EPISODE 20:
How to Sell Out Your Property Development in a Day: The Future of Off-Plan Sales

00:30
Okay, so Bali Business Club, I’m here today with Brad, Dean, and we’re in Cape Town. So we’re talking about property, we’re talking about off-plan, and we’re talking about your business, Launchbase, maybe in a nutshell, what do you guys do? Do you wanna go? Do you wanna go? Yeah. Yeah, so my background is in property development, so I worked for Rawson Developers for eight years. Dean, as the head of marketing, Dean had a very successful digital agency, and he came on to handle our
01:02
digital marketing for Rawson Developers. We’ve had a 20-year friendship, so through the digital marketing expertise that he has, and then my development background, we launched a few developments for Rawson Developers, the old way, which typically was quite slow, and took a long time to reach a pre-sales target. So old-school marketing, old-school sales agents, that whole model. Flyers, Flyers, yeah, flyers on cars. The old-school stuff, yeah. So Dean brought in sort of a digital approach to the whole
01:36
thing, it was kind of, as far as property marketing goes, in its infancy in terms of digital marketing, and it created a big difference, but we launched the first development for them, actually, in 2017 with our new sort of strategy, which was completely digital, and it relied on a interactive price list, and online launch, and there we sold 102 units of 105 in the first day, so it catapulted the sort of sales volumes up front, took a massive chunk out the apple, and then the developers were able to get to market
02:08
a lot sooner, break ground sooner, save on marketing costs, et cetera, but essentially that sort of started the idea for our business, which now consists of sort of three parts, one is the creative agency, which obviously packages everything beautifully, the second part is the performance marketing, and then we have our software platform as well, so the three working together. Three working together, okay. So I think today we’re gonna touch on what’s happening in Cape Town, Cape Town’s not a market
02:35
we’ve even touched on, but it’s cooking, I know a lot’s going on here, it’s been going for a couple of years, solid ROI, I think a lot of up country people like Joburg, et cetera, driving the property market in Cape Town, so we can touch on that. And then I think you’ve got some, quite a unique product with your business, I think for developers, especially in Bali where, here I think developers are quite big, like 100, 150 keys kind of developments, but it’s quite small,
03:04
but the same kind of marketing techniques would work, so I think for developers, this will be a great one to watch, so yeah, we’ll be back after the break. Okay, so welcome back, Dean and Brad, you were here in Cape Town, sunny South Africa, which isn’t so sunny, it’s bloody freezing, but yeah, we’re gonna be talking about Cape Town, property development, sales, performance marketing, and pretty much what you guys do, yeah? So I’ve got a couple of notes, because we’ve got to convert
03:37
everything to, from Rands to USD, which is a mind warp issue for me. So you guys have sold 1,523 properties, yeah, through your platform? So that was last year, so It’s probably more now. Yeah, it’s probably more in the region of two and a half, 3,000 properties since we started. Oh wow, okay. Total sales value, 4.8 billion Rand. Also last year. Yeah, well you must update your marketing collateral, right? So $260 million, more or less, yeah, which have gone through your platform. Highest launch
04:09
day, so a single day, 311 million, $16.8 million, and then just got the highest unit you sold as 1.28 million dollars for a single unit, yeah. Okay, so yeah, how did you do this? What are the four things, in a nutshell, things, in a nutshell, what are the four things you did, or five things you did that empowered this, or drives this, you know? If you take a back a step to where it all began, we used to go to a few physical launches. So we try to figure out what is the best way to launch a development.
04:40
We obviously, we were in the space of marketing for a developer. How do we do this best? Is a physical launch the way to go? So we used to attend quite a few launches. So IRL at the kind of agents A function venue. A function venue, yeah. Exactly, so we pitched up there the one day and that day was the day where this kind of idea was like, we need to do things differently because it was raining. So we’re like, do we even go to this thing? Like we were kind of unsure if we’d go. So we thought, okay, I’m sure
05:10
a lot of people would do the same thing and how many people didn’t actually attend the event just because of the weather. So anyway, we get there at four o’clock or whatever time until we were meant to arrive. And then there’s pictures up on the, or plans up on the walls, and about 20% of the units are already marked as sold. And we were like the first guys there. So we’re like, okay, this is weird. We may have sort of first choice or first bite of the apple, but we don’t. So immediately off the bat,
05:32
you feel like a second sort of rate buyer. And then the whole thing sort of opens up and they go, okay, you can now book your units, massive bottleneck. There was like two agents or three agents at this table where people asking questions and there was maybe 20 people wanting to get information and it was such a slow process, like a huge bottleneck. And then the other thing was besides those 20 people who were there to take units, and we stuck it out for a while and yes, 20 units or so sold, 20 more.
05:59
But most of the people there were tire kickers or there for the free drinks and canapes. So we’re like, okay, there is some cool hype around an event like this, but there’s a lot of issues. So we said, well, if we do it on a digital platform, we can remove the sort of geographical constraints. So anyone can attend globally, remove the bottlenecks so that you’re not dealing with three agents, anyone who sort of wants to press the button, whoever presses it first gets the unit. Yeah, so that
06:29
was the main thing, but still capitalizing on the excitement and the hype and the scarcity that there is around a launch event. So just taking away the kind of the friction, I would say. Exactly. And you know, something jumps to mind, you’re watching some Instagram posts on those Dubai launches and there’s like a hundred or a hundred people screaming to get in, it looks like a Black Sale, you know, Black Friday kind of sale thing. So yeah, it’s really interesting. Also the international
06:53
market, it opens up for Bali like 70% of the off-plan buyers are all international. Totally, for sure. It’s also obviously to put on an event, it’s expensive. So those events would cost maybe 300 to 500,000 rand, which would be 15 to $25,000, which now can be put towards media budgets. So let’s rather reach a whole lot more people and get them interested in the product. Who can attend the launch and not have that physical spend on that space Okay, we’ll put up like a couple of maybe images
07:29
on like what it looks like, but explain or describe the platform just so that people can visualize what the UX is like. So what is the experience? Because it’s difficult to say, oh, we digitized this process. How do you bring it to life? Very kind of engaging and interactive experience versus the very passive experience of having a plan and a printed out pass or a PDF price list. So there’s things to do and there’s reasons to come back. So during that process, people are shortlisting units.
