The future looks bright for Trade Me Property as it casts a darkening shadow on Realestate.co.nz

by Alistair Helm in ,


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“Someone should never take part in a fight unless they know they will win it”.

This was the opinion voiced in an article by David Hargreaves on Interest.co.nz in February 2014. Over 5 years ago. The article expounded the view that the real estate industry had more to lose than Trade Me, over the then, bust up over increased fees being introduced by Trade Me at the end of 2013.

Five years is a long time in our fast-paced digital world, yet the prophetic view expressed in the article is coming true all these years later, only not quite as imagined. The view then was that the real estate industry’s very business model, could in some way be impacted by the squabble with Trade Me. That has not eventuated. However, the real estate industry has lost in their ability to control the digital marketing platform. A loss far less financially significant, but none the less a squandered opportunity.

I have written at length over the years on what I see as the problems of Realestate.co.nz, and its ever weakening position against Trade Me in the competitive arena of digital marketing, including an impassioned address to the Real Estate Institute AGM last year. Sadly time moves on, and with it, the ever growing strength of Trade Me Property; and for its rival Realestate.co.nz, as the title of this article states, things look bleak.

The half year results of Trade Me published last month stated “The performance of Trade Me Property is exceptional and should continue into the second half of F19”. Not only is it exceptional at $22.3m, it is also sustainable. Trade Me Property in my opinion has found its sweet spot and for now the future looks bright. This result and optimistic outlook are the direct result of two significant successes that have yet to be fully realised. But before I examine these two matters, let’s pause a moment to look at Trade Me Property revenue over the past 4 financial years as reported in financial investor reports.

The most recent 6 months to December 2018 is outstanding, and follows what has been a fairly average performance over the prior years with revenue growth barely hitting double digit percentage growth.

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I am no financial analyst, but I would hazard a guess (as I have done in the above chart) based on my experience and knowledge that the second half of the FY2019 year is likely to see year-on-year growth of 30% resulting in a full year revenue of over $48m, up over 80% on 5 years ago when things went so wrong for Trade Me.

So to what do I ascribe this remarkable performance of Trade Me Property. Firstly a smart and highly successful new product launched last year – Premium Listing.

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This product works exceptionally well, Satisfying the needs of both the vendor and agent. The standout presence of this large listing creates impact in the search results and delivers a markedly high level of page views, not just on web browser pages but also on the Trade Me apps. This is significant, as up until the launch of this product there were no premium listings on either Trade Me Property or Realestate.co.nz that delivered a premium impact on the mobile apps in standard search results. The product design is loved by agents as it incorporates the agent and agency branding to great effect. Priced at a significant premium to the existing offering of Super Feature, the new Premium Listing has achieved a high penetration rate in the key markets of upwards of 15% of listings. This product is likely to benefit from the power of the virtuous circle. Agents love it, they include it in marketing budgets, the results are a delight to agents and vendors, other agents see the power and brand influence and they become adopters and for the buyer searching for property the design is as ever from Trade Me beautiful.

So that is one of the powerful drivers of this new rejuvenated and growing Trade Me Property business. The other is inventory.

I reported back in October last year that Trade Me had then surpassed Realestate.co.nz in terms of total listings of property for sale (including private sales). This was a key milestone as it destroyed the long standing cornerstone of marketing by Realestate.co.nz that they were the leader when it comes to inventory of listings. Subsequent to that turning point Trade Me has powered ahead and as of this month they have surpassed a new milestone.

Trade Me Property now features more property for sale from real estate agents than any other website. This is significant, really significant. Five years ago things went wrong for Trade Me over the price changes and the real estate industry endeavoured to boycott Trade Me. Today more of the industry support Trade Me than support Realestate.co.nz - the property portal that is owned by the industry. The charts below highlight this recovery by Trade Me, firstly for all listings and secondly for agent only listings.

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For Trade Me Property to be displaying significantly more agent listings than Realestate.co.nz on the website today (28,483 vs 26,277), means that real estate agent office are questioning the value of Realestate.co.nz. For the past 5 years the industry has rallied around the industry owned site seeking to consolidate support to make it the critical asset that it had the opportunity to be.

Sadly the industry, whilst well intentioned and principled as a body, is in reality a loose aggregation of over 600 independent business owners and over 15,000 independent contractor-status agents. They all think and act, first and foremost to their own best interest. Trade Me is a marketing tool, just as is the Property Press and the newspaper supplements, as well as Realestate.co.nz and when individual agents select marketing campaigns for their clients’ property what matters most is results. Those results are judged in page views and enquiries, as well as agent profile and presence, and this is where the rubber hits the road. Trade Me is winning this battle and likely to press the advantage even harder in the coming months and years, leaving the events of late 2013 to be a distant memory.


Disclosure: I have over the past 13 years been a senior executive at both Realestate.co.nz and Trade Me Property.

I am not at this time involved in either company through any role or investment. This article, as with other similar articles are written based on published information combined with insight gleaned from studying the property portal marketplace internationally over the years.


Hustle, Hustle, Hustle

by Alistair Helm in ,


I find serendipity an amazing thing. I find it strange when you start seeing repeated comments in the course of a day, especially when they come in fast succession and when they so clearly resonate in the context of your own day-to-day life. So it was the other week, when I felt I was being bombarded by advice to Hustle!

I’ve been a real estate agent for 9 months now and have been ‘encouraged’ to hustle to get listings, hustle to get your name out and about, hustle to ask people incessantly “are you looking to sell, do you know anyone who might be?”

Just last month a couple of local real estate agencies latched onto Hustle as a theme to grow your business.

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Thinking about this notion of hustling for business, reminded me of one of my favourite sessions I used to undertake in my role at Trade Me Property. I regularly spent about an hour providing insight into the everyday life of a real estate agent to enlighten software developers. This was invaluable; they relished the opportunity to get a sense of the world from the perspective of their customers. And in so doing, take this learning and apply it in the products they designed and built, given the agile environment in which we operated.

I recall that I’d often shock and surprise them with the simplicity of the role of an agent. However, on the other hand for every one of them, the lack of a cushion of a salary, and the incessant need to be working every hour of every day to seek out their next business opportunity. I could sense every one of them were nervous of this. It certainly didn’t illicit an instant rush to join the band of agents, despite the potential earnings.

