Overview of the Real Estate Business Globally and in Australia
The real estate market possesses an enormous financial potential; thus, it is an attractive investment field. Indeed, this field is not as risky for investing because even though house prices fluctuate, the demand remains high (Parle, Joubert, and Laing, 2017). For instance, sales in this market increased dramatically between 2009 and 2017, after the economic crisis and real estate market crash (Ullah and Sepasgozar, 2020). According to Ullah and Sepasgozar (2020), global real estate transactions exceeded $870 billion, and approximately $375 billion were invested in this field in 2017. Moreover, this sector’s overall Industry Value Added in Australia ranged from $200,000 to $270,000 in 2017 (Gilfillan, 2018).
The COVID-19 crisis disrupted all aspects of humanity’s life, including the economy. However, people started to buy more houses during the pandemic, realizing the importance of this asset at the time of lockdowns. In fact, housing prices did not drop; conversely, the cost of real estate rose during the last year in Australia (Global Property Guide, 2021). It appears that prices in this sector will continue to grow in the next few years until sales will start to drop, requiring cost reduction.
Microeconomic and Macroeconomic Outlook
Although people continue to buy residential properties, the Australian market seems to experience an imbalance between supply and demand amid the pandemic. The reason for this situation is temporary termination in people’s migration; hence, it is expected that this disproportion will change once the pandemic measures are terminated entirely (Godber, 2021). Nevertheless, a 1% annual rise in unit price and a 4% growth in yearly house price was recorded in 2020 (Godber, 2021).
Furthermore, according to Godber (2021), real estate prices will increase soon. To exemplify, Table 1 shows the percentage of growth of pricing for houses and units. Accommodations in Sydney will become 7-10% more expensive, while the cost of Melbourn’s properties is expected to rise by 3-5% in the next year (Godber, 2021). Furthermore, rental properties are growing in demand and prices, especially in Perth and Brisbane (Godber, 2021). Overall, the current situation in the real estate market opened new opportunities for investors.
Forecast for Real Estate Demand
Since the ongoing pandemic took millions of people’s lives and put significant constraints on countries, the global population will not increase at the same rate as predicted before. Therefore, as shown in Figure 1, the demand for real estate is expected to drop in the next two years (Godber, 2021). However, high demand will re-appear when migration to Australia and citizens’ internal relocation returns to pre-pandemic levels.
The Organization: First National
First National is considered as one of the successful companies in the Australian real estate market. It was established as a non-profit organization in December 1981, and the board of directors was elected in February 1982 (First National Real Estate, n.d.). The company expanded throughout all regions of Australia, New Zealand, and Vanuatu, opening 300 offices in these three countries (First National Real Estate, n.d.). In fact, it possesses more than 6000 properties across Australian territory. This firm’s services include leases, appraisals, and sales of rural, commercial, and residential properties.
The Company’s Strategies
The business decisions that First National Real Estate makes now will determine the firm’s performance on the market in the next several years. The Australian real estate market can be considered a perfect competition model, incorporating many competitors, ease of entry, undifferentiated products, and availability of information (Farnham, 2014). It means that this corporation should be conscious of its microeconomic steps to be ahead of rivals. In fact, strengthening their technical side helped the company be named an online leader among Australian real estate corporations (First National Real Estate, n.d.). Furthermore, this organization understands the importance of marketing; therefore, they include “traditional marketing with high-tech websites, buyer-tenant matching systems, and social media” (First National Real Estate, n.d.).
Notably, First National strives for excellence in providing services, regularly reviewing and improving the procedures and systems they utilize (First National Real Estate, n.d.). Moreover, the firm values its customers who do not speak English and translate their website to many international languages (First National Real Estate, n.d.). Lastly, multiple offices in different regions of the three countries is an effective way to attract more clients.
Microeconomic Outlook
Microeconomy is built upon the individual decisions of customers and businesses; thus, it is essential to review the current situation this organization. Since demand for residential properties rose in the last two years, First National should maintain an adequate supply for its clients (Godber, 2021). Therefore, it continued to provide high-quality services during the pandemic, keeping all the required precautions (First National Real Estate, n.d.). Overall, it appears that the current situation in this market is favorable for First National.
Forecast for 2022-2025
Based on the available information, it is expected that, in the next four years, the real estate market will experience fluctuations in sales; hence, First National may also be affected by them. Specifically, since demand will remain high in 2022, the company’s sales will also be increased. However, in the subsequent two years, sales may drop due to the decreased demand. Still, the situation should stabilize in 2025 when the migration rate will elevate, increasing housing needs.
Conclusion
In summary, the real estate market in Australia experienced an upswing during the pandemic. Indeed, people started to buy more residential properties during the last two years. However, this rise will stop in 2023 and 2024 because the demand will diminish. Still, the recommendation for First National corporation is to maintain high-quality services to keep its client network and a good reputation for the subsequent years, when the demand will increase again due to migration.
Reference List
Farnham, P.G. (2014) Economics for managers. 3rd edn. Pearson.
First National Real Estate (n.d.) History of First National. Web.
Gilfillan, G. (2018) ‘Small business sector contribution to the Australian economy’, Parliamentary Library, pp. 1-9.
Global Property Guide. (2021) Australia residential price index; weighted average of eight capital cities. Web.
Godber, C. (2021) Residential outlook for 2021. Web.
Parle, G., Joubert, M. and Laing, G. (2017) ‘Measuring economic performance of real estate developers in Australia: a longitudinal study’, Journal of New Business Ideas and Trends, 15(1), pp. 43-52.
Ullah, F. and Sepasgozar, S.M. (2020) ‘Key factors influencing purchase or rent decisions in smart real estate investments: a system dynamics approach using online forum thread data’, Sustainability, 12(11), pp. 1-36. Web.