As Australia emerges towards a new economic normal, economists and the government alike are urging businesses to continue to prepare for uncertainty. It’s no secret that interest rate rises and surging inflation will have a significant impact on the economy, but it’s also clear that both local and global events are influencing Aussie markets significantly. From the war in Ukraine, a changing Federal Government, and other fluctuating market conditions, the increasingly globalised economy means all these things are now inextricably linked like never before.
So how can you prepare your business for what the next financial year may hold? First priority must be preparing a budget for FY23 that can help your business withstand foreseen or unforeseen economic headwinds or tailwinds, particularly in terms of external economic barriers influencing the market. Ultimately this means preparing a budget that prioritises cashflow.
Cashflow will be more important for your FY23 plan than ever before, and there are several key reasons why. Apart from unpredictable market conditions, there are a multitude of expected changes that will impact the real estate market that we can expect to be driven by rising interest rates.
While we’re yet to see the true knock on effect of this on the housing market, it’s most likely that Q4 will see a softening for real estate businesses in Australia. This is of course, something of a correction, after record low interest rates led to a huge COVID boom in the market, but this unintended consequence of the global pandemic was never going to be a long-term characteristic of Australia’s property market.
So what are we likely to see as the year goes on? To start with, average days on market will likely increase in FY23. In addition, rising costs of labour including support staff etc has and will continue to increase in FY23, which will have an impact on your bottom line. For these reasons and more, cash flow is critical to the survival of your business.
There are other things you can do to hedge against stormier market conditions though. When writing your FY23 plan and budget, consider that external economic barriers, softer market conditions and rising costs of labour will make your financial philosophy vitally important. This philosophy must be based around running an efficient and profitable real estate business.
Ultimately the next financial year will see some businesses struggle. But the toughest markets always present opportunities to differentiate from the competition. Consider that property management and customer service will be more vital than ever before, and combining this with a well-thought out budget will put you in the best position to succeed in an uncertain market.