Trends and Opportunities for Practitioners
Date presented: Tuesday 28th March 2023
Presenters: Julie Toth (PEXA), Les Vance (PEXA), Bill Lang (Small Business Australia)
The conveyancing and property law sector has significantly changed over the last three years. Looking forward, the future changes coming due to the broader use of digital technologies, changes in customer and referral partner needs and the volatile economic conditions will be significant. These changes are already impacting the building sector and the number of property transactions and demand for property legal and conveyancing services.
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Trends and Opportunities for Practitioners
More ways to help support your business
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Australia’s property markets are being pulled in different directions by multiple local and global factors.
- Interest rates
- Demographics and migration
- Inflation and cost-of-living
- Jobs and incomes
- Global financial & geopolitical disruptions
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Demography is destiny
Adult population growth recovered quickly after the COVID-19 years.
High population growth by international standards
- Fundamental support to our housing markets.
- Resumed quicker than anticipated after COVID-19.
- Set to continue at current pace, possibly stronger.
Net migration contributes most of our growth
- Majority of arrivals are temporary not permanent visa holders, so the ‘churn’ of people is high.
- Majority of arrivals are working age adults, so they add immediately to demand for housing.
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The Great (interstate) Migration
State pop growth and migration point North
Qld currently has highest population growth
- Strong interstate arrivals from NSW, Vic.
- More international arrivals are now landing first in SEQ instead of Melbourne.
- Younger, more mobile population profile.
Vic population fell, now recovering slowly
- Gov expects Vic to regain pre-COVID growth rates but recovery
- Vic pop growth highly dependent on international student and
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Smaller households spread across more houses
Average household size is in long-term decline
New household formation rate averages about 2% p.a.
- This is higher than population growth (~1.8% p.a.).
- Recovered quickly after COVID-19 disruptions.
- Significant driver of demand for new housing.
Average household size is in long-term decline.
- More homes required for same or fewer people.
- Turbo-charged during COVID due to separations, regional migration and WFH needs. RBA estimates this contributed 120,000+ households to housing demand in 2020-21, despite zero population growth.
- Household density may unwind a touch from here.
- Important implications for the number of homes we require, also their size, type and location.
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Sydney always leads the pack
State housing markets: house price cycles
Sydney traditionally leads our residential price cycles
- number one destination for international arrivals
- high turnover of people and households
- highest prices + largest mortgages = more sensitive to changes in interest rates & credit availability
- first market to turn up or down
- larger price swings up or down
Brisbane (SEQ) has moved into second place as our largest,
most dynamic housing market
- stronger adult population growth & net migration
- stronger growth in new housing (but significant loss of habitable housing stock due to repeat flood events)
Perth is remote and somewhat unique, in that it tracks mining cycles
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Activity is settling back toward pre-COVID volume trends
State housing markets: settlement and refi volumes
Settlement volumes moving back to pre-COVID levels
- Peaked in all mainland states in 2021
- Now returning to pre-COVID levels
- Qld settlement volumes likely to stay higher than Vic & NSW due to stronger demand & market turnover rates
Refinance volumes are set to remain elevated in 2023
- Elevated refi activity likely to continue due to unusually high numbers of fixed-rate loans due to expire. RBA estimates 880,000 in 2023 and 450,000 in 2024, spread fairly evenly across geographies.
- ABA estimates that 70% of all loan refinancing moves to a new lender (directly or via a broker).
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Fastest steepest interest rate rises on record
Interest rates are close to their peak in this cycle
Interest rate impact on housing markets
- Fastest steepest rate rise on record in 2022-23.
- Immediate impact on property sales because around 80% of
property sales require finance.
- Delayed effect in 2023-24 as fixed loans roll over.
Interest rate trajectory from here
- One or two more cash rate rises (25 bp each) are possible due to
persistent inflation and strong local labour market, but the case for more rate rises is diminishing rapidly.
- Cash rate pause is increasingly likely as risks rise.
- Increasing risk that retail lending rates will adjust independently of
the RBA cash rate due to global credit market disruptions & risk
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What next in 2023?
Australian property positives
- Strong adult population growth
- Slower but positive activity growth (slow GDP & jobs)
- Trough forming in residential property prices & volumes
Australian property risks
- Rising unemployment & minimal income growth
- Lingering inflation and high interest rates
- Tighter credit availability and lending standards
- Inflation pressures easing
- Slow but relatively stable in China and Asia
- Supply chain and trade disruptions diminishing
Global risks – but also some sources of opportunity
- Financial market volatility and risk aversion
- Flight to safe investments and safe assets (e.g. in commodity markets, gold up but oil down)
- Increasing risk of recession in US and EU (recession conditions
already apparent in UK and likely to continue)
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Build trust and repeat business – Attract and retain clients
First time property buyers
- No to very low knowledge of process
- What “value added” to the end-to-end of buying process?
- TRUST – Credentials, Experience, Personal Referral
Sellers and re-buyers
- Past experience with you?
- Do they remember you?
- What “value-added” did you offer to past clients so they remember, refer and reuse you?
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Your formula for success – Understanding value creation
SPV = Superior Perceived Value
Value = (Benefits + Quality) – Price
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What conveyancers and solicitors are investing in – Working on your business
Top Business Improvement Priorities
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What conveyancers and solicitors are investing in
Getting a RoI on business improvement strategies
- Increase fee per client
- Reduced time/costs/stress serving clients
- Reduced Risks
- More referrals, more clients
- Less stress and more success for the owner
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What key technology trends might practitioners want to be mindful of when running their business?
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How can practitioners manage their cyber security?
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