Apartment price corrections have become a fact, and as experts forecast, changes in valuations may increasingly become more popular. Therefore, one of the main reasons why setting optimal apartment prices is so important is because pricing decisions directly influence buyer behavior. A price that is too high can deter potential buyers, causing the property to remain on the market longer than necessary. On the other hand, a price that is too low can cause a quick sale but at the expense of reducing the developer’s margin.
The fact is that the Polish real estate market is undergoing successive changes. With the decline in demand in the real estate market, the most popular words in advertising campaigns are words such as — discount, promotion, deal, extra gift, or bonus. When the market is dominated by buyers, one of the most common strategies developers use is to continuously evaluate the situation where prices have to be adjusted based on the current supply and demand analysis. This involves monitoring market trends, competitor actions, and readiness to decrease or increase values in line with the current situation.
It’s important to note that optimal pricing is crucial for maintaining the effectiveness and financial balance of each real estate investment. Moreover, prices impact the perception of the entire project. A property that remains unsold for an extended period because of a high price can be perceived as troublesome, potentially leading to a negative perspective from clients, even if there are no issues. There are several strategies in place to prevent these situations.
Price data can be collected in various ways, and their main task is to indicate how competitors set their base apartment prices and what promotions they offer. An automated method of comparing competitors’ prices is the most common approach to the current situation. This data analysis utilizes algorithms and mathematical models to estimate property values based on various publicly available data and other relevant information. This process enables tracking competitor actions, informing various decisions, by scanning the market for data regarding the valuation of similar or identical properties. However, it’s important to combine this analysis with evaluation and reporting, as without these factors, they would only be raw data with no practical application.
In the last decade, technology has revolutionized the real estate valuation process, facilitating faster and more accurate access to information. Automated valuation models gained popularity, enabling users to obtain estimated values in real-time based on large volumes of data and algorithmic analysis. These systems can assess hundreds of variables in a few seconds, providing instant and relatively accurate valuations. Big data has improved the ability to analyze market trends, demographic data, and purchasing patterns. This allows for a more nuanced and accurate assessment of property values. Moreover, the use of artificial intelligence and machine learning has enhanced the ability to predict market changes, identify undervalued properties, and optimize prices.
Additionally, digital platforms have also changed the way properties are exchanged and searched. Websites and mobile apps allow buyers to easily compare values and features of several locations, pressuring sellers to adjust prices to remain competitive.
In a highly competitive developer’s market, strategic price adjustment is crucial for maximizing the value of offered apartments and ensuring their proper sale. However, commercial strategies in the primary market vary considerably. Here are two examples on opposite ends of the spectrum:
- I know a few small developers who successfully sell their investments located in obscure locations — usually the outskirts of cities, without advertising actions, through mouth marketing alone. They rely on very positive feedback from previous builds and incredibly attractive low prices.
- On the other hand, other developers argue that it’s not the art to sell for cheap and thus they set the financing process of the undertaking to give themselves room to achieve the highest price possible. In this way, we added gained several million in additional profit within a year and a half on just a single segmented housing estate build.
In reality, decision-makers using different approaches in both cases above have their reasons. Looked at more deeply and on a larger scale, their approach depends on many factors and specific business conditions. A significant majority of investments in our market are made using financing obtained from credit or bonds, which do not leave much room for maneuver and impose a number of sales requirements in specific time thresholds. Therefore it is not as an “expert” from one of the popular internet sales portals recently claimed, implying developers can limit directing the sale of built-up properties. It’s also important to remember that the market is dynamically changing due to many different factors, with local trends often playing a key role in setting the correct sales strategy. Moreover, despite favorable conditions, customers remain cautious, postponing purchase decisions, hoping for better offers.
Author: Adam Białas is a business, real estate, and construction market expert, manager at “Bialas Consulting & Solutions” and a business journalist.
Source: https://managerplus.pl/strategie-wycen-mieszkan-w-zmieniajacym-sie-rynku-nieruchomosci-klucz-do-sukcesu-dla-deweloperow-98977