08:02
And so the reason to come back to the price list within that period is to see how many times the units you like have been shortlisted. In the boulder period. Let me explain those periods. So like, how do you create the hype? How do you create the selling period, like presale, et cetera? Why is everybody buying on that day? Yes. You know, how does it all work? Because most people don’t even know anything about it. Like, body doesn’t work like that. Yeah. Yeah. Well, typically we have a four week pre-launch campaign
08:32
where you have access to all the collateral and the price list, but you can’t buy. So it’s merely getting people into the showroom, having the virtual showroom, having a look browsing, and we are prompting users to shortlist their favorite apartments or homes or plots. So the idea there is that you’re getting them to the platform and they are engaging and showing some form of kind of ownership on the platform. And getting as much information during that period as they need, so that when it
09:04
comes to launch day, they don’t have any questions at that point in time. They just have to reserve their units. So that whole month is a period where they get educated, where they can ask questions, be fully informed. So that’s when the sales agents or sales people will be talking to them. They can chat to the sales agents. They’ll be in the CRM, they’ll be in that whole kind of process. Exactly. They can browse the units in a relaxed way. It’s a very sort of user friendly experience.
09:28
So the whole focus is being the easiest way to browse off-plan property. So you go to the website, you hopefully fall in love with the development and the brand. You move across to the interactive process. It can be middle of the night. You don’t have to wait for an agent to send you anything. You just log in, you go and browse, you start creating your shortlist. And any questions that you have, we’ve got a very comprehensive FAQ. So we try and say as much information as possible should be on the site
09:54
and in the platform, so that you don’t have to rely on an agent for all that sort of info, because the developer has most of the stuff. So the questions that people typically ask the agents would be like, which unit has the best view? So stuff that is a bit more opinion based. Or maybe it’s a harder finance that you know it’s on a foreign buy or whatever it might be. So there’s a few little nuanced questions that they may need help with. And the whole idea is to give people access to everything
10:21
so that by the time it comes to launch day, it’s very easy to just make a decision and pull the trigger. So you push all your marketing spend into the month before it goes on sale. Then I presume you like count down to the sale. It’s like five hours, then you’re getting a shitload of traffic onto the page. And then it’s just like, so it’s buy, buy now really kind of thing. Yeah, reserve. Yeah, it’s a big point of the process you can continue. Yeah, I think that’s a big
10:51
thing that people battle to wrap their heads around going, well, who’s gonna buy a X million tickets item online? And they’re not. They are going through a super easy process finding out which units that they sort of gravitate towards. And then they’re able to get a first right on that unit by reserving it on the platform. So come launch day, and as you say, you have the countdown, but the countdown’s for the month. So if you go on day two, there’s 29 days ticking down to launch day,
11:17
but you have access to everything, you just can’t reserve. So you start seeing, as Dean mentioned, how many people are shortlisting certain units, so you can see which units are more popular and go, okay, well that unit I liked is quite popular, maybe I need to have a few other options. You can also see on the platform, how many people are on there. So it just shows you that, you know, that particular development does have quite a lot of interest. And then on launch day, all the sort of marketing and hype
11:42
has kind of brought them to this day. And we say, like us, if you’re interested, obviously jump online just before whatever, one o’clock when this thing goes live. What’s quite exciting is that you start seeing how many people are online. So like you would in a physical venue, you’d go, okay, there’s 250 people here, but with us, most of those people are there to actually buy. Then there’s no free drinks. How do you ensure that, you know, I’m not sure there’s a lot of
12:06
people reserving, and then nothing happens. How do you tie them into it? So you pay. So once you reserve, so it’s first finger, fastest fingers first. So you press, as the reserve button goes live, once the timer reaches zero, One o’clock, timer reaches zero, buttons go green, you press reserve, you follow the process, it’s quite quick and easy. And then you can make an online reservation payment of 10,000 rand or $500. And then, so you put some money behind your decision, and it blocks people or stops
12:40
people from blocking units that they aren’t serious about. And that’s just a normal e-commerce pay gate kind of. Exactly. Okay, that’s interesting. Okay, any other elements that you skipped that kind of make the buyer psychology less friction to that whole process? Yeah, I mean, it is all around making the buyer experience as easy as possible. So I think we see other people doing in-platform ads. So you see an ad for a development and you submit, and then you wait for an agent to get back to you,
13:10
or you gotta submit a whole bunch of details. That is not how we think it should be done. We wanna go, what is the easiest way for the buyer to get the information? So to be an ad, you click on the ad, you go straight to the website. The website is as easy to navigate as possible. So it’s not a complex website where you get lost and get confused. You kind of scroll to the bottom of the thing. You’ve painted a visual picture of exactly what the development is about. And the whole idea is you get
13:36
to the bottom of the website and you go, I either love this or I don’t. That’s kind of the decision you want people to have. And at that point of time, in time, typically someone gets there and they either go, okay, I’ll submit an inquiry, which people don’t really like doing because then they gotta wait for someone to get back to them. It’s a bit of inconvenience. Or they leave and go, I’ll keep an eye on this project. Whereas what we try and do is go, once you fall in love with the project,
14:00
the next step is to go and browse what’s available. So at that point in time, you click across to the interactive price list and there you can just go and start browsing in your own time without waiting for anyone to get back to you. And what’s interesting is that we see about 90% of our leads coming from platform, the software platform signup, as opposed to inquiries in the website. So when we plug in the software Is it my volume or conversion? Volume. So if you just have a website with inquiries,
14:30
you get 100 leads. If you have a website with inquiries and then plugs into the platform, you get 1,000 leads. It literally 10Xs the quantity of leads, but also they’re not rubbish leads because someone has gone, seen an ad, seen the website, and now submitted their details to browse the platform. And then on the platform, you can start seeing what people are doing. So you can see how many times they go back. If someone just goes there once, doesn’t shortlist the unit, no, they’re not probably
14:55
interested by it. But if they go back 10 times and they shortlist the multitude of units and they unlock their launch discount or any of the sort of actions that we have on the site, you start getting really good insight as to who are the key and likely buyers. Okay, and I suppose the proof in the pudding is you sold how many units in a day? A lot. The most? 200 is the most? 200 was the most. So 200 units in a single day. And your website stood up to the volume of buyers, yeah? Yeah. You had a couple of crashes.
