Does REINZ recognise the issues facing Realestate.co.nz?

by Alistair Helm in


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This post is specifically written for real estate professionals in NZ, I am not saying that the content will not be of interest to other people, but I sincerely hope that this post more than many I write, is read and shared by real estate people who recognise the role and value of the Real Estate Institute of NZ (REINZ) and who share a belief in the value of Realestate.co.nz.

If you have been a regular reader, especially over the past 12 months since re-establishing Properazzi you will know that I have written regularly on the issues I see with Realestate.co.nz as the industry owned property portal, as well as other articles on the growing competitive threat it faces.

I have made these assertions based on what I judge is the unique experience and insight I have of property portal operation here in NZ and globally.

I’ve reached out in the past 6 months to some of the leaders of real estate companies who are shareholders in Realestate.co.nz, to share these concerned in a very detailed manner with extensive facts and market research. I don’t propose to share this insight here, as it’s based on my own IP and if anyone wants to pay me for this knowledge and insight, I am happy to discuss. To be clear I made it available to the industry simply because I am passionate not to see the industry squander the opportunity that Realestate.co.nz provides to all in this industry, both as a digital marketing platform but also a significant financial asset.

Sadly, my philanthropic gesture appears to have fallen on deaf ears. Not a single invitation was offered for me to meet with the board of Realestate.co.nz, the executive of Realestate.co.nz or any representative of its shareholders. Clearly from this I judge they do not think I have anything to offer. (Just for clarification and background for those who are unfamiliar, Realestate.co.nz Ltd is a privately held company as a joint venture between REINZ and Property Page NZ Ltd a private company itself owned by 5 of the large real estate companies).

With this lack of engagement, I chose this week try another angle and attend the AGM of the Real Estate Institute. I am a member of REINZ as a licensed sales person and therefore like 15,000 or so of my fellow real estate professionals able to attend this annual meeting. I requested in advance to table my address the Board of REINZ and the members present at the AGM under the General Business item of the agenda.

The AGM was a well-attended event and I would be the first to congratulate the board of REINZ and the outgoing chair Dame Rosanne Meo for the transformation that has been achieved in the organisation over the past 8 years. The industry has a professional and competent organisation that has a clear strategy to add value to its members across data, advocacy and education. However, my message to the REINZ board was sure to rain on their parade for which I make no apology. Bad news is never palatable but what I chose to speak about is I judge of significant importance.

I did not speak off-the-cuff but chose to deliver a pre-written address, so I could be succinct as possible and also I could share the address with others. Here is what I prepared and presented at the AGM.


Thankyou Madam chair, I appreciate this opportunity to address the board of REINZ and in addition the members of REINZ both here in person and through this meeting platform to the wider membership.

I have chosen to read from a prepared letter rather than express my opinion spontaneously for the benefit of brevity. Such is my deep concern for the governance of Realestate.co.nz that I might exceed my self-allotted time limit of 5 minutes.

I come here today to address this board and this organisation on a matter that I feels needs the urgent and critical attention of the board. As I will outline, I charge that the board of Realestate.co.nz have over the years mismanaged and squandered the opportunity to not only make Realestate.co.nz a credible and trusted digital platform for buyers and seller but also to create an asset of immeasurable value for the long-term benefit of all members.

Let me begin by introducing myself for those who may not know me. I have had the pleasure over 12 years in this industry to meet and get to know many of you here today. As some of you may know, I began my association with the industry back in 2006 when I became the CEO of Realestate.co.nz, a role I undertook for 6 years. Over the past 6 years I have continued my involvement with this industry working with direct competitors of Realestate.co.nz. Today I attend this meeting for the first time as a member of REINZ – a licensed salesperson with Bayleys. The comments I make here today are made as a customer of Realestate.co.nz and member of REINZ and I judge are professionally objective.

Let me be absolutely clear. I am deeply concerned as to the viability of Realestate.co.nz, not the long-term viability but literally the short-term existence; for I fear that the business has but a short timeline of relevance. I have over this past 6 months shared my thoughts and opinions with leaders in this industry in one-on-one meetings. I took the opportunity to address the board and assembled members here today as a vital opportunity to share this opinion within the wider real estate industry through the shareholding membership of REINZ.

At the outset Realestate.co.nz was established to support and protect the industry from the rapacious ambitions of the competitive media players. Sadly, that mission seems to have been ignored or at least less zealously aspired to over recent years. The company has in my opinion been poorly managed with lacklustre performance and at its core a woefully inadequate technology platform.

Over the 12 years of its operation, Realestate.co.nz has at times taken significant strides forward, whist at the same time has been offered significant competitive opportunities to attain leadership in the digital marketing space. Sadly, over recent years these opportunities have been squandered as a consequence of poor investment decisions made by the executive and board of the company. It is simply not true that the business is the leading property website and for the board of REINZ to be told that is at best misleading.

I hold the board of Realestate.co.nz responsible for what I think has been poor governance and worse still incompetent operational management of the company. This past year’s performance is appalling but is not an isolated year, prior years demonstrate that the opportunity has been missed to leverage this critical digital asset for the benefits of all members of REINZ.

Realestate.co.nz is a technology platform operating a digital marketplace, however over the past 5 years there has been not a single piece of innovation that can be demonstrated to in anyway challenge or in any way concern the competition. The current website environment is an embarrassment, comprises a capable but ageing 2010 ‘Classic’ site matched to a poorly executed ‘New’ site that after 18 months in the market is clearly recognised for the failure it is. Worst though are the mobile apps which nowadays as the platform of choice for more than half the audience of buyers and sellers; have been seriously neglected for years, having been at their launch the most innovative challenge to the competition.

In my opinion the management of the company has not demonstrated the competence required to run a digital business. I believe at the heart of the issue is the lack of technology and digital business experience within the board. Over the span of 12 years and 19 directors only 2 came to the role with the slightest relevant experience, over the past 8 years just 12% of the board representation has provided any relevant experience.

Realestate.co.nz was created as a ‘not for loss’ operation, as an asset for the industry – however to remain relevant and competitive requires reinvestment to grow, simply because in the digital classified arena if you are not growing you are declining and let’s be clear growth is not just providing annual results of revenue growth. Growth is asset value and consumer advocacy and I see no growth in either. The Chairman’s report this year reads like a facsimile of past years. Thanking the industry for support and speaking of challenges and improvements made but sadly these improvements must be in the minds of the board. For the industry, your customers are losing confidence, faith and trust in Realestate.co.nz – I know, I personally as one of your passionate and technically competent re-sellers is finding it increasingly hard to advocate the site to my clients, when it offers so little real value against its competitors, and as a technology platform it is rapidly becoming out of touch and I fear irrelevant.