However, in retrospect what I said then and what I know now seem even further apart apart as my first hand experience has grown. The fact is, what I was talking about then in my opinion actually bares little relationship to the true experience of my first year as an agent. Some months ago, I wrote an article sharing some of my early experiences of being an agent and the challenges I had faced breaking into this new role. Subsequent months have not seen that change much.

Real estate is as is so often said; is simple but by no means easy. To my way of thinking this relates to the process of engaging buyers and sellers in the core element of negotiation. Yet it also fully reflects the process needed to be undertaken before a rookie will ever get close to this end of the business, ever gets close to getting a listing in the first place. It’s again incredibly simple to understand. Without a listing, prospective agents have no presence and no involvement with clients, either as buyers or sellers. Add to this the fact that without a listing it is hard to prove your skills and capability. Sadly, this doom loop is staring every rookie in the face – no listing, no case study to demonstrate capability, so no listing.

How to break out of this doom loop is the core challenge for every agent in their first 6 months. I say 6 months, as the sad fact is that more than half of new agents barely make it past the 6 months mark, fewer last until the first anniversary. The reality is few can self-fund themselves through this period with no income.

I know there will be some readers who will by this stage be thinking to themselves “but this is good ; it sorts out the grafters, the hard workers from the people who just can’t handle it” and the other comment I suspect “fake it till you make it”. I get this. Darwinsim and ‘The Wolf of Wall Street’ syndrome combined. However, might this actually be the counterintuitive? Might the industry be fast tracking people into this industry who are great as prospecting machines rather than being great practitioners of this profession at its core? I may be splitting hairs, but I sense as a reader you will see my point. Is Hustle, Hustle, Hustle the right proving ground of this industry?

Every agent need to get their brand known and ideally top of mind. The simple fact is there are no shortage of agents across all of the country. All of them can and want to, support every customer. So it’s a tough battle every day to win a listing and unless you are known you are literally invisible.

There are many methods of getting known. Door knocking is still favoured as it provides an ‘in your face’ experience that says “here I am I’m a local agent who’s looking for work”. Other agents, such as a former colleague of mine have a natural exuberant personality that shouts from the mountain top. Jadyn Dixon is one of those people who loves the limelight and is doing a stellar job of getting known in a way that may not be suited to everyone – just look at his recent videos and through this his feature on Seven Sharp – incalculable marketing impact.

I am not really in either of these camps to be honest. I cannot muster the courage, or as I see it the disingenuousness behaviour of door knocking, nor do I intend to undertake outlandish videos. I’m choosing a more structured and credibility based route. I’ll readily acknowledge this strategy is potentially going to take longer, but I feel it’s better to remain true to myself and my principles. Principles such as offering deep property insight, significant marketing knowledge and experience, delivered with professionalism in a personable and trusted manner. To date it is working, but to be honest I have to wish I was succeeding more of the time!

As a final note whilst writing this article I came across this interesting post on Medium highlighting the trend of overwork in the tech start up world “Hustle Porn Is the Latest Toxic Scourge to Hit Entrepreneurs’ not a notion I had come across before, but I related to the depiction of the dog-eat-dog attitude that the only way to succeed is to work 18 hour days. Maybe real estate as an industry needs to take a breath and realise endless hustle may actually be counter-productive to the profile and the resultant opinion many people have towards this industry. That’s just my opinion.


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.


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.


How would you select an agent to sell your house?

by Alistair Helm in


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This was the question I was eager to answer when last month I undertook a survey to find out from people who had sold their house using an agent. The reason for undertaking the survey was twofold. Firstly for very selfish reasons I wanted to better understand the approach that I would need to take to be a successful agent; and secondly I have often written about the value that agents provide and I felt that the survey would go some way to validate these assumption.

The survey was undertaken online and was promoted through this site, my personal database, as well as some degree of Facebook promotion. The survey was just 8 questions long and was anonymous. The survey resulted in 60 completed questionnaires. I would naturally have liked to get a couple of hundred responses but given the specific requirement that participants would need to have sold a property through an agent in the past year or two and without the mechanisms of a large research company, I am comfortable with the scale of the survey. I make this statement up front so as to ensure that there is clarity that statistically this sample size does inherently have large margins of error.


The Results

I will go through the results for each question in the sequence that the questions were asked, providing the objective data as well as my comments and interpretation of the results for each.

 

Question 1 - How did you decide which agent to use?

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Facts: The overriding opinion of those surveyed is that they selected an agent based on personal connection. The most common factor was that the agent was the recommendation of someone they knew. The 3 leading results all speak to a connection or experience, either first hand or through a trusted recommendation.

Online research continues to grow in importance as our lives are so normalised in our behaviour to seek answers online and so this choice came in 4th place. Equally the physical presence of an agent through adverts and signboards do inform vendors. However clearly unsolicited letters and flyers appear to have little impact.

My opinion: These results are not surprising when you reflect as I have done over the years, that the true value of an agent is the personal connection that provides you as a vendor with a consultant, an advisor, a sounding board, a confessor as well as a negotiator, marketer and influencer. This speaks to the heart of the real estate process which relies heavily on trust. The key dividing line is the need to have a connection that brings trust and respect but equally establishes a clear professional detachment. An agent is not there to be your friend, they have a job to do, and have legal and fiduciary obligations to you and the buyers as defined by law.

The results also speak to the challenge for new agents – advertising your presence plays a part in building awareness which is so important but without the track record of working with clients this presence offers little until you secure a client who can then become a referral. For the new agent the response on the survey that shows real value is the digital presence to be found when prospective clients go searching for an agent.

 

Question 2 - Which real estate company does the agent work for?

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This question was included more as a validation of a representative sample. The results show the largest respondent group was using Barfoot & Thompson. This  does show a degree of Auckland bias as a representative sample of all NZ would probably see this around figure at around 15%.

Harcourts at 13% is a degree under-represented and Ray White at 22% slightly over-represented. Amongst the others were a mixture of regional operators and boutique operations.

 

 

 

Question 3 - When you chose your agent, to what extent did the real estate company's reputation and brand influence the decision?

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Facts: This question is pretty clear cut. Vendors choose the agent.

