By Dr Rupa Ganguli, City Futures Research Centre. Originally published by The Fifth Estate.

In NSW, the Opal and Mascot Towers defects scandals have galvanised a wide ranging response on the issue of quality in apartment building. Together with the tragic fire in London’s Grenfell Tower, the shine has most certainly come off the so-called swing to urban living typified by high rise apartment buildings. 

The overwhelming focus in this reaction has been on exposing the failure of the apartment developers and builders, together with allied professions – engineers, architects, certifiers – to ensure build quality. But critical though these professions are, surprisingly little attention has been paid to the role of another major actor in the apartment market: the sales agents.  

This is all the more surprising given the central role sales agents – called project marketers in the jargon – play in the whole high rise apartment development process. These are the people who convince buyers to take the plunge to commit to buying into the developer’s vision of a new home, in most cases off-the-plan before anything has actually been built. 

But rather than being passive players in this transaction, new research – based on interviews in mid-2020 with over 30 professionals involved in the apartment development and sales sectors – has exposed the highly active role these sales agents play in mediating the process. In many ways, understanding their role also helps explain why it is possible to sell a lemon to so many consumers.  

While their fundamental purpose is to maximise sales rates and prices on behalf of the developer and the project’s financier, project marketers play multiple roles beyond just the sales process, acting as market matchers, information providers, and price influencers, constantly adapting to market volatility. This makes them a key institution in the apartment delivery process, influencing the prices paid and who gets to live in the apartment sector.

These findings are part of my recent doctoral thesis titled, Chameleons in the city: An institutional analysis of sales agents in Sydney’s new apartment market, completed at the University of New South Wales under the supervision of Professor Bill Randolph and Professor Hal Pawson. 

Market matchers

So, what are the key roles of the project marketer?

Firstly, the market matcher role involves convincing buyers to purchase off-the-plan using face-to-face or on-line communication and creating hype and FOMO (or a fear of missing out), when the apartment exists only as a display suite or computer generated image. 

Well-established views on buyer typologies and pre-sales success underpins their approach to buyers. For example, investor purchasers are believed to be more common in a market boom and viewed as an easier target buyer group. They are seen as quick decision makers, often relatively well-placed to obtain a purchase deposit from financiers, making them less risky for a developer. Advertising and marketing costs were considered to be minimal in a market dominated by investor buyers, a positive for maximising sales revenue from the perspective of project marketers and their fee-paying developer clients. 

In contrast, the downsizers or empty nesters among the owner-occupier buyer groups who became more dominant in the bust are perceived to be a more challenging target group, in need of more hand holding in the sales journey.

This means more expensive advertising and marketing campaigns, including high-quality computer generated imagery, drone photography, and display suites. This could be offset by this buyer group’s ability to pay high prices compared with the first home buyers or investors.  

In this way, marketers become a gatekeeper by enabling or constraining purchase opportunities to certain buyer groups and in doing so controlling access to apartment ownership. 

Information providers

Project marketers are also information providers to developers, architects, and consultants, which can affect what is eventually built and sold.

The information includes advice on the target buyer market at the land purchase and project feasibility stage, as well as asking prices and sale rates, design features, and competing projects. 

But they also provide information to buyers. When advising off-the-plan buyers, research participants spoke about different types of information shared between investors and owner-occupiers. For example, investors were seen to be more interested in characteristics which positively affected capital appreciation and rental yield prospects. 

There was no connection made to the issue of poor construction quality and this sales mindset. During the boom of 2012 to 2018, few buyers asked about the profile and track record of the developer or builder. But these questions have become more frequently asked following the defect scandals with marketers adopting a quality assurance role to reassure buyers of product quality.

In contrast, there was little mention of information being requested or shared with buyers on the environmental sustainability of projects. This issue had clearly not filtered through to developers or their project marketers.

Price influencers

Thirdly, the price influencer role involves advising developers on expected off-the-plan sales prices. 

Importantly, these may be incorporated into project feasibility, informing the price payable for the land and eventual sales goals, and asking prices. This role is performed within the context of limited information transparency for buyers, with marketers employing different off-the-plan sales strategies for investors versus owner-occupiers. 

In one reported instance, pre-sale prices were kept five per cent below the market level for the first third of the stock released for sale, with prices ratcheted up as sales continued until a target pre-sale rate was reached. Thereafter, prices were kept to five per cent above market for the last third of sales stock. The objective here was to attract investor purchasers in the initial stages and owner-occupying downsizers in later stages as the latter were keener to see a project’s physical progress. Of course, buyers remain completely unaware of such price manipulation.

Implications for cities 

These research findings have global implications for all urban centres experiencing rising housing density. 

Far from responding to a hidden hand, the high rise apartment market is actively shaped by project marketers whose job it is to maximise returns and sales rates. 

In a hyper-commodified market context, the project marketer acts as a central conduit through which information on new apartments reaches potential buyers. In this process, they actively manage to whom pre-sales are targeted and at what price. 

In such a one-sided transaction, the possibility of on-selling a product of inferior quality becomes not only possible, but compelling.