I did not get the chance to finish this address, I was just over half way through when Dame Rosanne Meo stepped in and requested I wrap up. She stated that whilst she recognised my passion for the business of Realestate.co.nz, she judged that my opinions expressed were not the view held by the board of Realestate.co.nz. She said the board of REINZ were supportive of the Chair and board of Realestate.co.nz and as Realestate.co.nz is a separate company in which REINZ is a 50% shareholder this forum of the REINZ AGM was not the platform for discussing a separate company in which REINZ was just a shareholder.

I did not object to her interruption of my address, I respect her opinion and I politely and graciously returned to my seat. I was though naturally disappointed as I strongly believe that the performance and governance of Realestate.co.nz is a critical matter to REINZ, something that should be addressed.

I contend that the industry, that being the members of REINZ should have confidence that the operation and governance of Realestate.co.nz is being undertaken to optimise the consumer experience as a critical search portal, the customer value as an effective marketing platform for clients’’ listings and the asset value of the investment that REINZ holds in Realestate.co.nz for the benefit of the organisation and the industry. This latter criteria is the one that most concerns me as I fear the board of Realestate.co.nz have little appreciation of the true asset value – not a difficult assessment to make given the transparency of publicly listed property portals around the world.


SQUANDERED OPPORTUNITY

Let’s cut to the chase a bit here. The cold hard fact is that in my opinion the board of Realestate.co.nz have squandered a golden opportunity.

At the inception back in 2006 the focus was very clear – why let the traditional print media companies or their arrogant ‘start-up’ siblings dictate the future media platform of digital which was so clearly going to be the platform of the future, when we the industry, can compete and operate such a platform. This was the smart strategic insight. It proved so smart and by 2010 it was a successful strategy as it defeated the REA aspirant AllRealestate and thwarted the progress on Trade Me Property. This was the time when the board did assess the future equity value of the asset they were creating at the time when global property portals’ market cap’s shot skyward. The directors did star gaze and wonder if this asset might best be sold off for tens if not hundreds of millions of dollars, with that windfall gain being funnelled back into the industry for the benefit of the industry and its members.

Sadly, that mindset diminished, and the focus became beating Trade Me and attaining a goal that was illusive at best, and more than likely impossible – that of surpassing Trade Me’s audience and that is why the single-minded focus from 2013 became consumer advertising on TV and all other media with no thought to the investment in the technology.

As that strategy was followed, so the competition arose and that 100% audience gap stubbornly remained, years past and the notional asset value of Realestate.co.nz began to erode and that is where we find ourselves today. A still massive audience gap to the market leader in Trade Me, new competitors nipping at their heels and a technology platform creaking and crumbling from a lack of investment. At best the value of the asset now can be measured in single digit millions of dollars if it was even of value to anyone. This is the reality of a missed opportunity that I think the whole industry needs to know.


Addendum

This article was drafted between Monday 25th and Thursday 29th November, the Monday being the date of the REINZ AGM.

I was very tempted to post immediately after the AGM, but thought I would wait. Just to see if I had sparked any reaction, feedback or question, 4 days later nothing. Nobody in attendance at the AGM has made contact.

At the AGM, as soon as it had concluded I waited around. I was approached by the Chairman of Realestate.co.nz Fairfax Moresby. He asked me in a friendly manner ‘why I had not picked up the phone and chatted with him to share these concerns’ - I told him that I had chosen to reach out to the shareholders and not the executive or Chairman. That was decision I have taken , I did not feel the approach by me to either of these parties to tell them what they were doing wrong (in my opinion) was either appropriate or would be taken in the right manner.


OneRoof - a 6 month review

by Alistair Helm in


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OneRoof has now been active in the property portal space for just over 6 months and I thought it would be of value to review its success and see what if anything has been the response of the competitors.

When I reviewed this new aspirant back in April, I highlighted what I believed would be the challenges it would face in securing listings and engaging an audience. As ever, these are the two inextricably linked components of a dual-side market that are at the heart of a property portal. For without content, there is no value for a consumer audience, and equally without a consumer audience there is no value for content providers, especially if they are asked to pay for content display.

After 6 months in the market, OneRoof has made significant gains in one of these areas - listing content. From the starting position of having just Bayleys as the foundation content provider they have added a 3 more of the major 5 companies in the industry.

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Lacking just Harcourts from the stable of content, I would say that OneRoof now has close to 80% of all real estate agent listings. A significant gain in the past 6 months. At this time no real estate company is paying for a base subscription of unlimited listings, but clearly any misgivings that the industry owners of Realestate.co.nz had in supporting a competitor have been largely ignored in favour of exposing their clients’ listings to as wide an audience as possible.

Touching on that point of ‘free’ base subscriptions, nothing as ever is for free for long and I would suspect that OneRoof will adopt a ‘pay per listing’ model or monthly subscription sometime in 2019. In the meantime their premium product offering is being extensively marketed to agents either as a standalone offering or as an appealing bundled offering with print pages in Herald Homes. This bundling is a very powerful model that uniquely will see a high priority given to OneRoof on the marketing portfolio offered by agents to their clients and I expect to see emerging revenue results for OneRoof in the 2018 full year accounts of parent company NZME.


CONSUMER AUDIENCE

Now this is where I fear OneRoof has a long way to go to seriously challenge the powerful leading incumbents of Trade Me Property and Realestate.co.nz, not that they are not vulnerable, but they do hold a strong and well established brand franchise.

I do not have access to the most accurate and insightful measures for digital platforms, that being Google Analytics or Nielsen digital ratings. I therefore have been tracking the relative performance of OneRoof and its competitors using a global tracking tool by the name of SimilarWeb. This Spanish company analyses web traffic to create a global ranking of all websites and thereby provide detailed estimates for monthly audience and source of audience.

I recognise that the absolute data points reported on SimilarWeb may not be accurate, however when analysing OneRoof, together with Homes.co.nz and Realestate.co.nz on the same platform over the past 6 months it is possible to infer objectivity to their relative performance. It is this comparative perspective that I am interested to present and analyse. Unfortunately SimilarWeb is unable to provide data for Trade Me Property as it is not possible to extract the property data from the main domain of Trade Me as SimilarWeb only tracks primary domains.

OneRoof has grown a relatively sizeable audience in a short space to time. An audience that within the 3rd month had surpassed Homes.co.nz and is currently around half the size of Realestate.co.nz in estimated scale of visits. Again it is worth noting that SimilarWeb can only monitor web based traffic and therefore no analysis has been undertaken on the relative scale of audience to mobile apps for any of these platforms.