The company they work for; the brand that sits alongside them has a bearing, but in only 1 in 8 of those surveyed did they state that the company was critical; whereas over 8 out of 10 said the company was of little importance or not important at all.

My opinion: This comes as no surprise. The facts are there for all to see, well established real estate agents that move between brands don’t skip a beat in regard to business – the business follows the agent. Agents are the brand, and building and curating that brand is so critical to the success of every agent. There is no doubt though, that a new agent does leverage the company to establish a credibility and support. There is a symbiotic relationship between agents and real estate companies.

 

Question 4 - Did you just select an agent,  or did you ask a number of agents to come and appraise the property?

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Facts: Half of respondents stated that they chose their individual and went with that choice without reference to any other agent. Half of respondents decided to interview more than 1 agent.

My opinion: I find this fairly predictable given the answer to question 1 – recommendation or first hand knowledge is largely driving the decision, so it would follow that that person would be appointed, as against the process of assessing a number of other agents.

 

 

Question 5 - If you chose to invite a number of agents to appraise your property and present themselves, how many did you invite?

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(Ok - I know this result seems to be at odds with question 4 which said that half of survey respondents chose their agent without interviewing other whereas this question now says that this was just 40%. I guess this is one of those issues with survey questionnaires. In retrospect I should have designed the questionnaire better to have conditional questions, my apologies.)

Facts: Whilst 4 out of 10 of those surveyed said that they stuck with the one agent they selected, the majority of those surveyed – 6 out of 10 decided to invite more than 2 and nearly half invited 3 or more.

My opinion: This is the question I was in some ways most interested in. Personally I believe this should be the case when choosing an agent. Property owners should take the time to review a number of agents. Selling a property is a major event and given it is undertaken on such an infrequent basis I believe every property owner should select a group of agents and request they make their pitch to win the business, but also to win the trust and confidence of their future client.

The pitch to win the business should clearly separate the appraisal (the market valuation), from the marketing strategy for the property, from the profile of the agent. This process would allow the property owner to get a sense of who they think they can work with best to facilitate the sale, and which agent has the right manner, approach and capability to succeed to extract the value that resides in the property in a successful outcome.

 

Question 6 - In choosing your agent what do you think were the most important factors in selecting that agent?

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Facts: The top 3 attributes all related to professional capabilities. Likewise at the other end of the spectrum incentive based choice ranked consistently lower.

My opinion: These results again are affirming of the ideal objective process. Choosing an agent based should be based on capability and personal confidence, not being swayed by incentives. However in my few months of experience now at the front line of this industry I have heard (as yet not experienced first hand) agents loosing out in competitive situations to the practice of competing agents 'buying listings' (appraising with a high price to play to the vendors greed) or competing agents offering free marketing or heavily discounted commission.

Now I'm a pragmatist and at the same time I have been a vendor several times over the past couple of years and it is my view that hard earned income should always be wisely spent, and I certainly have never wanted to spend more than I needed on products or services. However I am the first to recognise that when someone heavily discounts a service you have to wonder if the service will match the value. Additionally when it comes to marketing there is no such thing as 'free'. Marketing is core to the process of selling a property and it has to be considered as an investment, the more you put in the greater the output - ideally that being in the outcome of multiple competing buyers attracted to a beautifully presented property, some being motivated to buy even though they were not actively looking; rather than just selling to the current active buyer in the market.

 

Question 7 - Did you research the agent online before appointing them? - if so which sites

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Facts: Three quarters of all survey respondents researched the agent online before they appointed them.

There is a clear focus to review the agents own website and the real estate companies website, not surprisingly Google comes a close 3rd to those top two choices. As to the use of property portals Realestate.co.nz and Trade Me are represented well, however Homes.co.nz should feel well please with an 7% - one in 14 respondents used this service to research agents. The level of just 8% who researched the Real Estate Authority agent register is low at just 1 in 12 - its main purpose though is to verify the license for the agent and to highlight if any substantiated complaints have been made against the agent.

My opinion: I think it is encouraging to see 75% of respondents undertaking research online. The bias though is to search the agents' own marketing platform which certainly provides a profile, however it tends to heavily skew to current listings and a portfolio of prior sales. This information is useful but I sense there is more that people could find out of value about an agent using more independent platforms. In saying this I am alluding to LinkedIn; at just 12% this platform's share of research is very low. Selecting an agent should be thought of as recruiting an agent to undertake a job - sure the job may only last a month or so, but in the scheme of things it is a recruitment for a role. No recruitment agent in today's world or employer for that matter would not undertake a LinkedIn search for a candidate profile, so it should be for real estate agents.

Interestingly amongst the 'other' options in the survey question, a single respondent did said Facebook.

 

Question 8 - At this stage of the sale process how would you rate the service you have received from your agent on a scale of 1 to 100?

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Facts: The median rating of the service of the chosen agent was just on 8 out of 10.

My opinion: As some one offered in responding to this question, the better question might have been more refined as to "how you would rate the service you received from your agent, as against your expectation at the start of the process". This was a very good point and may assist in interpreting this result.

Is 8 out of 10 good? or should it be 10 out of 10?

I think any service based relationship that involves a complex and emotional interaction of such significance and risk will lead to tested interactions. This is only to be expected. If an agent acts professionally, more so in today's far more challenging property market, then a result of 10 out of 10 on a survey of 60 respondents would be unrealistic and show the survey to be flawed or biased. I think 8 out of 10 is great. 

The distribution chart above though is illuminating. Fully 90% respondents gave a score at 5 out of 10 or above. The big question lies in those 6 respondents who rated their agents below average (below 5) and the single respondent who rated the agent a 1. I would hope that these respondents shared their feedback with the agent. We all need feedback, people hate giving it but in a service based business we need it more than ever, especially in a profession where trust is so key and referral business is so critical to success.


Update 

Since publishing this article earlier this morning I have had a number of emails all asking the same question "What would you do differently now you have these research findings?"

