Skip to main content Skip to footer

Incentives in the Property Market

News article_Residential_incentive_1536x1040

While the goal of homeownership remains almost universal, the role of incentives for home buyers, be they government funded or via incentives from developers, being promoted to the market are usually linked to prevailing economic conditions. When there’s negative sentiment it could be argued that new buyers, in fact, benefit from the available incentives.

Currently with shifting buyer sentiment, we are seeing many more incentives in the market. Is this a negative? It’s a question that often comes up in discussion and I would suggest that incentives are a valid and at times a very important part of the housing market.

Expressed in the simplest terms incentives are a time-tested effective way to motivate people and that includes real estate buyers, after all, it’s usually our biggest purchase in life and there’s no reason to think incentives do not work or apply to the real estate industry.

We’re almost conditioned to react in a positive way to incentives as a foundation of marketing. Think about the child who will clean dishes, vacuum the house and tidy their room just for a few dollars allowance.

As consumers we like receiving incentives or rewards, especially when the offer is simple or convenient and adds value to our purchase or impacts price. This motivation is exactly what makes incentive a big part of marketing and a great, proven tactic to engage our target market. However, it’s very important to have the right incentive because as we are currently seeing, the direct financial cost can at times run into tens of thousands of dollars.

In our industry incentives can be offered by almost any sector and that includes governments, developers, banks and individual vendors.

Some of the most popular and perennial incentives are offered by governments and usually include stamp duty concessions, first home owner grants and recently access to superannuation savings to boost a home deposit. Retirees are also being offered a $300,000 incentive to move from the family home.

The most extreme real estate related incentive might well be those associated with Amazon bidding cities where corporate incentives to the online behemoth include; free land ceding community control, New Jersey is offering US$7 billion in incentives and Chicago, could redirect between 50/100% of state incomes taxes from Amazon employees right back to Amazon, a concession that could amount to US$1.32 billion.

However, locally home buyers are always very sensitive to prevailing economic conditions and markets are seldom uniform. Demand can be high in one area and low or patchy in others and so incentives need to be carefully planned and promoted. Under such varied circumstances the skills of marketing are tested.

Thinking generally about buyers it is important to appreciate that today buyers are market literate and more than capable of doing their own market research and thus incentives must be well targeted.

Buyer awareness of market conditions also extends way beyond price and by logic the value of any incentives on offer. Buyers have a holistic awareness of the market and that includes an appreciation of the quality and number of properties that area available for purchase. Incentives must have value and not simply be seen as a way to ‘close the sale’.

Against this background and given the ongoing appetite for property, it is necessary for those working in the market to identify what buyers will value and importantly not undermine the quality of a project or developers brand.

This may be easily said and much harder to do. Not harder in the literal meaning, but by looking at the market with the emotional and financial attachment of a buyer.

Incentives that will have a positive impact, that is they lift the number and rates of sales, require ‘listening to the market’ and being ahead of the pack to engage buyers in a constructive way. In any sort of incentive-driven market, like we currently have in some sectors of the residential mix, this is essential.

Direct incentives that a buyer might receive could include cash value or discounts, price reductions or rebates, free stamp duty or upgrade packages, these are some of the most popular options.

There are other varied incentives in the form of delayed or structured settlement terms, customer referral payments, loan caps or body corporate off-set or free fees in strata projects.

The promotion and use of customer referral incentives are common in many industries and depending upon the prevailing laws and regulations can be used with incentives offered to both parties. These incentives are also more flexible given the widespread acceptance of social media and the value of personal recommendations.

It is also possible to offer much larger incentives like those that are now commonly on offer from project builders associated and with some large land estate. Here we have seen incentives to upgrade with a heavily discounted package almost become the norm.

While this might eventually lead to buyers always assuming these incentives will be on offer, it does reinforce the need to match buyer expectations. Car sales are an example where today it’s almost impossible to sell a car without an extended warranty.

Incentives used in any sales path need to be justified by the success they achieve, however, at times a quick response might be needed if market conditions take an unexpected U-turn. Experience does show that well-managed and accountable incentives can help drive solid sales results.

If incentives are well defined and not seen as a narrowly focused ‘gimmick’ they deliver positive benefits for everyone. As outlined incentives can be very diverse and have a direct cash value or be more aligned to lifestyle outcomes.

However, if and when used they can’t be expected to influence the market forever, like builder upgrade packages they can run out of steam, become the standard and no longer work as a useful incentive. For some markets it may transpire that it will be necessary to manage price. As perhaps the ultimate incentive, the price is determined by market conditions for private homes or large projects.

Related Experts

Peter Chittenden

Managing Director | Residential


Sydney CBD

My professional knowhow stems from an extensive career in Residential property development, project marketing, site acquisition and property valuation.

I rejoined Colliers International 11 years ago as Managing Director, and since then I have worked to grow my team and our Residential division by more than 300%.

Across the country we have successfully launched and sold over 100 Residential projects, and we have played an instrumental role in every aspect of these successes for our clients.

I have built a team that offers the complete end to end service for our clients and customers alike, from the site aquisition right through to the sale and settlement of every last apartment. 

My 30+ years of experience in real estate, and genuine passion for property has seen me involved across numerous key industry bodies and groups, as well as the establishment of my own thought leading blog, with over 4000 followers from within the industry. 

Prior to my time at Colliers International, I held the position of National Sales and Marketing Manager for Stockland Apartments. During his time I launched and managed a national portfolio of major projects and led a large national sales and marketing team. Prior to this, I started and ran my own successful project marketing company, Realm Project Marketing, for three years specialising in large land estates, housing and apartment projects predominantly in NSW, providing a high level of service that extended beyond the traditional sales appointment.

In my earlier role at Colliers International I was the National Director, Residential Land Marketing, where I established a highly successful division which led to the appointment of our business to project market several major estates in Sydney and Melbourne, which commenced long lasting relationships that our business still maintains today. 

View Expert