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Whilst as stated SimilarWeb does not track Trade Me Property it is possible to infer a relative traffic in proportion to Realestate.co.nz based on the comments made at the recent investor presentation of Trade Me where it was stated that their traffic is ‘>2x’ the unique audience of their largest competitor.

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In relative terms given how short a time OneRoof has been in operation it appears to be attaining a scale around 25% that of the largest player in the market which is impressive.

However as ever statistics can be misleading when you only observe the headline numbers and fail to dig a little deeper.

When it comes to online traffic a key question that needs to be asked is what is the source of that traffic, is it:

  • Direct traffic - driven by domain name URL being keyed in, this is a key measure of brand awareness?

  • Search engine traffic which comprises organic search a reflection of deep Search Engine Optimisation, together with paid search traffic from Adwords?

  • Social media traffic which also can be through organic or paid traffic?

This is another reason why I favour SimilarWeb, as in addition to tracking traffic on the web for all sites it also track the origin of traffic and this is so enlightening within this segment of property portals in NZ. Detailed below is the comparative make up of the traffic to each of the 3 portals and one data point above all leaps out.

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Close on two thirds of all traffic to OneRoof last month was referral traffic, compared to virtually nothing for Homes or Realestate.co.nz. What is the source of this referral traffic? You don’t have to look far to find out that the vast majority 99.92% of all this traffic originates from NZHerald.co.nz.

From day one OneRoof has benefited from the fact that the NZ Herald website rebranded all property articles as OneRoof articles and all property articles are hosted on the oneroof.co.nz domain powering this massive traffic.

So the reality is that two thirds of OneRoof traffic originates from news articles and ad links on the NZ Herald website. I do however concede that once on the OneRoof site, these consumers do browse listings as the number of pages per visit is 4.2 according to SimilarWeb - that compares to 8.5 pages per visit for Realestate.co.nz and 6.4 pages for Homes. I should also point out I have been tracking all of these sites since March and there has been no variance in any of these metrics.

The fact that OneRoof is leveraging the media presence of NZ Herald to drive audience is no surprise, I foreshadowed it in my April article under the section “Media Family”. It’s been the highly successful strategy of Domain.com.au in Australian which leveraged the Fairfax media stable of digital platforms to build a massive audience. However their market leading competitor Realestate.com.au was not slow to bring this to the attention of ist shareholders who wondered how Domain had grown such an audience. Their investor report of 2016 showed that Domain traffic was made up of 70% news articles and just 30% property listings as compared to Realestate.com.au which equally leveraged News Corp digital property news for traffic but only to the tune of 8% of total traffic.

As a further data point to the relative audience across the 3 main portals I would offer up my current property listing which has received 5,276 page views on Trade Me, 1,789 page views on Realestate.co.nz and 382 page views on OneRoof - the listings received similar premium advertising packages on all 3 platforms as part of a significant marketing campaign. These stats whilst a sample of one would seem to support the conclusion that OneRoof has a long way to go to build a consumer franchise to support the premium advertising solutions; having said that they have everything going for them, a great platform and user experience, a strong brand building programme and massive industry support.


COMPETITIVE RESPONSE

As to that comment at the start of this article questioning what if anything has been the reaction of the competitors. Well to be honest when it comes to Realestate.co.nz I suspect nothing. Realestate.co.nz continues to show no signs of any activity - no decision yet even after 18 months as to whether they have a viable new site; nor as to an aligned and unified view of their shareholders, who rightly could and in my view should have seen OneRoof as a real threat and looked for unity within the industry to rally around the industry owned portal.

As for Trade Me, they have quietly got on with the job in hand launching an excellent new premium product which is delighting agent customers, their shareholders and the consumer. In the long term I fear for the future of Realestate.co.nz as OneRoof is undoubtedly going to ‘eat their lunch’.



Quarterly Property Review for NZ outside of Auckland - Q3 2018

by Alistair Helm in


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The Auckland market is now firmly a buyers-market and the near term outlook is for a continued weakness well into 2019 based on the latest clearance rate and stagnant sales volume. However looking beyond the City of Sails reveals a property market for the rest of the country still experiencing healthy activity, with prices edging upwards, although that rate of increase is slowing.


SALES VOLUME

The latest 12 month total of property sales outside of Auckland up to and including September of this year was 52,998. This represents a small fall of less than 100 as compared to this time last year. The market volumes are certainly plateauing and have fallen by 15% from the peak of sales in August of 2016.


PRICING

The median price of property sales continue to edge upward with a 9% year-on-year increase in September taking the median to $466,730. Whilst the past year has seen strong year-on-year increases of between 6 and 8 percent, the actual median prices have been fairly flat indicating that the next 12 months will likely see percentage increases slip to virtually nothing.


CLEARANCE RATE

The latest analysis of the clearance rate (which tracks the moving annual total of property sales against the same time period of new listings indicating the core activity in the market) shows a slight weakness in the September data in many ways similar to the weakness witnessed in a more significant manner across the Auckland market. As highlighted in the analysis of the Auckland market the opposing forces of supply, finance and broader economic indicators are leading to a weaker market and maybe these self same factors are beginning to impact the market outside of the City of Sails. It is a fact that the rest of NZ tends to follow the Auckland market and this quarters analysis would seem to support this hypothesis based on sales volumes, median price and clearance rate. The next few months heading to the year-end will provide that evidence when we come to report on the Q4 update in January.








The Auckland Quarterly Property Review - Q3 2018

by Alistair Helm in


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The Auckland market is in the midst of one of its most interesting phases witnessed in the past couple of decades. Typically we see Auckland experience a see-saw market - alternating between a booming market or a retreating market.

For fully the past 11 months, the market, coming off a steady 2 year decline in sales has stubbornly, resolutely and somewhat belligerently refused to succumb to further decline; however and this is the unusual part, the market has not in anyway shown any signs of a resurgence, yet.


VOLUME SALES

Analysing sales volumes is critical in understanding the market and more importantly in identifying the future direction of the market. Simply put, rising sales tend to foretell a future rise in prices and equally the converse is true - this is somewhat simplistic but helpful as a rule of thumb.

So what to make of the market we have experienced since this time last year. A year ago the 12 month total of sales for Auckland stood at 22,781, it was the 23rd consecutive month in which sales volumes on a 12 month rolling basis had fallen. From a peak in October 2015 when the total was 34,060, volumes had fallen by 33%. However for the past 11 months sales volumes as seen on a 12 month rolling basis have not changed. Not changed; as in remained within a range of just less than 1,000. Here are the raw numbers and you can see how flat the sales have been.

October 2017: 22,278

November 2017: 21,788

December 2017: 21,608

January 2018: 21,614

February 2018: 21,619

March 2018: 21,350

April 2018: 21,435

May 2018: 21,554

June 2018: 21,561

July 2018: 21,661

August 2018: 21,645

September 2018: 21,615

This is an astonishing series of numbers - the mean variance from the median of 21,614 is just 34, representing 0.2%.