The short answer I would change nothing. I guess the reason for undertaking the survey was to affirm my feelings or intuitive sense of the process. I remember from my early years in product marketing it was drummed into me that you should never do any research unless you had an outcome or hypothesis you wanted to test. So I tested the hypothesis and proved that my suspicions were correct. As a new agent you need to build your brand and work hard to make connections. The analogy that has come to me is of an old fashioned London bus - those ones where there was an open platform at the back so you could jump on and off. The bus is full of prospective sellers and equally a large number of experienced agents who are all engaging with vendors. I am the guy trying to grab hold of that rail as the bus speeds along - hoping I can hop on and get a chance to pitch my offering; there are many buses but they are all speeding along and I don't want to break my arm trying to hop on board. 

 


Does the iBuyer business model represent true innovation in real estate?

by Alistair Helm in


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Last week, a new listing came onto the market in the US – a property for sale in Chandler, Arizona. A 4 bedroom home with a price expectation of around NZ$600,000. Not that interesting you would have thought given the fact that probably close to 20,000 new homes come onto the market every day in the US.

What makes this home different from tens of thousands of others is that the owner of the property is Zillow. That is Zillow; as in the largest real estate website in the US – a property portal.

Think about that for a moment, this would be akin to Trade Me listing for sale a property owned by Trade Me having been bought by Trade Me from a Trade Me member!

Let’s be clear this is not happening in New Zealand. At least not yet, and to be honest I don’t think it is something that suits the New Zealand market. However before getting into all that, let me explain what is going on here.

A new segment of the real estate market emerged about 4 years ago in the US. The ever optimistic, cash rich and somewhat over-hyped tech sector turned its eyes, and its investment dollars to the real estate industry and asked the question – “why is it so hard to sell a property in the US, and why does it take months?”

The answer, and therein the problem, lies in a myriad of archaic systems for legal title-management and exchange; and the equally complex processes for mortgage origination. Both of these in theory being digital processes, naturally the tech investment sector said they could fix and in doing so create the opportunity for a viable business model to arbitrage residential property. This new segment of the industry that has emerged has been dubbed the iBuyer market.

The pioneer of iBuyer was OpenDoor, with the fast follower – Offerpad  and now Zillow with Instant Offers, who far from limiting themselves to just being a real estate website, sees value in this real estate service which can leverage their expertise and knowledge base around property data and valuation modelling.

The business model for iBuyer is simple. A homeowner looking to sell goes online and enters their property details, in what is a matter of hours in most cases, the company comes back with an offer to purchase the property. The offer is at around market-value based on their proprietary algorithm of an Automated Valuation Model (AVM). The seller can literally confirm acceptance and choose a completion date and the sale is then completed, and payment is made on the allotted date. There are naturally legal conditions and inspections as well as deductible fees, but pretty much this has to be the fastest and simplest way to transact real estate. So in theory, you could decide to move and within a week or so you could be moved, cashed up and onto a new life!

The process then moves into top gear with the company undertaking a fast and efficient cosmetic makeover of the property in order to get it back on the market in a matter of weeks for a price that they (and their algorithm) feel is the right market price.

The business model of these iBuyer operations is to act as the sellers’ agent, and the buyers’ agent, as well as the property developer; with the clear intention of flicking the property as fast as possible with a reasonable margin on the purchase price, this they seem to be doing.

With the full sales commission charged to the seller, as well as their representation as the owner for the on-sale, the business model allows for a satisfactory margin through the process as well as any improvement margin.

The core value proposition for this business model is speed and the associated removal of stress which has universal appeal. Just recently a survey undertaken by the Real Estate Authority here in NZ found that 35% of sellers found marketing of their property involving the open homes, the toughest part of the process. The iBuyer service removes this completely. It is critical to appreciate that the core value proposition is all around adding value; and has nothing to do with saving costs or a lower priced offer (a critique I made recently as to the only other aspiring innovations seeking to disrupt the real estate industry).

Whilst not a perfect analogy, the market for used cars is somewhat similar. If you want to trade for another car you can just sell to the dealer for cash or trade in your car, so in theory this is the process for your house – at least in the US at this time.

There are elements of the iBuyer business model that are a true disruptions of the real estate process enabled by technology:

  1. The automated valuation model has become a commodified capability, here in NZ as well as most every country of the world, empowering these companies with the core market information, historically tightly held by real estate professionals
  2. The financing of the properties that these iBuyer companies take on, is enabled by technology as they can leverage the necessary debt financing through whatever financial market structure that suits and is available at the time, packaging the portfolio of properties on-hand thereby optimising lending options
  3. Marketing directly to prospective sellers through targeted marketing and in so doing capturing the selling agent commission
  4. Utilising Internet of Things (IOT) to revolutionise the home viewing process. Once a property owned by the iBuyer company is put on the market, prospective buyers can register and access the property remotely through an app that allows unaccompanied viewings with remote security monitoring

These collectively add significantly to this technology-enabled improvement to the process of real estate, and at first sight would appear to be threatening to the traditional real estate profession. However these iBuyer companies are smart to ensure that their long term ambitions to establish a viable and significant market position are not jeopardised by off-siding the industry of agents. Their business model engages agents with a seller and buyer-side commission structure, positioning themselves to be seen as a fellow competitor in the market rather than a looming destroyer of the market process.

It is important to note that the Zillow iBuyer model is somewhat different to both OpenDoor and Offerpad in that Zillow are actually not purchasing properties in their own name, they are facilitating the market-making between willing sellers and financial investors. They are operating in much the same way as they do with their core business in market-making between buyer - agents - sellers - agents. In this way they are keen to avoid the accusation that they are competing with their customers - real estate agents, especially as they lay out the option for sellers to choose to turn down an 'Instant offer' and sell through an agent.

So having identified what these iBuyer companies provide in their business solution the next key question is – will they succeed?

I believe the answer is yes, but not in the sense of a massive disruption to the overall market. This is key, and as any investor pitch-deck will show, even a very small percentage share of the real estate transaction market in the US represents a significant business opportunity. The estimated value of this market is somewhere around US$60 billion so a mere one tenth of one percent would be US$60m turnover.

There are 2 key issues that the iBuyer business faces that I believe are going to restrict the market opportunity. Firstly there is an inherent risk related to the the volatility of the property market and the downside risk of an iBuyer company being saddled with a large inventory they cannot sell without taking a loss on sale, should the market turn down.

