirely different market dynamics.

 
4 Key Categories and 16 Market Drivers:

Government Incentives: Analyse government spending on infrastructure and cash incentives aimed at boosting the market.

  • Major Infrastructures Projects
    • Federal Governments
    • State Governments
    • Local Governments
  • Cash Incentives & Bonus’s

 

Population Growth: Understanding population growth rates and trends, including factors like rising or falling unemployment, is vital.

  • Births, Deaths & Marriages
  • Intrastate Migration
  • Interstate Migration
  • International Migration

 

Supply and Demand: Assess the pipeline of new dwellings in the target area to avoid potential oversupply.

  • Development Approvals
  • Building Approvals
  • Construction Industry Health
  • Finance Approvals
    • Owner Occupiers
    • Investors

 

Purchasing Power: Consider factors like interest rates, finance approvals, and employment rates that impact buying potential.

  • Unemployment Rates
  • Interest Rates
  • Household Income & Consumption
  • Fiscal Policy
    • RBA Forward Projections
    • APRA Macroprudential Policy
 
Headwinds and Tailwinds:

Identifying headwinds (e.g., rising interest rates or population decline) that hinder market movement and tailwinds (e.g., major infrastructure upgrades or record low unemployment) that propel the market forward is essential.

Opportunity Awaits: When tailwinds outweigh headwinds, opportunities emerge. Savvy developers seize these chances by understanding the specific drivers shaping their target market.

In conclusion, understanding the complexities of property development goes beyond just analysing current market conditions. Success in this field is about visionary planning and the ability to adapt to future changes. For developers, this means engaging with a detailed study of local environments and the forces that drive them. It’s about making informed decisions based on a comprehensive evaluation of various factors, including economic policies, demographic shifts, and the balance between supply and demand.

Such strategic insight enables developers to anticipate market fluctuations, making them better equipped to seize emerging opportunities and mitigate potential risks. This approach underscores the importance of preparedness and adaptability in a sector known for its dynamism. Embracing this mindset is key for developers aiming to achieve long-term success and sustainability in the ever-changing world of property development.

Credit: Rob Flux, Property Developer Network

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