This unusual plateau in sales volumes is clearly seen in the chart below which shows the past 10 years, with the inset view of the full data since 1993. Simply put there has not been in the past 25 years a period when such a prolonged plateau has occurred.

Such an unusual trend calls for an explanation. Here are my thoughts around why, and also what may be the future trend.

The period from the peak in 2005 until November of last year was the classic end of ‘the Golden Summer’ - prices had reached a level that was becoming unsustainable and coupled with tighter lending restrictions, investors particularly, parred back activity in the market as yields became unsustainably low given the likelihood of low capital growth.

There can also be no ignoring the fact that the period of the past 11 months paralleled the duration of the new government, although I would judge this more correlation than causation. However the new government has placed housing atop the agenda, added to which the publicity of KiwiBuild has potentially enthused may first home buyers, but at the same time frustrated others as it clearly demonstrated just how long it takes to activate the supply side of the market.

Ignoring the political influence, the most likely explanation is that a plateau in sales volumes is the outcome of strongly opposing forces - cheaper finance, matched to limited supply of properties coming onto the market, added to which the tail end of strong price appreciation and a strong economy, all key factors continuing to drive demand. Facing off against this is tighter lending criteria in terms of LVR but also tighter debt servicing requirements from lenders, added to which have been growing fears of global economic uncertainty and that same consistent issue of limited supply of properties coming onto the market, in this instance working against the market.

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PRICING

So whilst sales volumes have plateaued, what has been the resultant movement in median price? It would come as no surprise to see that median prices have also plateaued. Proving the premise that rising volumes foretell rising prices as does the opposite. Equally a ‘standoff’ in sales trends to lead to a ‘standoff’ in price movement. Over 2 years ago Auckland median sales price topped $850,000 and since then prices have barely moved. For 6 of the past 9 months year-on-year variances have been down, albeit by no more than 2%.

The one variable that has not been analysed in the foregoing charts is new listings. Adding this into the mix provides what I consider the most robust lead indicator of the property market, that being clearance rate.


CLEARANCE RATE

In the last quarterly report published in August, with the data including July, I was confidently foretelling of a developing upswing in clearance rate and judging that the comments made at the time by the Reserve Bank Governor, that prices may be as likely to rise as to fall could be accurate on the upside. Well a further few months of data are now showing that prices may in fact be more likely to fall in Auckland as to rise. For the much heralded recovery in clearance rate has had a significant set back as shown in the chart below.

The fact of the market is that a stagnant level of sales is facing off against rising level of new listings which have lead to a drop off in the clearance rate which is significant and a setback to the heralded recovery. The rise in inventory is not to be unexpected at this time of year, however, remember this clearance rate is based on 12 months of moving total data of both new listings and sales and therefore excludes seasonal influence and more accurately therefore reflects true underlying market trends.

It therefore looks more likely that the Auckland property market is going to continue to face strong head winds in the coming months with a potential slide in prices as a buyers-market takes hold and sellers learn to adjust expectation in order to win that sale and in so doing allow themselves to become tough negotiators with their buyer-hat on.


Realestate.co.nz and the crumbling marketing strategy

by Alistair Helm in


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It was 5 years; almost to the month that Trade Me made its ill-fated blunder. A very costly blunder, a blunder that continues to hold strong memories within the minds of many in the real estate industry.

Trade Me implemented a new pricing policy. That in itself was not the issue, as price changes are a part of any evolving business especially as 5 years ago digital marketing was still evolving and establishing itself as a core element of property marketing. The real issue that took a poorly-thought-out pricing strategy and turned it into a costly and damaging blunder, was the handling of the communication coupled with the reluctance of Trade Me to engage with its customers and really understand and acknowledge how little they understood the business they had been operating in for 7 years.

The repercussions of that pricing strategy involved the Commerce Commission, a lot of lawyers and a window of opportunity for the industry owned portal Realestate.co.nz to seize a golden opportunity.

Realestate.co.nz had been up until 2013 playing a role as a challenging #2 specialist property portal to Trade Me’s #1 generalist classified platform of which property was a critical financial vertical, but sadly not managed with a clear understanding of the sector or the industry customer relationship. With the industry’s reaction leading to a boycott of Trade Me in the fall out of the pricing strategy blunder, the whole industry of agents, business owners and real estate companies rallied around Realestate.co.nz to bolster the industry-owned site. It appeared at that time that the future was bright for Realestate.co.nz which just might result in ascendancy to market leadership.

So much was going right for Realestate.co.nz through 2014. Real estate agents across the country where advocating the site to their clients, ensuring 100% adoption and strengthening the brand awareness. Additionally and importantly these agents were preferencing, like never before the platform as part of marketing campaigns, whilst playing down or rejecting marketing on Trade Me. The industry was swelling the marketing coffers of the company through the advertising dollars spend on premium products. Trade Me meanwhile was losing customers and importantly losing listings.

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From a time when Trade Me was an undisputed leader in inventory, the tables were reversed and Trade Me slumped to barely 80% of the total market inventory. This, rightly or wrongly became the battle ground upon which these two played out their competitive battle of the next 5 years.

Realestate.co.nz decided that this ‘win’ of superior inventory was to be the strategic marketing advantage they could leverage from that day to now to win this fight - the marketing spend was massive as the company ploughed almost all net earnings into marketing.

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In my opinion this strategy was a massive mistake, for 3 reasons.

  1. Inventory superiority was never going to be a unique advantage that could be sustained - that has now come be true and will now haunt them.

  2. I contend that whilst the industry is fixated on inventory; after all it is the single most important metric as listings precedes sales, and inventory showcases real estate brand. However to the consumer what relevance is there in inventory? When a consumer goes to Trade Me and searches for listings for sale in Greytown - they want to see what is for sale. If they use Realestate.co.nz they will also see what is for sale and likely they might use both sites or both apps, but do they bother to look to see how many listings there are for sale - NO. For information Trade Me shows 40 listings of property for sale vs Realestate.co.nz at 36.

  3. Focusing everything on marketing was dumb. Building brand awareness is key, but surely someone at Realestate.co.nz was aware that brand advocacy and recommendation of the user experience of the core product (website or app) is much more important than endleslys repeated advertising shouting about inventory. Sadly it would seem that nobody thought to ask this this question or challenge the investment in marketing vs. product development, as over the past 5 years (as judged from consumer perspective) hardly a dollar has been ploughed into product development. The core web site is still the same website launched in 2010. A ‘new site’ was launched in June 20017 but still remains in beta. And let’s not forget the apps - the iOS app last got an update in July 2016, is only compatible with iOS 9 (this is n-3 for the geeks out there) and last got a refresh back in March 2014. The Android app was last updated in August 2016 which was purely a cosmetic change.