Then secondly there is the complete reliance on the automated valuation. The business simply cannot possibly scale if they were to rely on an army of inspectors. As a consequence their risk profile means that they will only offer the solution to what can be thought of as homogeneous houses. This is easily seen by the markets in which they currently operate – Phoenix, Las Vegas, Charlotte North Carolina, Atlanta, Nashville as well as couple of others in the case of OpenDoor. These markets have a growing suburban belt of new homes and the typical house managed through OpenDoor is recently-built homes with a price around the median sale price between $300,000 and $600,000. This is smart. These houses are a commodity that has a low risk of not finding a buyer coupled with a high confidence factor for automated valuation.

In the US this subset of the market still represents a sizeable market opportunity of around $10bn a year. For New Zealand the business model is unlikely to offer such a lucrative market opportunity. Firstly, very little of NZ housing stock falls into the category of truly homogenous - whilst there have been large scale new housing developments in Auckland that mirror the chosen US markets that have been the target of OpenDoor; and undoubtedly there will be more built in the coming years. This market segment will be small, too small for a company to achieve scale. Secondly the NZ market does not experience the same pain point that the US market suffers from, as a consequence of archaic and protracted transaction process. A NZ property can be marketed and legal transaction completed within weeks if necessary, certainly legal unconditional-sale is achievable within a month from listing day - something not achievable in the US, until now.

As to the question posed earlier, could Trade Me offer this solution? - they could, especially if they facilitated a market-making environment with verified investors. By following the Zillow playbook they could very nicely then generate a leads-business for agents of ready sellers. That would be a smart solution that might just see Trade Me advertising a property for sale that Trade Me facilitated the agent-sale of, from a Trade Me member to a Trade Me member, financed through a Trade Me member and managed by a Trade Me real estate agent.


Better Homes & Gardens – a new name on the real estate high street

by Alistair Helm in


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Recently I wrote about the new entrant to the real estate digital advertising arena in the shape of the NZME site OneRoof. It’s many years since we saw a portal vie for a place up against the two established incumbents; so it is with real estate companies in the NZ market. The fact is, there have been very few new additions to the brand line up in the past decade or two. I can count just 3 – The Joneses, who crashed and burned in 2008; then a couple of years later in 2010 Mike Pero, and at pretty much the same time Sothebys International. Both of these trading on very well-known brands – one kiwi; one international.

So we now we have the news is that there is to be a new brand to take on the Australian and New Zealand real estate market – Better Homes & Gardens Real Estate. A brand that certainly has contextual relevance, but doesn’t come with any heritage in this market or across the Tasman. First and foremost it's a media brand, a lifestyle brand; most recognised for the well-known magazine and TV channel. The key question though is, can it carve out a place in the real estate high street in New Zealand?

To answer that question you have to dig a little deeper behind the name to look at the organisation that is driving it.  

Better Homes & Gardens Real Estate began life in the US in the 1970’s as a classic brand ‘line extension’ from the original magazine which dates back to the 1920’s. The magazine has been a stable of the Meredith Corporation; a major media company that earlier this year acquired Time Inc for US$2.8bn. The operation of the real estate business ran for 30 years under differing operational management before the brand name was licensed to Realogy, the largest US real estate conglomerate. Realogy Holdings Corporation operates a number of brands in the US and International markets including Century 21, Coldwell Banker, The Corcoran Group and Sothebys International. It is a huge corporation with over 190,000 sales agents in the US and around 100,000 in more than 116 countries around the globe.

The core principle of Better Homes & Gardens Real Estate is to leverage the essence of the parent brand that speaks to people’s aspiration to a lifestyle epitomised in the magazine and then capture that dream through the process of buying or selling a home. This promotional video on the brand's US website embodies this brand principle.

The company has grown to a significant scale in the US market over what has been a fairly short period of time. A lot of the credit for this success can be attributed to the founding CEO Sherry Chris, who I have seen at numerous industry conferences over the years. She is an impressive individual as well as real industry icon. She has driven innovation and technology through the organisation to create a tremendous business.

So that’s the background to this company and this brand; however as to the local NZ or even Australian market opportunity I am sceptical. The US real estate market is so different to most other countries; fundamentally due to the nature of the dual agent role in the transaction process. An agent representing the buyer and a separate agent representing the seller. This for me is why Better Homes & Gardens Real Estate (BHGRE) was adopted so quickly in the US – the buyer side service is inherently lifestyle and aspirational as that is how buyers approach the property process, full of dreams of their new home and BHGRE plays on the media channels to sell this service. However the seller side of real estate is always transactional and seldom embodied by aspirational lifestyle. The stark reality of the seller side of real estate is that sellers face everyday challenges brought about by life changes, be they financial or functional.

The NZ and Australian markets are seller side agent markets and are transactional process driven, even if the outcome they seek is aspirational the sell process is a means to an end. Buyers living in their aspirational mindset are largely left on their own to undertake a self-service process where the property portals take on that role as their aspirational guide. Interestingly as I write that comment I realise how poorly the incumbent NZ property portals deliver on that role.

Now add to that transactional process requirement of sellers' agent role, the significant consolidated operational power within the New Zealand market which I recently analysed where more than half of all offices operate under one of 5 brand banners along the high street, and you have a playing field that does not augur well to the brand positioning of BHGRE. 

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The reality of the real estate industry unlike other consumer services is that a new entrant doesn’t just set up shop, hire staff and start a business. The core of real estate industry, right at the coal face, is individual agents (each one a unique brand) as self employed contractors, that is how the industry works. Any new operation such as BHGRE will have to entice such agents to join their brand and leave their existing brand. It is not only agents, but business owner / licensees who will have to switch brands to enable this new entrant to get a foothold. This situation is not new in this industry, as I have recently commented Ray White has made significant gains by getting other business owners to switch and so it happens with other brands given the franchise nature of the industry.

The only potential entry for BHGRE as I can see it, is to be found in the fact that BHGRE is a part of the Realogy stable of global brands including Century 21 - a brand that in NZ has slipped down the rankings with now around 50 offices. It might just be the base that the franchise holder in Australia and NZ of both Century 21 and BHGRE: Charles Tarbey could use to transition the Century 21 offices to launch BHGRE in NZ. Time will tell and as the article cited states the plans for NZ would follow Australia probably in 2020.

