Real estate has always been tribal with the distinctive divides of the numerous exclusive pockets across Sydney. It’s the tribes which exist within each of these areas which unites buyers in a cross-tribal meeting-of-the-minds!
With 2018 upon us we are now well acquainted with the ‘changing market’, the boom years of 2015 – early 2017 are yesterday’s hero and some property buyers are rejoicing, whilst others remain cautious of the Sydney real estate market.
With 67% of Australian’s having their wealth tied up in the property market, according to the latest Census, and 100% of us needing somewhere to live, it is likely that the buyer’s and vendors you are working with have embraced the philosophy of one of the tribal property groups, and each of their beliefs is different and warranted for certain markets and market factors.
The Property Tribe Pyramid provides a snapshot of our marketplace and insight into the belief systems and purchasing psychology or motivations of each Tribe. To engage with buyers on a deeper level in a cooling marketplace now is the perfect time to consider their Tribal strategy and how they can make the most out of the 2018 real estate market. Some buyers may now be open to swapping tribes, whilst others will maintain their long-term purchasing psychology.
Is 2018 the year for first home buyer tribes to enter the market, or will upsizing be the focus for your clients who may be reaping the benefits of past planning and recent prosperity/equity to make it into the smaller group in the Free-Loaners tribe?
- Old Schoolers Tribe: Believers of the tried-and-tested philosophy of saving your deposit and buying a property which they can move into (or potentially use as a sole investment property), and begin their journey on the Property Pyramid. This tribe aspires to eventually join the Rolling Stoner tribe. In Sydney the barriers to entry being among the highest in the country, with median dwelling value being a tab under $900,000 at the end of last year (according to Core Logic), some first homebuyers are using newer philosophies to start on the property pyramid, such as the Rentvestors and Rainbow Tribes.
- Rentvestor Tribe: This tribe chooses lifestyle over investment in some cases, however they value the property market as a means to set themselves up for the future. In their current situation a Rentvestor may not be able to afford to buy the property they want to live in (or in the area/size they desire) and so they purchase a more affordable property. This tribe is aspirational and eventually, some of the tribe will use their profits of this original investment in order to set themselves up to move into the Flipper Tribe or Rolling Stoners Tribes. As we mature into a more global city economy, this tribe will grow and there will be more people who chose to stay in this tribe long term.
- Rainbow Tribe: This tribe is the most vulnerable in the marketplace. They believe in the pot of gold at the end of the rainbow and have bought the promises of other stakeholders in the property market. They buy into incentive programs that encourage First Home Buyer’s to invest in some of the most ‘high-risk’ developments available in the market with the off-the-plan promises of shiny new fittings or savings and benefits thrown in for ‘free’. The Rainbow Tribe believe that things do get thrown in ‘for free’ and quite often are not made fully aware of the risks involved with this type of property or the hidden agenda of stakeholders. This tribe is hopeful and understands the value of owning-their-own-home or some may also be convinced that they are going to buy in ‘low’ with the goal to sell ‘high’. For members of this tribe, the slowing market spells danger as some of these properties could be valued at less than what they have pre-purchased them for, given the median value reductions at the end of 2017 (CoreLogic)
- Hot Spotters Tribe: The tribe renowned for their ‘crystal ball’ abilities and strategy to out-smart the blue-chip investors in more traditional established locations/markets. Hot Spotters have been protected in the rising market and as greater Sydney has experienced growth across the board in past years, however as the market tightens, Hot Spotters will need to be more cautious as this form of investment will be even more high risk than in the past. Hot Spotters are generally inclined to ‘turn over’ their properties, however, if predictions of growth are not what they had anticipated they may end up having to hold on to their property longer than planned because the investment does not given them the financial freedom and ‘boost’ they had hoped for. In this case, they could be a little stalled until the next ‘boom’.
- Flippers Tribe: Trendy to a tee, thanks to TV culture, many aspirational buyers have joined this tribe in recent years. However, the Flippers tribe are going to see many of the members making the survival move towards the Rolling Stoners camp as the slower pace of the market means the ‘stepping stone’ approach is going to be safer for their finances in the current climate. Flippers may benefit from a more long-term approach and forecast for the turnovers of their creative babies. Over the past 6 months of 2017, some of the Flipper tribe have been badly burnt, particularly if they purchased in the peak of the market in April 2017.
- Rolling Stoners Tribe: The matured Old Schoolers tribe, this tribe gradually make stepping-stone moves up the property ladder. This tribe have been in the market for a number of years and may have previously dabbled in the Flipper’s tribe for a period (or a house/stepping stone) as well. This tribe has transacted 2-4 properties already and their long-term progression will be joining the Sit-a-later Tribe. Initially, this tribe purchased an entry-level apartment or small house and as the market and their equity permitted, they have upgraded and grown their profits/ownership and personal fortune.
- Bubblegum Tribe: The ‘Bubble Bursting’ believers. This tribe has not entered the Sydney market because they believe that there is going to be a better time, a cheaper time, to enter the market in the future. The popularity of this Tribe has grown with the rise of our market. With the market cooling in the second half of 2017 and no ‘burst’ happening, the tribe lost some members to all three of the First Home Buyers tribes, Rentvestors, Old Schoolers and Rainbows. This happened because the lure of property ownership, and ultimately the psychology of ‘financial freedom’ became too irresistible as downward trends emerged and prices seemed more ‘palatable’ or ‘cheaper’. In saying this some of the true Bubblegum tribe believers still believe there is a bubble which will burst and they will continue to hold off for their predicted ‘Property Armageddon’.
- Quantity Lord Tribe: This tribe is likely to own more than 3 properties and it is unlikely that the properties are located in Sydney. The properties provide strong cash-flow but a Quantity Lord would not plan to reside in. Banks are a keen stakeholder in this tribal belief system tribe because of the multiple mortgage facilities they require. An issue this tribe may face going forward is related to capital growth and how much long-term financial freedom this strategy will give them.
- Sit-a-later Tribe: This is the final Step for the Rolling Stoners and any tribe of aspirational property investors and owners. The journey for this tribe is now paying down the last of their mortgages and sit-and-wait until they will finally join the Free-loaners Tribe. A Sit-a-later tribe member has secured the property they will stay in long term. The only reason this tribe may transact again is to downsize and free up some of the equity they have built up over the years for their enjoyment at retirement.
- Free-loaner Tribe: The Holy Grail of property ownership where the members have no mortgage and are loan-free! This is the most desirable tribe. This tribe has either invested well and slowly graduated through the stages and tribes of the Property Tribe Pyramid. The property market is ultimately a financial market with huge psychological influences because it is all relates back to our lifestyle choices. The Free-loaners live without the financial strain of a mortgage and they have the financial freedom to spend their money on everything else their heart desires.
Divided by locations but united by the tribe we work with, tribes and the role we play as agents and facilitators of the market. Regardless of the area you are focused on it is likely you are working with members of a number of the tribes at the different stages of the Property Tribe Pyramid and their ultimate property journey goals.
The Sydney property market has changed dramatically throughout 2017 and as we adjust to it as agents and move into uncertain times, what we can be certain about is there are many other Tribal members going through the same process with us. The question of change and adapt. Survival of the most well-adjusted perhaps?