The Crumbling Inventory Advantage

Let me come back to the first of these - building a competitive advantage on inventory. The fact is this advantage is over. Trade Me can now legally challenge the claim that Realestate.co.nz is “the property site with the most listings”. The fact is Trade Me holds supremacy as the site with the most properties for sale - with 4% more properties for sale at this time.

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As at the 10 October Trade Me Property features 26,317 listings of properties for sale including lifestyle properties but excluding bare land and building sections whilst Realestate.co.nz features just 25,146.

The Future

Realestate.co.nz has now got to work out what to do - I don’t envy them. The odds as I see it are stacked against them. The catalogue of problems they face keeps growing:

  1. They have no CEO (the previous CEO left speedily in June)

  2. They face massive competitive threats from both Homes.co.nz and OneRoof

  3. Their web platform is a disaster - the classic site is still live and trusted but is showing age from a competitive standpoint around the user interface.The new site is still buggy and not trustworthy, I still personally rely exclusively on the classic site.

  4. There is no awareness of their Automated Valuation Model that is so critical these days and is so much a part of the appeal of Trade Me, Homes and OneRoof to home buyers

  5. The mobile apps are neglected and so far behind the mobile platform expectation and their competitors

  6. The services they provide to agents, both in reporting of listing performance and insights as well as agent brand profile are way behind Trade Me with OneHub and Homes agent branding offering

I could go on, but I think these 6 are sufficient for the board to take on at this time. The industry has placed a huge amount of trust, faith and dollars into the industry-owned site over these 5 years. Now as a part of the industry I personally hope that someone on the board or someone amongst the shareholders wakes up and realises that this business is vulnerable and is potentially fated.








Facebook’s ambition for real estate could significantly impact Trade Me

by Alistair Helm in


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There is no denying or ignoring the reach and ubiquity of Facebook. Despite the recent setbacks and concerns over privacy and the world of fake accounts. Facebook is the platform to reach any community – true of NZ, as it is in almost any place on the planet.

In NZ more than 2.3 million check it every day. Whether that is to share thoughts, photos or simply to while away a few minutes on the latest meme.

There is as ever always a commercial focus for Facebook, and ever more so of their Marketplace product which holds massive opportunity. It will ultimately allow the company to move beyond advertising and pitch up against Amazon in the broadest sense of retail. In the context of real estate, I don’t foresee a property-for-sale move coming anytime soon, however their early moves have been into rentals and flatmates. These 2 categories happen to be core elements of Trade Me Property’s portfolio representing 27% of their total revenue, equating to $10m per annum according to their most recent financial report.

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Just last month in the UK it was announced that Facebook had struck an agreement with the second largest property portal Zoopla and the leading industry owned property portal On The Market to syndicate all of their rental listings into Facebook marketplace. This is a significant move with potentially massive implications for the NZ real estate industry and Trade Me.

Facebook at its core is a community platform that values stickiness – that ability to attract and retain users and monetise them. This is very different to Google that in essence seeks to attract users and then as quickly hand them off to their advertising customers. This difference is significant if we examine the history of property listings syndication in NZ and to some extent globally.

Around 10 years ago Google set up an initiative (Google Base) to present real estate listings on Google Maps – a massively disruptive move which encouraged real estate companies to syndicate their listings to Google to be found on map based search. In many ways bypassing the property portals who were adamant that this was disruptive and damaging to their business model. Most of the global leaders boycotted the platform and in some cases went as far as stopping their Google Adwords marketing budgets which at the time were massive.

The initiative died a few years later and is now consigned to the archives of initiatives Google has tried and killed. The initiative though was something at the time I supported whilst CEO of Realestate.co.nz. I chose to work with Google to support our customers. Realestate.co.nz was an industry owned-portal and in this sense the ambitions of our customers, real estate companies was perfectly aligned for this syndication whereas for Trade Me and the likes of Rightmove and REA Group they were opposed. They feared the ambitions of Google as a truer competitor, being a content aggregator search engine that could disintermediate between the listing originator (real estate company) and the consumer.


So let’s fast forward back to 2018 and Facebook’s partnership in the UK. Already Rightmove the leading property portal has said it will not work with Facebook in syndicating rental listings. Facebook does not want to go direct to real estate companies, property management companies and private landlords to power Facebook Marketplace for rental. It is not in their DNA to be a search engine nor a structured data integrator. Their preference is to partner in order to source a trusted comprehensive feed(s) of listings. In this way they get structured data and don’t have to bother with the interface vagaries of multiple data transfer systems that would be required to be maintained if they went to real estate companies, property management companies or end users.

What attracts Facebook to property rentals and flatmates is stickiness. It also happens to be content that is skewed younger and is perfect social and viral content – all aspects that align to Facebook strategy.

Let’s look at how Facebook Marketplace sits today in terms of inventory of rental and flatmates in NZ for rentals and compare it to Trade Me as shown below, using Wellington as an example.

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No comparison. At 70 listings on Facebook vs. Trade Me with 1,241. Facebook is stuck in the classic 2 sided market conundrum. Without listings there is no audience engagement and without audience engagement then no appeal to add listings. However Facebook is not without an audience who would flock to Marketplace if they went from 70 listings to 1,241 listings in a day. That would change the dynamic for Facebook Marketplace for property.

So would Trade Me Property syndicate their listings to Facebook? Trade Me effectively is the market in this segment; with all private listings and all property management listings.

In my opinion no way. Trade Me earns over $10m from rental listings. Syndicating these listings might be an appealing proposition that they can offer their customers as a wider audience reach. However it would be, as I see it in their judgement taking traffic away from their platform. So if not Trade Me, where might Facebook access the syndication pipe for rental listings?

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This is the threat that Trade Me is very likely highly nervous of – what if Realestate.co.nz stepped in and made an arrangement with Facebook?

At this time Realestate.co.nz does not have the depth of content of rentals as their source is only property managers and their inventory today is just over 5,000 as compared to Trade Me at 8,500 rental and over 4,000 flatmates listings. However based on the same principle as I adopted all those years ago the syndication of those listings would be aligned to the outcome to Realestate.co.nz property management customers, offering a vastly expanding audience reach for these listings. If Realestate.co.nz was really ambitious and thinking strategically to could manoeuvre Trade Me. They could build an interface to allow private landlords to list their properties for rent as well as offering a whole new service to flatmates. Such a move would offer all these customers a powerful USP of exposure to the massive Facebook Marketplace audience for free – how powerful could that be? At the same time there is no reason why Realestate.co.nz could not monetise those listings which at say a low $50 per rental / $10 per flatmates. This could generate c. $8m per annum of incremental revenue, even at half those fees $4m is a massive opportunity for Realestate.co.nz.