So potentially this could be good news for some business owners and top performing agents as the enticements by a new entrant may be sufficient to make the switch, but so might the competing offers from the major 5 brands. As we know time will tell, but I for one would be surprised to see BHGRE becoming one of the top 5 players anytime soon.


Financial year report - NZ real estate industry FY2018

by Alistair Helm in


The end of the financial year-end provides a perfect time for any company or industry to reflect on the year just completed, and look ahead to the forthcoming year. So I thought it would be of value to undertake such an analysis for the New Zealand real estate industry.

In the financial year ending March 2018 exactly 73,000 residential transactions were completed by the industry, with a turnover of close to $48.5 billion. This I would judge to be called a ‘good’ year by the industry, at least if you consider the last 10 years or so – by no means the best year but equally far from the worst. That latter record would undoubtedly be the 2009 financial year when just 55,000 transactions were completed for a turnover of $22.4 billion. Interestingly the best year of the past decade or so would be last year; for although slightly fewer transactions were completed in 2017 than 2016, the transaction turnover hit a record of $55.2 billion from 87,630 transactions.

The real estate industry is large – employing just over 15,000 individuals who as recorded by the Real Estate Authority (REA) held active licenses. Supporting these active agents would be almost as many in support roles; as well as those in service industries related to the process of real estate sales.

The industry continues to grow and attract new individuals. Over the past 2 years the number of active licenses has grown by around 3% per annum, however the number of new licenses issued fell by 15% in the past year with just under 2,000 new licenses issued in the year to March. That number matched to the number of active licenses demonstrates the churn in this industry. It is well known that close to half of all new entrants to the industry give up before their first anniversary contributing to this overall churn of around 15% per annum.

When it comes to the structure of the industry from the perspective of the major brands, the picture is one of consolidated strength among the recognised high street brands, with more than half of all offices displaying one of the six major brands. Assessing these major brands based on number of offices, Harcourts and Ray White take the top two spots with 180 and 166 offices a piece, far distant to the scale of the next 4 who are close rivals at the level of 60 to 70 offices around the country.

The fact is, the high street is changing and the physical presence of real estate offices is nowadays less a method of lead generation, than it is a branding exercise. This is most evidently shown by the fact that the local real estate office these days will more likely resemble the reception area of a smart lawyer or the ubiquitous local cafe, as compared to the the cluttered desks and reception counter of a decade or so ago. However much the style and design of these offices change, the industry is not immune to the fact that high street presence is a costly form of marketing and the past decade has seen a contraction of their presence.

A decade ago there were close to 1,500 real estate offices around the country, today less than 1,200. This reduction has not though been uniform. Harcourts have certainly retained their leadership with a reduction of less than a dozen offices. Ray White has grown significantly though a combination of new openings and brand switching, most significantly the Re/Max Leaders Group in Wellington and the recent switch of Austar Realty from LJ Hooker in total adding 24 offices as Ray White has grown to edge within 14 offices of Harcourts.

A number of brands has seen significant declines in offices numbers over the period. The Re/Max decline was significantly impacted by the Leaders move to Ray White. First National has declined from 78 to 42 offices, and the combined operation of Harveys & LJ Hooker which merged in 2010 has gone from 111 offices to 76 today.

Conversely on the rise, has been Bayleys up from 60 to 72 and Property Brokers which a decade ago was a regional operation in the Manawatu and Hawkes Bay and now spans across multiple regions of both the North and South Island, more than doubling offices numbers to sit at 41 today. 

The only new entrant to the market has been Mike Pero which has 54 offices. Mike Pero's operation has leveraged their franchise model to expand fast to create this infrastructure however their office support around 170 salespeople equivalent to just over 3 per 'office' whereas across the whole industry the average office supports 12 salespeople.

Whilst the number of offices speaks to high street brand presence and undoubtedly does drive the performance of these brand operators, the scale of each brand in the market is more rightly judged by the number of salespeople or better still transactions. Whilst not universally published, the major brands do make reference on a fairly regular basis as to the scale of their business by transaction, by this means it is possible to make informed estimates as to the scale of each operation. What I find interesting is to take that collected and intuited data and analyse the 'operational efficiency' of each brand by the measure of transaction per office as the final chart below details.

The telling insight this brings, is that Ray White and Harcourts manage very similar levels of transactions per office - around 90 to 100 per annum, whilst Barfoot & Thompson and Bayleys achieve a higher level in the 130 range per office per annum. The average across all 1,200 offices is 74 transactions in the past 12 months per office, with the smaller brands matching the independent operators at around the level of 1 transaction per office per week.

 


The property portal space just got more competitive – welcome OneRoof

by Alistair Helm in ,


 
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Once there was one, then became two, a third lasted but a few years, another made some noises, but soon exited, all was quiet for many years before ethnic diversity spawned a new entrant and then with a rush first one and then another came to challenge the two primary incumbents.
— A historical perspective of NZ's property portals

Such is the history of the past 20 years of the digital real estate classified marketplace, those to which I refer can be seen in the chronology below:

1995 – RealEnz was the first property portal in NZ owned originally by REINZ (Real Estate Institute of NZ). It went through a few iterations and stumbles including a time around the turn of the century when the major 5 real estate companies launched a competitor in Realestate.co.nz which lasted 2 years

2005 – Trade Me launched a property classified portal, initially as a private selling (auctioning) platform it soon focused on advertising and sought out the support of the real estate industry. Ray White were the first to sign up with gradually the rest following until by 2009 all were on the platform

2005 – The REA Group from Australian launched Allrealestate.co.nz, leveraging the platform of the Australian Realestate.com.au site, the investment in NZ was significant with mainstream advertising and incentives for agents

2006 – RealEnz re-branded as Realestate.co.nz under a new ownership 50% REINZ and 50% Property Page NZ Limited (Harcourts, Barfoot & Thompson, Bayleys, Ray White, Harveys, LJ Hooker)

2008 – Allrealestate.co.nz closes operations. It all became unsustainable and their focus was on richer international markets

2009 – Sella.co.nz (owned by APN) expands to offer property classified

2011 – Hougarden launches as Chinese language property portal utilising initially a complete listings feed from Realestate.co.nz

2012 – Sella closes

2015 – Homes.co.nz launches initially as a property valuation portal but from 2017 as a listings portal with first supporters of the major brands being Ray White 

2018 – OneRoof (owned by NZME) launches

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For most of the past dozen years the digital classified property space has been dominated by the two largest incumbents – Realestate.co.nz and Trade Me Property. They have jostled for leadership, challenging from a position of listings supremacy in the case of Realestate.co.nz, and audience supremacy in the case of Trade Me Property.