15:28
That they did. We had a few bugs along the journey, but those are things of the past year. In the early days, there was a Couple of hiccups. Let’s just say like we’ve sold more apartments than there are in the development before. There was a time back in the day where if you press the button almost at the same time, there was like a millisecond where two people could get in. And there was a time where once or twice, two people were in the same unit, but there was a Which is a nice problem for
16:02
the developer to have, that they sold 140 of 90 apartments, but a tricky phone call after. You have to refund. Yeah. Sorry, you don’t get it. Okay, and how do sales agents work and get on with you? Because I suppose this is a whole new paradigm of selling property. So I’m sure you guys dealt with just educating, different educational process, like old school buyers, there was probably a bit of resistance to this. Sales agents, how does that relationship work now? So with all the developments that we do,
16:35
we need an agent, we need a person on the other end of the line. So either the developers have an internal person that they could use, or they partner with an estate agency. And we would kind of obviously educate the estate agent or agents responsible on how the process is different to the normal process. Basically, it’s the volume you would have over a year of inquiries and leads to action happens in a month. So you’re typically getting 100, 150 inquiries a day, inquiries or signups a day.
17:11
So the volume is just crazy. So they have to be dedicated to that project. So it’s different because they’re used to three or four a day maybe, and doing a whole lot of other work at the same time, but this is a dedicated person or people on the project for that month period at least. And our business has been received well by some agencies who are open-minded who have said, cool, those guys seem to be doing the right thing. Let’s reach out, let’s see if there’s some synergies.
17:46
And then there’s other agencies who have seen us as the competition and have kind of Blackboard you. Exactly, which is kind of obviously silly because we would work with kind of, we have no real affiliation to, we’ve never had an affiliation to an agency. So kind of open to that. But initially they went over the moon. And it works well for them as well. So there’s a few of them have now approached us. So in the early days, the sources competition, there’s a few have come to us and said,
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listen guys, like we can’t market the way you market. That’s not our business, but we are good at closing and selling and all that type of thing. So how do we work together? And what they’ve also seen is obviously a lot of these developments sell out very quickly. So they go, well, if we put one or two months of our team on this project, we will take a slightly smaller commission. It’s gonna be far more money in a shorter period of time. Let’s rather do more projects this way
18:43
than less the old way. I mean, maximizing your income over a shorter period. Exactly, yeah. I mean, I think, and you guys touched on it earlier, but in terms of what we do differently is that every piece of the puzzle has to be like 10 out of 10 in our minds. So, you know, you say that, you know, what is unique. Every project has renders, every project has a website, hopefully, those type of things. But so much of the stuff we see out there is not on a level that is competitive. So if you drop the ball in
19:16
any of those areas, Dean often uses that analogy. You can have the best content in the world and not put it in front of the right people. You have no sales. You have the worst content or average content, and you put it in front of all the right people, you have no sales. You’ve got to have incredible content, reach the right people, have a seamless process, and then the sales, the results are exponentially different. So what we believe is get every sort of element out of 10 out of 10. So renders have to be
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beautiful, hard to discern from reality or from a photograph, make you feel something emotive, have people that don’t look like like SIMS people, all that type of thing, beautiful, easy to use website, amazing brand, often people neglect the brand as well. So they just go like, we’re selling a product, this is what it looks like. It’s renders and stuff that would be sufficient if you’re building your own home to get an idea of what it would look like, but it’s not enough to make
20:13
you fall in love with something. So it’s actually about building a luxury brand and getting that in front of the right people as well. I suppose with you guys, the keys here, the size of the developments are a little bit larger. In Bali, it’s a little bit smaller, so it’s like five, 10, 20 units. Guys aren’t as sophisticated as to how, they’re either passionate about design or they want to build their own villa and decided to get some more capital and build 10, but they’re not as
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sophisticated. So things like renders for sure fall over, things like sales for sure fall over, those kinds of things. So yeah, I mean, I get that just on the smaller scales, a little bit more tricky. So if you’re speaking to like, because I suppose your solution, you do everything 10 out of 10, but not every development is equal or created equal or that performs as well. So you can get all those kind of branded things correct and what you guys do with pre-sale, et cetera. Where do developers fall over?