All of this of course is purely hypotheticals, and sadly I don’t believe that Realestate.co.nz has the vision or courage to take such bold steps. Having said that, Trade Me Property should not rest easily, for it could equally face another challenge. For whilst Realestate.co,nz might not pick up the baton offered by Facebook then maybe OneRoof might judge it worthwhile or even Homes?


Tauranga - a property hotspot

by Alistair Helm in


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This week saw a media article highlighting the un-affordability of Tauranga property. It also stated that the city was now the 12th most expensive city in the world.

I am really not sure where this data point comes from and sadly the publication - The NZ Herald, failed to substantiate the claim. Seems odd to me where a city of 125,000 people can be the 12th most unaffordable in the world, when there are over 1,000 cities nowadays with a population of more than 500,000 people with many in economically strong stable western economies. Anyway, I was drawn by the article to undertake some analysis to compare the property prices in Tauranga with Auckland just to see how different they are currently and historically.

Back when accurate reporting began of property prices in 1992 the typical property in Tauranga sold for $113,000. At that time the median property in Auckland sold for $135,000. Tauranga properties back in 1992 were 16% cheaper than Auckland properties. Fast forward 26 years and today Tauranga median sale price last month was $635,000 whereas the median sale price in Auckland was $835,000. Tauranga properties today are 24% cheaper. However whilst the relative gap has moved in favour of Tauranga as a cheaper place to buy there is no denying the underlying fact that Tauranga prices have seen more than a 4 fold increase in the past 26 years and Auckland a more than 5 fold increase. Again these factors of price growth are not unique to NZ as I recently outlined in the article "Do house prices quadruple every 20 years?".

To see just how this price inflation has played out over the past 26 years I have constructed this chart which tracks the percentage growth by month of the REINZ House Price Index using January 1992 as the base month which each month indexed as a percentage against it.

The property price inflation seen in this chart reflects the well documented property cycles experienced in NZ over the past 26 years. However there is a period within the Tauranga data that is very unusual and frankly pretty staggering.

During the period of just 20 months beginning in December 2014 and ending in August 2016 the House price index in Tauranga rose 50%. That is a staggering rise. Over those same period when the Auckland market was super hot the Auckland index rose just 34%. Compare that to the most recent 20 months leading up to the latest data for July 2018 - Tauranga's price index has risen by just 8% whilst Auckland has made a very modest 1% rise.

As to the comparison of Auckland property prices and Tauranga property prices today, as noted earlier, Tauranga median sale prices today are 24% cheaper than Auckland.

The median variance over the past 26 years is 21% cheaper; so today Tauranga property sales prices are a little bit cheaper than historical average against Auckland prices. Those are the facts of property statistics, I recognise that these facts are of little comfort as affordability, upon which the orgininal media article focused is all about income in comparison to price, and in that regard un-affordability in Auckland is as real as un-affordability in Tauranga.


The unchanging face of NZ real estate

by Alistair Helm in


 Photo by  Sharon McCutcheon  from Pexels

Photo by Sharon McCutcheon from Pexels

I had the pleasure the other week of lecturing to second year Property students at the University of Auckland Business School. The subject of the lecture was the structure, processes and practices of residential real estate. In putting together the slides for the lecture, I was wanted to provide some facts around the 'typical' real estate agent and therefore went over to the Real Estate Authority website to check out the latest stats on licenses held by those in this industry.

This single slide provided the students with a visual insight into the industry some might be interested in joining, or so I thought. I took the opportunity to ask the assembled c.100 students how many were considering a future career in residential real estate?

Not a single hand rose.

The fact is most of these students see their future career in commercial real estate or property management or valuations, so I took the opportunity to open up a discussion as to the students' views of residential real estate.

However before sharing the thoughts and feedback let's dwell a moment on the facts as presented in this chart.

The demographics profile of NZ real estate agents

The age demographic of the NZ residential real estate industry has hardly changed over the past couple of decades. It is regarded by many as a 'second career' with that median age hovering in the late 50's. (No surprise here that my recent entry into this industry as a practicing agent puts me squarely in that age bracket!)

Across the more than 15,000 individual licensees the gender balance is slightly more skewed to men, having said that within the age bracket with the most agents, being 40 years to 60 years; women are in the majority, representing 52% of all agents. However in my opinion, the most glaring statistic relates to the two age extremes. The fact is that less than 1 in 10 of all licenses held by agents (both men and women) are under the age of 30. Whilst the proportion of men over 65 years in the industry is 1 in 6. These are the facts, and whilst I have no historical data to hand, I recall from earlier readings that even 10 years ago these demographics were pretty similar. 

It is interesting to compare these numbers with the latest data from the US and their National Association of Realtors whose 2018 Member Profile Report shows that 63% of agents in the US are women, the median age is a similar 54 years but over there, the age bracket of under 30 years represent just 5%, whilst over 65 years represent 20%!

Across the ditch whilst I could not find any published statistics, I know from first hand experience that it is a far younger industry, with I would imagine probably around a quarter of all agents under 30. The industry in Australia certainly has a more youthful feel.

Now back to the question and the subsequent discussion - why is it that young people are so under represented in the make up of the real estate industry in NZ? Here are 4 possible explanations as voiced and discussed by the students.

Income

The first explanation voiced by the students was money. As I had outlined the NZ real estate industry is a commission-only industry and it is hard reality that a new agent entering this industry will need to support themselves for up to 6 months with no income and in addition would likely require to fund total costs of many thousands of dollars to get established. Students already saddled with debt are highly unlikely to be able to survive such a start to a career.

Trust

Secondly, trust came up as a point of relevance. How could a twenty-something be able to build trust when perception is that wise older individuals with the relevant life skills engender greater trust around a process that is fraught with emotion and risk? It is a fair comment, especially when you also consider that twenty-somethings have not bought and sold a property. However I could well counter that with the fact that in any line of business such new entrants to the workforce are often handling contracts and responsibility for multi-million dollar value goods and services, the difference being that they are operating within a structure that supports them and backs them within the 'organisation'. In real estate the fact is that you are the organisation.

Perception

The industry is a reflection of the current incumbents and this is self perpetuating and a hard cycle to break, there is no denying that. However there are well over a thousand agents under 30 years who are making a success in this industry. They are overcoming these hurdles and breaking the perception.

Industry Structure

The NZ industry as I have outlined in the past articles is very concentrated with 6 leading companies holding more than half the share of offices around the country. This strength in the major brands and franchise structure that the majority operate, could be seen to perpetuate the same business model that attracts the same demographic profile of agents and does not foster innovation.