Now there is a new contender that has been quietly offering a beta version of a site since December – OneRoof, backed by NZME. It is officially live and open for business and that is reason enough to share my thoughts, opinions and perspective on the new challenger.

Firstly the NZ industry has seen challengers come and go. Allrealestate backed by the Australian REA Group made a valiant effort to take on the market between 2005 and 2009 and made a good job of it. If it had not been for greater international opportunities it could well have succeeded as a long term player. The management knew the business, they held a good share of inventory and they had deep marketing pockets at a time when Realstate.co.nz did not, and Trade Me was of the view that marketing budgets were unecessary.

Equally Sella, albeit a clone of Trade Me made serious plays in 2009 and attracted some listings and certainly had an audience but the industry was not keen on a media owned competitor (at the time owned by APN which of course became NZME).

The landscape in 2018 is somewhat different though, and for this reason and the reasons I will explain below, I believe OneRoof could potentially be a very serious player in this market as early as this time next year.

 

User Experience

The OneRoof platforms of website and mobile apps are superb. They are in my judgement better than either Trade Me or Realestate.co.nz and given the turmoil that seems to be inflicting the latter in terms of its ‘new site’ this competitor puts their efforts to shame.

The platform is rich with a diversity of content, combining listings with property data, highly intuitive search functionality and excellent premium listing presentation. You could criticise them and say there is way too much data covering everything from travel times to crime data, local restaurants to property stats. For me it all works; and you can avail yourself of the richness or ignore it as it is far from intrusive.

From a technical standpoint it is interesting that they have chosen to create 2 browser platforms – a desktop and a mobile version. The more normal approach these days is a single fully responsive single browser experience. Having said that Trade Me still operates two browser platforms although they have been beta testing a fully responsive site for quite a while. The Realestate.co.nz new site is fully responsive (however the original Classic site was actually semi-responsive). There are inherent issues running two browser platforms, but equally fully responsive sites with multiple breakpoints are a technical challenge.

The apps on the mobile device for OneRoof are great based on my testing of the iOS app. The app is great with excellent map based search and great user interface design. The full rich diversity of content is as complete on the app as on the browser.

I have to say as a user OneRoof is the best digital platform on the market today.

 

Existing relationships

The huge advantage that OneRoof has over other challengers like Homes and even I have to say Trade Me is the relationship that NZME has with the real estate companies. These parties have been close for decades as the industry have been supportive advertisers in the NZ Herald and strong bonds exist across all the real estate companies. This is an Auckland skewed situation, but there would be few real estate companies around the country that at sometime or other don't advertise in the Herald or any of the other mastheads that the company operates (Bay of Plenty Times, Hawkes Bay Today, Rotorua Daily Post, Northern Advocate and many others across the North Island).

This trusted relationship will have been tested last year when NZME must have engaged the industry to announce their intention to launch OneRoof. That is what I assume. The fact that the site is live indicates that the industry were comfortable (I might judge this as being somewhere between grudging acceptance and supportive dependent upon which real estate company you talked to).

A big question for me is whether NZME will truly package up online and print advertising in easy bundles for agents to sell to vendors or if has been the case over the years the digital sales teams and print sales teams retain their own account books and end up confusing and forcing agents to choose?

All of that having been said the one worrying issue is that given the site was launched in beta in December and now is fully live in April the inventory support is very low. Of the major 5 real estate companies (who also remember own 50% of Realestate.co.nz) only Bayleys has jumped in 100% with listings. It is surprising and somewhat concerning that OneRoof has not secured any other major yet.

 

Media family

As mentioned the ability for bundled package selling of print & digital is a natural opportunity that NZME has created in this new platform, however the media family offers far more.

As the Australian counterparts have shown in both having media parents (Fairfax in the case of Domain) and News Limited (at least as majority owner of REA Group), there is much to be leveraged in the cross median marketing.

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Already the weekly NZ Herald property supplement has tipped its hat to OneRoof, I suspect it will not be long before the supplement is branded OneRoof, mirroring the Domain supplement in the Fairfax newspapers The Sydney Morning Herald and The Age. Equally the News Limited papers have used the branding style of Realestate.com.au in their property supplements.

The media machine that produces the newspapers around the country generates a vast amount of content around property which will be honey for the OneRoof audience adding to engagement.

I suspect it will not be long before OneRoof quietly smothers the fledgling specialist Commercial portal of True Commercial; it has been labouring away for many years but OneRoof Commercial makes more sense - a single platform for all types of real estate... all under OneRoof.

 

Maturity of digital media

There is a significant difference between a new competitor entering the market for real estate advertising now as compared to back in 2005 or 2009. The industry, and by that I mean the main 5 companies have a clearer view of how they operate today in the digital space. They have confidence in their industry owned portal of Realestate.co.nz. They judge that the relationship with Trade Me is balanced and they have not witnessed the total demise of print media.

Therefore in my mind, they are more likely to accept the establishment of OneRoof especially as Homes.co.nz is already an emerging competitor which has the full support in terms of listings from Ray White. This in someways demonstrates the split in the make up of the 5 major real estate companies when it comes to digital media. Ray White have always been the first mover as they were in 2005 supporting Trade Me, they equally supported Trade Me after the pricing fiasco in 2013 when Trade Me needed an ally. So they have with Homes, judging it better to take strategic advantage early on rather than follow the herd. Bayleys equally with a seasoned media person as General Manager in Greg Hornblow, can see the strategic advantage of an early agreement with OneRoof. As for Barfoot & Thompson and Harcourts they are the most staunch supporters and board members of Realestate.co.nz so it is no surprise that they are hedging their bets when it comes to Homes and OneRoof. As for LJ Hooker I don’t know, except to say they have not been known for strategic moves.