21:14
Like what would you, you’ve done, I don’t know, how many different developers, where do they sum stack up and where do some fall over? And why? In reality, like in execution. Just overall, like if you had to give some advice to an aspiring developer or a small scale developer, I mean, what is your biggest thing? I mean, it goes back to what we were talking about now, getting all those elements 10 out of 10. So we’ve seen it a lot. A lot of developers come to us, even small guys, who are saying, listen, we’ve
21:44
got 20 units or 15 units and we can’t sell any. Cool, let’s have a look at what you’ve done. And we go, well, your starting point, your renders are the renders that your architect provided you. So no one’s gonna fall in love with this. Like a SketchUp Yeah, a little bit better than that, but they’re not great. And the reality is those guys, they probably spent whatever it was, 200 grand on their renders. If they’d spent 300 grand, Rand Couple of thousand dollars, yeah. Yeah, a couple
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thousand dollars. That’s what they saved, but it cost them so much at the end of the day. So, you know, in terms of your marketing, don’t try and save on renders. Get the best renders that you could possibly get. Create your own website, so that you’ve got somewhere where people can go track all your leads. But also maybe don’t let your niece do the website for you or nephew. That’s often the case is when we take over projects, where we’re taking over a standard WordPress templates site
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that kind of isn’t customized, there’s no love there. But to Brad’s point about the renders, before you actually have a physical built project, your render is your product. So we go on and on about renders, and we have arguments with developers about renders, and who renders, who we choose, which artists we choose. But for 12 months before development is kind of starting to show signs of coming out the ground, there is nothing to see on site. So you don’t want people to drive past
23:22
and see where the developments gonna be, because it’s not great. It’s an old house that’s falling apart, or an old business park that’s Derelict property, yeah. Derelict, you don’t want them going there, but you do want them to see the vision on the site and go, “Geepers, look how amazing it’s gonna be.” And that is why you don’t save money on your renders. Because often we find the developers been in the project for a year or 18 months or whatever it is. So they’ve got this vision of
23:51
what this thing is gonna be, and they think that the average buyer out there has that same vision, which they don’t. So they think that when they see their render, they’re like, “Oh, this is exactly what it’s gonna be like.” But someone else sees it for five seconds, and it’s gotta articulate everything that went into the last 18 months. And the only way to do that is to have world-class renders. So don’t save money on your renders. So that’s one thing. Where else do
24:17
they drop the ball? Because there are a lot of balls being dropped. So you see the volume. Where else? They’re letting themselves down. Probably numerous places, but one of the other ones is if you have a development with multiple units, maybe over 100, architects tend to get a bit lazy, and they don’t pay attention to every single layout because there are so many, it just doesn’t become feasible. So when the plans typically cross our desk, Brad’s eagle eyes quickly starts to spot the issues
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that we see. So the layouts themselves maybe haven’t been considered. The general building may be fantastic, but as soon as you start to nitpick, you actually realize that there’s a lot of work that still needs to be done there. That’s the one thing. The other thing is the willingness to spend and put a bit of risk. They’ve obviously spent a lot getting to the point of marketing, and so they are a bit more reluctant to spend more. But the golden thing is you only have one chance to launch,
25:31
and if you don’t do it right, it jeopardizes your development in a big way. So if you don’t put the bucks behind a solid campaign and solid marketing and solid everything, your chances of success are that much less. So we’re not for everyone because people will say we’re too expensive and our strategy does require a lot of more upfront capital than you would, typically doing the older slower way of selling. But what way, more capital? From the media side of things. Media creation or
26:08
performance marketing? So performance marketing. Yeah, yeah, yeah. Okay, well let’s talk about that. But also content creation as well. So a video, we all say, “Guys, you create a beautiful video that kind of” Like a rendered video or like a A lifestyle video. Shoot something that kind of speaks about your brand and creates the brand. They’re not cheap. So renders will be more because you’re getting one of the top four guys in the country. Do you do the renders or outsource?
26:36
Outsource. I’ve seen some of your renders, they’re top notch. So renders you’re paying more for, you’re probably paying more for more renders because you want to paint the full picture as well, video and building your own sites and all those things. All those elements add up. So guys are like, “Okay, I would rather just use the architecture renders.” That’s gonna, they’re gonna fall short eventually. But what ends up happening is if you don’t. As Dean’s saying,
26:59
if you don’t spend the media upfront, you don’t reach enough for the right people. So it doesn’t actually sell out that fast. So it’s almost like a, guys call it like a whisper campaign. So they go soft into the market. You sell 10% of your units. It’s very hard to recover from that. So your momentum that you get in that launch sets the tone for everything. So, you know, if you take a sort of 60, 70% bite, out the apple off the bat, you know, it’s go, wow, that went well,
27:23
like let’s jump on board. So it just keeps that momentum. Once you’re on the back foot, it’s so hard. It’s almost impossible. I see that in Bali, like you don’t sell out, you don’t get many buyers or the first, one or two months is impossible. And the other side of the coin is that, you know, there are a few developers who are willing to put the money behind it and take the risk because that’s their game. It’s a risk game. So they believe in the product. They believe
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they’re priced at well. They believe that they’ve got a great design. And we worked with Mason. It was one of the first ones that like went really, really well, like it blew everyone’s expectations. There was two state agencies who didn’t want to take on the project. They said they’re not sure that it would sell but those prices will be a tough sell and whatnot. So eventually we got on board and they just backed us. Really cool developer to work with. Said, do you guys go with it?
28:11
So we spent a decent marketing budget. It was 51 units. I think the total value was about 200 million rand with penthouse at up to about 10 mil. And that sold out in seven minutes. So their marketing budget ended on day one. So they obviously had a contingency for the next sort of 12 months. Marketing budget stopped. They could get into ground sooner, the savings they made because they were willing to put in that sort of money upfront and take the risk was huge as well. I see this a lot also is
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developers or creators, they kind of get a little bit deluded as to how easily this development will sell in the market. So in your experience, you’re a performance marketing guy. Yeah. So what kind of spends are you looking at? Now I know this will be quite Cape Town specific but I presume it’s more or less the same all around. What is your experience on how much spend to how many units to how much spend per unit? What you need to budget, all those kinds of things. Because that is taken into
29:15
account in other places, especially with the larger developers, small developers, they totally overlook it. Or they realize how expensive it is, CPA, et cetera. And they get terrified in the first. And I think agencies are gonna handle and solve all their problems. Which they do sometimes, but often not. Yeah. Okay, so the smallest development we’ve done is, was 13 units, 12 or 13 units in Greenpoint Cape Town. The biggest one we’ve done is 500 units, 508 units in Stellenbosch. The lowest budget that we
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would propose for a proper full launch on a kind of smaller development would be about 10, No, not 10,000. $10,000. 12? Yeah, 10 to $12,000. What’s that per unit? $1,000. I was gonna tell you. I said my math wasn’t good. Yeah, yeah. So $1,000 spend per unit. On a small development like that, yeah. Yeah. The bigger one it goes less per unit. Okay. So it seems low. Yeah. And you sold out on that? Yeah, no, no, there was a two or three, two or three left there, bigger kind of very expensive penthouses.
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But Beach House was the same, there was 18 units and that sold out similar concept. Yeah. So that was- And what was your mix local to foreign buyers on that? So Beach House was, it was interesting that it was about two or three overseas buyers, probably local but foreign buyers and then the rest Capetonians Across the board we see roughly 70, 80% South African and then 20% foreign. It’s not kind of the stats you see in the media with all the foreigners are buying all the properties in Cape Town.