So that's 4 perspectives as to why the industry demographic is the way it is and the way it has in someways always been. So what could change, what could be the seeds of change that could be sown to foster a greater diversity amongst the league of agents in the next 10 years? 

Here then are a few of my own ideas to stimulate some debate as to solutions.

Income

Tackling the issue of income has been broached by some companies in the industry through cadetship - offering a base level of salary for an initial contract period rather than commission-only earnings. This base income sustains the cadet and still offers an adjusted commission which would give the young and aspiring agent a vital leg up. I know of some of these schemes from Harcourts, Barfoot & Thompson and I know first hand of such a series of schemes at Bayleys.

I recall very well the discussions back in 2007 when the revision to the Real Estate Agents Act was being debated and the issue came up as to the status of 'independent contractor' which was challenged, but finally upheld for this industry. As I recall at the time it was limited to real estate agents, share milkers and courier drivers. Maybe in time, just as in Australia a minimum salary becomes mandatory and provided to all agents in real estate.

Would a change to employed agents change things? 

In someways it would, as it would seriously challenge the business owners in their recruitment and performance management of all agents as to costs of supporting a non-performer would be very real. It would though at the same time not fundamentally change the open commission opportunity and with it the core appeal of the industry to the majority of top performing agents.

Trust

I am not actually sure this is an issue that needs addressing. It is a perception that is so easily overcome when dealing face to face with a smart professional who can deliver a great service and age is no barrier to that.

Perception

I think there are a number of things that can be done to change the perception of the industry from a career opportunity perspective. There is an organisation that specifically focuses (as the name suggests) on young real estate professionals: Young Professionals in Real Estate (YPIRE) - it's an Australasian organisation but has held a number of events in NZ, however none lately and none planned. It has the backing of the Real Estate Institute of NZ and Realestate.co.nz but judging by its Facebook page and website it has all the signs of a distinct lack of attention.

Engaging young people I think has a lot to do these days with creating an entrepreneurial spirit, young people are inspired by peers who are leveraging technology to transform industries and processes. I have been impressed over the past few years by a US initiative driven by Realogy (the leading US real estate franchise conglomerate) - FWD is an annual innovation summit where budding startups pitch their technology solution within the real estate industry and stand the chance to win the top prize of $25,000 and with it the kudos of being profiled in front of the most influential people in the US real estate industry.

Why not adopt this approach in NZ. There are a number of smart tech innovators looking to offer solutions to the real estate industry here in NZ who have ambition to capture a global market. How hard would it be for one of the leading real estate companies or even REINZ to put such an event together and in so doing reframe the perception of the industry, one that is open to new ideas and willing to support innovation.

What am I doing?

Something I am doing personally is to participate in the Business School 'buddy' system - acting as a mentor and allowing a couple of students to tag along with me as I do my day-to-day work over the next few weeks giving them what I hope is an insight into the industry, and in so doing foster some greater appreciation of the way this industry works and highlight the opportunities open to smart graduates.


The great Auckland property divide

by Alistair Helm in


As the topic of affordable housing continues to capture the headlines; the statement is so often made that Auckland is one of the least affordable places to live in the world. Now I don't propose to debate this question, outside of making the point that if house prices were unaffordable, as in truly unaffordable; then the demand would shrivel up and price expectation would adjust accordingly. Now I know this is a simplistic statement, and the fact is that property prices have more than doubled over the past decade pricing many out of the market. However the fact remains that every day 60 properties are bought and sold across Auckland at a median price of $835,000. By comparison I see that the average advertised price for all property in Great London is now NZ$1,169,000 and in Sydney the sale median price is now NZ$1,225,000. The common link is that all 3 cities are centres of innovation and economic growth and are the leading city of their respective country. It is also not surprising that all three cities are simultaneously experiencing house prices falling, such is the connectedness of global property prices.

This current median price of Auckland property of $835,000 is 84% higher than the median property sales price outside of Auckland, where the latest median price is $455,000.

I was curious to see how this premium for Auckland property had tracked over the past couple of decades to see just how relatively unaffordable Auckland had become in domestic terms and thereby provide insight into the property price divide between Auckland and the rest of NZ.

I have chosen not to use median price as the metric for this analysis. As I have mentioned in preceding articles my favoured measure is the Stratified Price Index provided by the Real Estate Institute. This is in my opinion, the most accurate measure of house sales price for comparative purposes.

So this analysis is presented in the chart below, it is to my way of thinking quite enlightening. At this time based on the price index Auckland is trading at a 95% premium to rest of the country. Three years ago the divide between Auckland prices and the rest of NZ peaked at 128%, with Auckland more than double the price in the rest of the country.

The Auckland divide of house prices comparing Auckland with the rest of NZ

The historical perspective is very interesting. Back when data was first reported by the Real Estate Institute in 1992, property prices in Auckland were 40% above that of the rest of the country, through the mid 90's that shot up to 80% premium, a level that was pretty much sustained through until the end of 2013. Then began a surge in prices outside of Auckland, at a time when Auckland prices were certainly rising. This pushed the divide down to just under 50% at around the start of the GFC.

The next 7 years from 2008 Auckland went on a relative rollercoaster ride as compared to the rest of the country driving the divide from 50% up an ever accelerating steep curve to top out in 2015 at that level of 128%.

Given the current picture of property prices outside of Auckland compared to Auckland it is very likely that the divide will continue to fall in the coming year reducing the Auckland premium from 95% closer to 75% / 80%.


Quarterly Property Review for NZ outside of Auckland - Q2 2018

by Alistair Helm in


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As I have commented recently, I've made a conscious decision to cease to produce data analysis on what is seen as the "NZ Property Market" - the fact is this aggregation is really no longer as relevant, given how distinct the property market is between Auckland the rest of the country. So this is the first of what will be a quarterly report for the aggregation of property data for areas outside of Auckland, complementing the separate report for the Auckland market.

The brief overview of the property market outside of Auckland based on data up to and including July, shows a relatively healthy market with good clearance rate, sales volumes fairly static at a strong level, with prices continuing to rise with mid single digit year-on-year growth.


Volume Sales

From a volume sales perspective - annualised volumes are steady at around 52,000, a level that has been consistent for around 9 months. The past 4 months has seen a very slight increase but not enough to yet call it a upturn. This level is down 16% from the last peak of sales which was close to 2 years ago, far less than the fall seen in the Auckland market which was 37% from peak.

NZ property sales excluding Auckland 10 yrs to Jul 2018

When seen as annual variances in monthly sales, the picture shows modest rises in sales comparing each month with the same month in prior year with barely a perceptible trend up or down.