31:20
They most likely are buying a lot of resale property in the Atlantic seaboard, but not necessarily off plan. So off plan, the local investors know the kind of climate, they’re happy to take a punt kind of over two or three years whereas overseas buyers, it feels a little bit more risky. They tend to buy closer to completion, so kind of within the last 12 months until the development is complete because then they can also see it being built and more importantly go for the biggest stuff. So we have sold a lot of big,
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our latest most expensive upon was 35 million rand penthouse in town, foreign buyer and a huge sale for that area. I think we’re probably also seeing a similar amount of sales in off plan developments as you have in the market as a whole. I don’t know the stats on how many foreign buyers there are in Cape Town, but I don’t imagine it’s more than sort of 15%. And I think it’s a reflection of how many people are buying into the Cape Town market as a whole that they kind of come
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through onto the developments. But often developers are, they think it’s gonna be way higher and they’re like, oh, the foreigners is gonna lap this up. It’s never the case. We pretty much see 70% of local buyers, so Capetonians or at least Western Cape buyers buying investment property in Cape Town. And then you get a sort of 20% Pretoria, Joburg, Durban and then 10% foreign. That’s kind of the average on what you see across the board which is super interesting. But to what you were saying earlier
33:02
in terms of media spend and that, it’s such an interesting one. So we’ll spend anywhere between, as Dean said, like 250,000 rand to let’s say a million rand, maybe a little bit more, which is $12,500 to $75,000. $50,000 on the high end? Yeah, yeah, $50,000, $75 on the high end. And you mentioned that like, is that agencies in the past doing their thing? Well, what we’ve also seen is probably about 5% of sales across the board on all of our projects come from the portal. So P24 private property and
33:38
then agency databases. And we’ve got a good database as well, but we don’t rely on it because you get a handful of sales from these massive databases of investors. 95% of sales on every development come from new markets through digital channels and performance marketing. So that is a place that a lot of people underestimate. It’s not typically people who are browsing for property, who are in the market, constantly P24, looking for the best investment property. It’s guys who aren’t.
34:07
And however, if presented with the right thing or a buyer, so they’re browsing whatever, they see an ad, they go, “Sheesh, that looks like an incredible development.” They’ve got the cash, they fall in love with it, they’re a buyer. 95% of your market are those guys. And that’s what has been underestimated in the past, we believe. And people keep on going, “Well, you’ve sold nine development out on day one. Like, how deep is this market?” The market is deep.
34:32
There are so many investors out there, so many people with the right amount of money. They’re just not looking on Property24. investment property. So you just got to find them. But I mean, your ROI on that, on your ad spend is incredible. I mean… It’s very good. Yeah, do you think you could replicate that outside of South Africa? Or Cape Town? So, well, we have just recently replicated that to a certain extent, but we launched a development in Zanzibar. 81 units in Paje, south-east coast of Zanzibar,
35:07
kind of big for kite boarding and kind of youngsters, nightclubs and stuff. We launched last month, 8th of May. The budget was a little bit higher because the market was a lot broader, so they don’t have a big local market that will buy this property. So we had to go to Europe, we had to go to Africa, we had to go to the States. The marketing spend had to be stretched quite far. And obviously, during the build-up campaign, we were able to kind of tailor it and reduce in certain territories that weren’t performing.
35:44
But on the launch day, we landed up selling 50 of the 81 apartments. That is basically a world record for Zanzibar. They were over the moon. So it probably doesn’t sell that quickly. And they were super chuffed. Great developers, let us do our thing. And that’s when we have the best results, is when we can kind of… Exactly. Dictate what we do. Tell them where to spend, what to spend, how to spend it. And the results were amazing. And even though we’ve had nine launch day sell-outs,
36:19
that was probably one of the most rewarding developments we’ve ever done. Because it was a new territory, testing this strategy and how we do things here with a nice project in a relatively young territory. So they don’t have a big, probably, development ecosystem there. So for a number of factors, every sale that we made there was as exciting as one of the sell-outs that we’ve done here. OK, yeah, that’s super interesting. So because you deal with so many developments and developers,
36:49
I suppose you see a lot of data, like what mixes, what property size, what pricing bands, all those kinds of things. What’s your top-line recommendation to a developer, you know, trying to figure out what he wants to do, space allocation, etc. What do you recommend? Sure, it’s an interesting one. Let’s go halvies there. But I think there’s two principles. The one is to have a variety. So if you have all of the same, you’ll typically have a very small price band. So if it starts at one and a
37:26
half million rand, so it starts at $100,000 and ends at $2 million or $2.5 million, $130,000, $140,000, you are limiting your market, your pool of buyers to that band. Similarly, if you have only $5 million to $10 million, it’s a band. So we try to have a mix of kind of entry-level apartments and then the most expensive entry level and the cheapest one-bedroom, for instance, a studio to a one-bedroom, should kind of just be closely priced. And then you go into the one beds and then similarly,
38:03
the most expensive one bed to the cheapest two bed. And so you have a lovely kind of scale, a sliding scale of pricing. The property that sells the quickest on the Atlantic seaboard, for instance, will be sub four million rand. Atlantic seaboard is an area in Cape Town. Area in Cape Town, very hot area. And so $200,000, a little bit more, dollars. Anything sub that you can probably sell quite quickly because guys are looking at letting those out for short-term rentals and that flies. Then the next kind of step up
38:44
takes a bit longer. And then the penthouses and the bigger units are also quite in vogue and popular because guys are then looking possibly to buy as a holiday home or to possibly live six months of the year or when they come down here. So what’s the mix? Sure, the mix is for us, we’d like 50% under four million and then 70% under four million. Yeah, it depends on the product and where it is and what it’s for. I think right now there’s a lot of investors who are buying for the short-term rental returns.
39:25
So there it’s price points and return. So the studios and the one bedrooms do quite well. So those sell fast. You do get the guys who are buying the two bedrooms. But at the moment in the Atlantic seaboard, the prices are a really high per square meter. So there isn’t a humongous market for 80 square meter, two bedrooms, selling 100,000 rand a square. It’s eight bar. That’s not so much an investor unit anymore. It’s kind of becoming more so of an end user type of product. So if it’s
39:57
So small units. Small units for the investor-based product and for the investor-based item. And there’s a lot of investors. Is that because Airbnb is driving those markets so much? It is. Which we’ll touch on. I think that’s a big thing of Cape Town. 100% factors in and a lot of guys are doing it. But it’s not a development that everyone is doing it for short-term rentals. There’s a lot that will still do the long-term route because it’s easier. The cost, you don’t have to finish it.
40:22
You’re not paying 20% to the short-term management agency. And there’s 20% of running costs. So yeah, it’s a bit of both. But there definitely are guys who are buying it for the short-term rental angle. But price point’s important. So if you’re looking at, again, Atlantic seaboard, the 2.5 mil to 5 mil brackets, that’s the sweet spot. Anything sort of One or two bedrooms, small one or two bedrooms. What’s that? $100,000, $100,000 to $300,000 kind of thing. I think you struggle to get a
40:56
two-bedroom for 5 million rand anymore. So in 2022, the most expensive two-bedroom on main road seapoint where we do a lot of developments was 5.5 million rand top floor, ocean view. So what’s that in dollars? 250,000. Yeah, 250,000 for a two bed. And we were worried about those selling, and they did sell. Now you’re looking at 10 million, 10, 12 million for that same unit. $1 million. Yeah. Which is still cheap on an international level, but punchy. A lot punchier. And then what about the type
41:43
of developments? I know in Bali at the moment, those wellness kind of developments are the rage. So you got your ice bath, and you got your sauna, and then you got your spa, and then you got your whole I think it’s coming here. Not yet, yeah. No, not yet. But I think it’s coming. We’ve seen it a bit overseas. We’re chatting to some American guys as well, and it’s featuring quite a bit. Like, developments tend to be very themed these days in Bali specifically. Yeah, yeah. So it’s like wellness, and
42:13
you’ve got a horse, and all these kinds of yoga, or whatever it might be. It’s just giving people they want to live what their interest is. Yeah. We’ve got an interesting one. So we have basically two types of developments. One development that has no amenities whatsoever, but is in an area that you have access to all of that. So you live outside of your complex, or your apartment block. And then the other ones that try to put everything inside, which is an easier sell, but it’s typically maybe not
42:44
as good an area. Or it’s a nice area, but the developers just want people through that building. So we have launched developments that the only amenity is a concierge service. So it’s just apartments and a concierge. Not a pool, not anything. In the right location, like Seapoint, you can definitely get away with that. And then on the flip side, the development we launched in Stellenbosch, student development, had every single amenity you could ever dream of. So you don’t actually have to
43:15
go to lectures. You could probably stay within the compound. Next level gym, swimming, two swimming pools, all sorts. Yeah, I think it’s a big international trend. Yeah. OK. So yeah, anything else on the data side? Any other things that developers would find good to know? I mean, so Investment investors. I think so many developers think that the end user buyer, there’s going to be more end user buyers. It’s just not what we see. So guys will come to us and say, this product is built
43:50
for the end user. This is the story. Family and so on. It just isn’t. So what do you mean by that? Like, what do you mean end user? So someone who’s buying it to use for themselves. So it’s all investment properties, yeah? It’s a lot of investment properties. Or not necessarily only investment properties to rent out, but as second property. So there’s not a lot of guys buying off-plan stuff for their primary residence. So it’s secondary residence, holiday spot, or investment.
44:19
There’s obviously a handful of guys who are buying it for their primary residence. But they take way longer to make that decision. And typically, I think more people want to actually see the final product or make that decision closer to the time. But they’re actually going to move into it. So we’re selling stuff two to three years ahead of completion. I don’t think that many people are worried about where they’re living in three years’ time. They’re more concerned about
44:44
where they’re living now. So it just no matter what developers think, the end user buyer as their first as their primary residence is a smaller component. And that kind of leads onto our strategy. If we’re partnering with a developer who is doing a development or an estate that is primarily for end users so guys are gonna invest in these properties. It doesn’t make sense on paper. That would follow a totally different strategy to our apartment block kind of investment strategy launch.
45:17
Like a pool of investors kind of thing. And that applies to sort of the high-rise Atlantic seaboard properties, the smaller units. Very different story when you start going out to Paarl or Stellenbosch where you’ve got these estates, big plots, big homes. Different totally different buyer. Totally different buyer. I’m not sure not every single one of your developments has been a raging success. Which ones failed? Which campaigns failed? And why? One, we sold 60% of units on launch day, which was amazing.
45:51
For this particular product in its area, which was a challenging area, shot the lights out. And that developer decided to stop the media spend from the next day. They said we’ve got 2,500 leads that came in. And we’ve sold however many units it was, 70 units. But we’re going to mine this 2,000 And get the rest. Group database. And we said, guys, we’ve seen this many times. Those 2,000 people, if they were going to buy, they were going to buy on launch day. They’re gone. Maybe you’ll get one or two
46:21
more sales if you really 2,000 is not much. It’s not. And that’s exactly what happened. They barely made another sale. So continued marketing is absolutely So what happened in that case? What did the developer do? I don’t think they’re actually deciding to go through. So they just pulled it. They decided to And they paid everybody back. Yeah, so obviously the funds are held in escrow or the transferring attorneys. So it’s completely safe. So everyone gets their money back. But the project
46:47
didn’t go ahead. So that’s a good example of it. So continued marketing is key. And I guess because you typically see a small fall off after launch. So there’s maybe 5%, worst case 10% of guys who either extended themselves too much or have cold feet. And that next month is steadying the ship. The next month you’re still marketing. And you’re replacing the guys who fall off with new buyers. So we typically don’t see you sell 60% and then the next month you’re up to 70%.