Property sales for NZ exc Auckland 2000 to Jul 2018 variance yr on yr

Pricing

In terms of pricing the median sales price over the the past quarter has marked time at the $455,000 level. Back in March the median price peaked at $460,000 and subsequently it has bounced around that level but not as yet exceeded it. The chart below tracks the year-on-year variance of monthly median sale prices over the past two decades, showing as it does how consistent property price appreciation has been over this extended period.

NZ median sale price property excluding Auckland 2000 to Jul 2018

Clearance Rate

I am very keen on this relatively new metric of the clearance rate as a tracking tool for the trends in the market. It is measured as the rate of sales against the rate of new listings - think of it as the available stock in a warehouse - if your clearance rate is below 50% then you will suffer the pressure of overstock and will need to adjust prices down to clear inventory. The opposite with a clearance rate of over 50% indicates strong demand which can create price inflation.

As you will see from the chart below the clearance rate for NZ properties outside of Auckland is edging up, as it has been for most of this year so far. The point about clearance rate is that it is all about relative market activity so whilst sales are almost static this is matched to static new listings, within this market dynamic, the properties being listed are being sold at an ever increasing rate; and as the chart shows clearance rate tracks to a pretty close correlation to price inflation. It is also worth comparing the clearance rate outside of Auckland with that in Auckland. Auckland clearance rate is currently just 55% as compared to outside of Auckland at 68%.

Clearance rate of NZ property excluding Auckland tracked with median price movement 2008 to Jul 2018
 


I have added a modified version of the clearance chart below prompted by a comment from John - he was questioning the uneven scale range between price movement and clearance rate. I have used the 50% clearance rate as the midpoint and then adjusted the upper level to +25 percentage points as per the price movement and equally -15 percentage points to the lower level.

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The Auckland Quarterly Property Review - Q2 2018

by Alistair Helm in


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A bit later than planned here is the quarterly report. I've included the latest July property data to produce this analysis of the Auckland property market. As I have commented recently I've made a conscious decision to cease to produce data analysis on what is seen as the "NZ Property Market". The fact is this aggregation for all NZ property data is no longer as relevant, given how distinct the property market is between Auckland the rest of the country. That is why I will produce a quarterly report on Auckland and another one on New Zealand outside of Auckland.

The picture of the Auckland property market now with the benefit of a further 4 months data since the last report is showing a market in the doldrums. A situation that is actually quite uncommon from a historical perspective as compared to the rollercoaster that typifies the Auckland market.


Volume Sales

From a volume sales perspective - annualised volumes have remained at the level of 21,500 for virtually all of the past 9 months with just the vaguest sense of an increase in the past 2 months. Remember this is annualised sales so there is no seasonal factor to explain any movement. This level of sales remains at levels reminiscent of the post GFC period of a decade ago, far from the peak activity of 3 years ago. The decline since that time is significant 37% less sales. 

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When seen as annual variances in monthly sales the same visualisation of the market in the doldrums is reinforced. The typical cycles of the Auckland property market usually see a seesaw rise and fall, whereas the recent period has the appearance of a market just marking time; deciding if the next move will be up or down, almost mirroring the recent proclamation of the Reserve Bank Governor.

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Pricing

In terms of pricing the median sales price over the the past quarter has similarly marked time at the $850,000 level, although July saw this slip down to $835,000. It is now fully 18 months since the Auckland market topped out at $905,000 - subsequent months have seen prices bump around between a low of $820,000 and a high of $880,000. The chart below tracks the year-on-year variance of median sale prices over the past two decades.

Auckland median price movements 2000 to 2018

Clearance Rate

I am very keen on this relatively new metric of the clearance rate as a tracking tool for the trends in the market. It is measured as the rate of sales against the rate of new listings - think of it as the available stock in a warehouse - if your clearance rate is below 50% then you will suffer the pressure of overstock and will need to adjust prices down to clear inventory. The opposite with a clearance rate of over 50% indicates strong demand which can trigger price inflation.

As you will see from the chart below the clearance rate for Auckland is edging up, as it has been for most of this year so far. The point about clearance rate is that it is all about relative market activity so whilst sales are almost static this is matched to very low new listings, within this market behaviour the property being listed is being sold at an ever increasing rate and as the chart shows clearance rate tracks to a pretty close correlation to price inflation. 

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So just maybe the Reserve Bank Governor was righter than he thought when he stated that there was as much chance that property prices would rise as they would fall!

 


Do house prices quadruple every 20 years?

by Alistair Helm in


No sooner had I written the article "Do house prices double every 10 years?" than I get the question posted on LinkedIn as to whether house prices quadruple every 20 years?

My first reaction was - No Way, if they double in 10 years, how could they possibly quadruple in 20 years? - to be clear $100 doubling in 10 years becomes $200 and within 20 years quadrupling to $400. But then I remembered the good old adage of compound interest. The annual rate of growth to double a sum of money in 10 years is 7.2% and that same 7.2% annual growth rate compounded will quadruple the original sum within a 20 year timespan.

The next question for me was to Google the question, just as I did with doubling house prices, not 339 million results this time just 8 million. But top of the results from The Telegraph in the UK with a 2003 article stating just that fact. Between 1983 and 2003 average house prices went from £29,993 to £121,742 – a quadrupling. As an aside I bought my first house in the UK in 1984 for £22,150 so I can confirm that is what a typical house cost back then. I sold that house in 1985 for £20,650 so clearly I should have waited!

Anyway I digress. Back to the question posed on LinkedIn. Given the fact that NZ property prices have doubled during some 10 year periods, have we seen quadrupling over any 20 year period?

The answer is yes for Auckland but not for the rest of the country in aggregate. I have only been able to assess the period from 2012 as the available data from REINZ of sale price data only goes back to 1992. Here then are the same charts I used in the prior article adapted to track each 20 year period from 2012 to 2018.


NEW ZEALAND - ALL PROPERTIES

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So for the period from 2012 onwards the 20 year rise in house prices across all of NZ was an average of 237%, that is over a three fold increase but at no time has a quadrupling been experienced. Of note is the fact that the current period June 1998 to June 2018 at 271% is the highest ever 20 year rise.


AUCKLAND

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In the case of Auckland the average 20 year period price rise has been 296% between 2012 and 2018. In 31 of the 78 months the 20 year rise was more than quadrupling of prices in that 20 year period. The highest ever rise was for the period from August 1995 to August 2015 which saw a 329% increase.


NEW ZEALAND EXCLUDING AUCKLAND

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For the rest of NZ excluding Auckland the average 20 year price growth has been 197%, so just under a trebling of prices over a 20 year period. Of note though is the steady rise in the price rises since 2015 with the latest month of June recording a 240% increase in prices since June 1998.