47:20
The next month it’s 80%. It’s probably 60% for the next month, maybe a month and a half, because you’re losing one, getting one back. And then it starts in month two to kind of start chipping away at the sales again. Developers thought that there would be a bigger pool of investor buyers. And in hindsight, there probably should have been. Because I think you probably could get quite a good return at this estate. But it turned out that the buyers were heavily skewed to an owner-occupier buyer
47:53
who couldn’t make a decision within that short period of time. So they had to either sell their own home or organize finance, or because they wanted a slightly more expensive unit, wait till their household income was a bit more so they could qualify for a higher bond. So we saw a small amount of sales on launch, flipped over to the continued marketing approach. And I think about 90% sold out now. But so that was an amazing case of a developer who was in it with us, who kind of could see that
48:28
maybe the decision to launch this way wasn’t right, even though they thought there would be a bigger investor appeal, and said, instead of pulling the plug, we’re going to continue marketing, change our tune a bit, and chip away at those sales. And it’s worked out amazingly for them. So that one, we did a build-up and launch campaign. So we had that month build-up. And on launch, it didn’t sell as many as they hoped, for that exact reason. In those scenarios, which are more end-user focused,
49:04
it should have probably been a straight-to-market approach. There’s still decent budget, but allowing people to buy from day one and not as much competition on a launch day. But it would also, you mentioned product mix earlier. And this was a really good example of product mix being slightly off. They were freestanding homes, and they all had one garage, and they were all double stories. And the feedback after the month from the sales team was that people wanted double garages. They wanted slightly bigger
49:33
gardens, because the gardens were small. And for the older people in this particular area, they wanted the single-story homes. So the developer was so jacked on this one. They just said, cool, we’re listening to the market. They added double garages. They made single-story homes. They consolidated some plots, made bigger homes. And they started moving them. So it’s almost sold out now. I think there’s five units left out of the 100 or 90 or whatever it is. So flexibility. Flexibility, yeah.
50:00
And listening to what the market wants here. It’s a bit tricky if you bought into your vision and your renders and your architect. So is there anything developers could do up front with research around? On a phase development I mean, your data must be quite interesting to be able to do some kind of data analytic research on, OK, this is what’s selling here. Do you have that kind of service? In markets that we launched a lot of products, yes. But in a different that particular product was
50:32
something we hadn’t done before in an area we hadn’t worked on before. So very little data on that. So kind of have to just trust the developer that they’ve They’ve got it right. They’ve got it right. And the fact that they were adaptable was the key to that. They weren’t successful. But in terms of the high rises and stuff in Seapoint in town, we’ve got a very clear idea of what works and what sells and what the price points are that are How big effect is developer credibility.
50:56
In Bali, I would say some big developers, but usually quite small, things do go wrong often, belly up, et cetera. Other developers in Cape Town repeat developers. They do 100 apartment, and then off to 50, and then off to 50. So there’s trust in that kind of developer. You’ve got trust. The buyers got trust, et cetera. These all new operators who you’re picking up and dropping as you go. There’s probably four or five developers like that in Cape Town. The big guys who are doing project after project.
51:34
But we’ve done launches for about four or five totally unknown developers that have had the same results. Oh yeah, interesting. So the buyers or the investors don’t seem to be too concerned about their credibility. I think they’d like the credible developer to be doing it. But it hasn’t seemed to deter buyers in some of the projects. And it could be the sites that they’ve managed to get have been really good. So almost the location and the marketing and everything and how we’ve packaged it has
52:11
given them that level of comfort. But we haven’t seen a huge fall off because a developer doesn’t have a big track record in Cape Town. Interesting. But that said, the developers who do have a track record and do things properly, they definitely have a bigger following. And I think they’re able to achieve higher square meter rates typically. A development we launched recently. We launched one last year in Seapoint. There were 80,000 a square. And at the time, people were like, that’s nuts.
52:43
No one’s going to buy them. And both of them sold out on the day. A couple months later, we launched another one for one of the developers. A great developer. They really deliver high quality stuff. They’ve got an amazing building team behind them. They hand over all the units personally themselves as the actual owners of the development company. And they achieved 100,000 around a square. So I think those little things do enable you to achieve more in the long term. And they’re going to create
53:10
an awesome legacy. But that said, a once off developer who is going to do things right is also going to be fine as long as they have the right builders. And I think that’s the big mistake that some of the guys make. Same with the Bali contractors and architects. So I think a buyer, if they’re using a renowned builder, the developer’s using a renowned builder, it’s more about the builder than the developer. Yeah, Bali’s all tiny. It got two kinds. Like your next door neighbor’s builder.
53:43
Yeah. Things can go wrong. And I don’t know about in Bali, but do you finance the build as a buyer? Or does it get hold in trust until it’s complete? You finance the build as a buyer? Yeah, I mean, you would finance the build as a self-units. You finance the build. So I guess there’s more risk in that. It’s a cash market. Because here, the developers financing the build themselves, the buyer’s money sitting in a trust account with an attorney. So they’re completely protected unless the building
54:12
well until the building gets handed over in a sufficient way. So I think you’re more protected here. So there’s obviously more risk in doing it that way. Well, I think that’s pretty much it from us. We’re going to touch on Cape Town, but I think we’ve pretty much covered that off a bit. Like what’s hot and what’s not, but you’ve gone through a couple of those things. So I mean, any other tips or nuggets or insight that you could give to developers or even buyers,
54:37
I suppose, that could get something out of what you’ve seen as far as sentiment, trends, things to do, not to do. What do you want to close off with? I guess the interesting thing that Brad just mentioning about we launched development this year at 100,000 rand a square. Last year was 80,000 rand a square. $400? Oh, dear. 4,000, 4,000 a square is 80,000 rand. And then 5,000 is going to be roughly 100,000. $4,000? Yeah. But the year before was $3,000. Before that, you probably had 45 grand a
55:15
square, maybe 40 grand. Like so, it’s gone up by $1,000 a square meter. There are certain developments in the areas that we launch in the last three years, three, four years. So it’s still, I mean, it doesn’t show sign of slowing. And so I think the guys who took a punt at $3,000 a square meter were going, “Sure, have we bought at the top of the market yet?” And then the guys last year who bought at 80,000, we probably were like, “Sure, maybe we’ve bought at the top.”
55:46
I think it’s a global bull market at the moment. It won’t last forever. I mean, Bali’s pumping also. But especially we do a lot of land banking and that kind of thing. It’s 2, 3, 4, 5X in a couple of years. You can count them on your hand. It’s also pumping. How long it lasts would be interesting. But as long as Airbnb keeps going for Cape Town, I think it’s the biggest Airbnb market in the world, I think. Is that true? I’m not sure. I don’t know. Most listings in the world.
56:16
I think most listings, yeah. But I don’t think there are any signs showing that it’s slowing, that the number of people coming into this area is slowing down. So I did read a stat about that by 2030, the whole population of Bloemfontein would have moved into the Western Cape, not physically from Bloemfontein The number of people who live in Bloemfontein. That’s a couple of million people. It’s a couple of million people, all which have to find accommodation, rental or buying. And is this from our country?
56:57
From our country, yeah. Or from everywhere else. And foreigners also. Cape Town this year has got some great press. Now that you’re… no more electricity issues, which is a big issue. Like this whole year, I saw a lot of good media about Cape Town. And it’s fascinating. So last year we were selling apartments with inverters and all sorts of backup. And this year that’s kind of disappeared. So it’s no longer a prerequisite. But again, if you can and you have the keenness to invest,
57:32
there’s never a bad time to do that. Plus, in this market, you can put 10% deposit down and then only the balance kind of close to transfer or with a bond. So it’s not a huge capital outlay on day one. And then your money is growing. What are the rental? Do the rents cover the bonds these days? Not quite off the bat, but sometimes. So the short term rentals are close. My sister bought a place in one of the developers and developments. And now in winter, she said in July, it’s fully booked as
58:08
a short term rental product. And I think it’s covering her costs. So there are some that do. But even if they’re not, your shortfalls minuscule and your returns are good. The high, they’re around the sort of 8% to 12% zone. And you’re getting that capital growth that we’ve been seeing. So you combine the two and it’s cooking. So even if the market flattens off in terms of capital growth, you’re still getting good returns. But as it currently stands with the combination, it’s a good time.
58:41
It’s a hot market. Yeah. Yeah, 8% to 12% is good. I mean, Bali’s around the same, up and down. Yeah. Yeah, interesting. It would be interesting to see what the Airbnb regulations or the short term regulations do. I mean, it would be a pity in a way if that came in strong. If it came in strong, I think pity. But at the end of the day, you can’t have a like Barcelona is a big issue now. New York’s a big issue with Airbnb regulations. It’s kind of important. Otherwise, you’re just going
59:10
to lose your local population and just have a bunch of empty places in winter. Cape Town’s going to become a ghost town. But I think some sensible regulation might be needed, but it might cool the market a little bit. But yeah, I mean, we’ve got the same issue in Bali. All hot markets, you get investments and they just sit. It’s interesting though, because I mean, Dean lives in Sea Point and I did live in Sea Point a few years ago. And it’s not something that I picked up on as a local,
59:35
going like, oh, wow, this is just all tourists. There’s a good portion of tourists, but it’s like local driven as well. So like in the middle of winter, our restaurants are thriving. It’s all locals. There’s a strong local community. So I don’t think it’s tipped too far, in my opinion. But I think you’re right, you know, having regulation in place that makes sure it doesn’t go too far to one end. It might just get priced out. You know, long term, I read somewhere the other day was
59:59
70 percent short term or 30 percent long term on Atlantic Seaport, like in the center of Cape Town, which is massive. I mean, if you’re a young professional trying to find somewhere to live in Cape Town, it must be competitive. Yeah. Which could be a problem long term. Yeah, I guess there are a few issues with that in that the long term rental you’ll be able to achieve will never quite be the same as the short term. And building costs of construction keep going up. So it’s not as if building is
01:00:32
getting cheaper and somehow developers are able to go, cool, we’ll sell at this price for the local population. So that is the trickier, just economically, it’s a tricky one. A de-risked investment is the long term tenant, as Brad said. You don’t have to do all this upfront costs. You don’t have to share pay an operator. But terms are good as well. And the returns, they’re stable. Shifting in Bali now. So we actually did a podcast on this. It was like the short term versus long term
01:01:06
kind of squeeze. Yeah. It’s definitely shifting. It’s just a bit expensive, running a short term letting. Yeah. And long term is just so much easier. Yeah. And you can get those rents these days. Yeah. I think it’s good for Cape Town’s city. So there’s a lot of this short term rentals happening in the Atlantic seaboard and there is in town as well. But there’s so much development going up in the city, which is unlike most of South Africa’s other CBDs. I mean, there’s probably 10
01:01:36
going up that we know of currently, which is incredible. And obviously there will be some that are catered for short term, but a lot that are going to be for the long term as well. And that’s right in the city. It’s close to the Atlantic seaboard. So there’s a lot of good stuff happening. So it’s a good space to watch. In fact, one of the developers we work with on multiple projects, we launched a development for them last year. We sold 90 apartments. So three floors were sales, raisy sales.
01:02:03
And then the bottom six floors are they holding them and for renting them out. And whether that will be long term or short term, they’ll determine that. But that is a lot of stock for the rental market. And that’s their business in Joburg is the rentals. So there should be more of that, I think, which would then cater to a longer term tenant, which will help. Cool. Okay. Any other wise words of wisdom? Um, subscribe to my channel. Moisturize every day. Yeah. Yeah. Yeah. No, we think, um, the
01:02:46
developers that we work with enjoy, as we don’t take ourselves too seriously, as you can see, but, it’s always a partnership versus a client, agency relationship. So, so we have a lot of offline, chats about the market, about the property, that the development itself, um, what they should and shouldn’t be doing kind of earnest chats and it’s, I guess it’s, it helps us do our job. Well, it gives them peace of mind and it makes this whole very serious thing. Not feel as serious as it could be.
01:03:20
Um, because there’s a lot of risk taking. Um, and because we’ve had so much experience on such a multitude of different types of developments in different areas, with develop different developers and, and personalities, we kind of, are very well, almost probably more experienced from that side, than some developers because they’ve only done one or two projects we’ve been involved with 50, um, and being involved in being on the inside, you see the ins and outs and obviously not on the
01:03:51
construction side and all of that, but on the thinking and the decision-making. Strategy, launching Which they get our experience when they partner with us, they get insight to that, um, which I think puts them at ease that they’re not taking too much of a punt. It’s actually a calculated risk, based on, on what we’ve kind of learned in the past. I’ll put your guys’ website in the description, yeah. So you can contact you guys, but, yeah, thanks for that. Um, but yeah, thanks guys.
01:04:23
I appreciate it. Thanks Gawain, shot man. Thanks for your time.