 

Burdens of incumbents

OneRoof is fortunate that the digital media landscape is somewhat fluid at this time, in this I am referencing the two main players.

Realestate.co.nz is the industry back-stop, supported by all real estate companies but feeling a little bit like it is floundering, given the current platform evolution on the web. Its strategic role as the price setter, has been a massive success. But I feel that this is now assumed by many in the industry to be what it was, not so much what it is or what it might become.

Trade Me Property is still fighting with a hand tied behind its back as a function of ‘long memories’ in the industry to the price changes back in 2013, this has limited the role it once held as a market leader in terms of business model and technical platform. Trade Me needs to establish a new platform urgently, especially in regard to the browser as the mobile apps are great but agents are not as engaged in the platform as they once were.

 

Market conditions

The property market especially in Auckland has clearly cooled and likely to remain cool for the next period, be that a year or more, with an expectation of sluggish growth as opposed to negative growth in both sales volumes and prices. For the rest of NZ the fact is what Auckland leads the rest follow (in time).

This property market is going to be very interesting for the property portals; for whilst a cooler market spells ‘longer time on market’ with a rising inventory (with the attendant rise in revenue for per-listing services) it may not depress overall advertising spend, quite the opposite as a cluttered market with high inventory will require smarter marketing to get properties to stand head-and-shoulders above the rest. The real estate industry is likely to go through a structural shift with a large number of agents exiting, but the overall size of the cake of advertising spend may not reduce markedly.

Given the requirements of smarter marketing a new entrant with smart premium advertising options matched to package bundling of print and digital could well reap huge rewards – OneRoof is so well placed.

 

The kill switch

With all this believe and positive encouragement for OneRoof you would think the champagne corks may be popping down at their Central Auckland head office, there remains though one nightmare reality. It is that the real estate industry holds the ignition keys – the listings.

As long as OneRoof fails to gain a decent foothold of listings inventory, the consumer will lose interest and repeated marketing attempts to re-attract them may reach a point beyond which the consumer may ignore the site completely. It is one thing for Trade Me Property to continue to succeed with 92% of listings it is a vastly different matter for a new site to offer at best 25% of listings. OneRoof needs to be very careful not to offside the major 5 real estate companies as without them they will struggle to get beyond 35% of the market even with Bayleys.


How vulnerable is the $100+bn property portal industry worldwide?

by Alistair Helm in ,


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In less than 25 years, a whole new industry has been created. Property Portals, these digital platforms that span the globe, aggregate property listings that serve as the primary advertising for the real estate industry. To the consumer this industry provides the most convenient method for searching properties for sale or rent, whether residential, commercial or industrial. Hundreds of millions of consumers every day.

In aggregate this industry of publicly traded and private companies approaches a collective market cap of something like $100+ billion across every corner of the globe.

The largest of the players would be Zillow with a market cap just nudging $10bn as it begins to eke out a decent (adjusted) EBIDTA which rose to 22% from just 2% the year prior on revenues of $1.1bn. This profitability however looks paltry as compared to the profit powerhouse of Rightmove in the UK which consistently exceeds 70% EBIDTA margins on revenues of $340m which is why it supports a market cap of $5bn.

The list goes on through the likes of the REA Group, ImmobilienScout24, VivaReal, Schibsted and many hundreds of others (including in NZ Trade Me and Realestate.co.nz). Suffice to say this business model of aggregating listings of real estate companies for consumer search supported by premium advertising and listings subscriptions makes for a very lucrative business, one that the incumbents will defend through constant innovation, as well as acquisition. However no industry is ever safe from disruption, especially digital platforms.

Whilst I don’t contend that the demise of these property portals is imminent, I do foresee a risk. A risk every bit as real as the global newspaper industry which became the victims of the property portal success as through the 90’s into the new century their real estate advertising goldmine, began to crumble and today has all but disappeared.

So what is this risk and where will it likely come from?

To understand the risk you need to simply look at the portals’ role. They are an aggregator of both sides of the market in which they operate. They aggregated advertised listings and they aggregate a consumer audience. Their global success has been the ‘winner takes all’ model as the aggregation of the largest audience (although in most countries there is a #1 and a #2 leaving the rest in their wake), audience advantage guarantees dominance in listings, so begets the audience.

But stop for a minute and reflect as to the future of search, after all this is what a property portal is, a search engine. The technology revolution for search is voice. The improvements of the past couple of years has been incredible and the next few years will take us forward beyond our current estimation. The reason why, is the accelerated adoption of ‘home’ devices. The Amazon Echo, The Google Home and the Apple HomePod. For a moment ignore the latter and concentrate on the first two. They are the global powerhouses of search and artificial intelligence, coupled with the global reach that would surpass the local audience of any property portal.

So imagine a future state. You’re on the couch and with your Google Home you ask “Hey Google – what properties might I like to see this weekend” – the screen of your choice (TV/ Tablet / Glasses) then starts to display homes for sale open this weekend.

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Let’s look at the mechanics of this scenario. Google Home is paired to your Google account so it knows so much about you – where you live, where you work, where the kids go to school, how far you drive on weekday and weekends, where your relative lives and your friends. Google knows what your style preferences are and what you have bought in the past few years to renovate or decorate your home, it also knows details of your finances and likely as not your mortgage.

So when you ask Google to show you what properties you would want to see this weekend, you don’t need Zillow / Rightmove / REA as intermediaries or their ‘simple’ search filters – location / beds / price.

Google has the listings inventory of every real estate company in every country, they have collated it for years in search logs. They have deep attribute knowledge of every house that has been advertised for over 15 years at least; they also every house’s estimated valuation. It knows the level of your interest in types of houses and more important the best match of you to your future house. So Google will deliver a portfolio that is personalised to a very fine degree for your review. However it will never stop learning leveraging its vast AI capability to do this. Every comment you make when you see a property in this portfolio will be a key signal to adapt the portfolio to better meet your needs by style, condition, location and attributes. Every comment is also a signal which helps other Google customers who benefits from your comments. Should a new property hit the market via the local agency that is the perfect match, it will add this to the morning update it provides before you leave the house in the morning, and schedule a catch up with the local agent optimising you and your partners diaries.

This capability is real and achievable not just by Google but also by Amazon as they have a significant advantage in consumer engagement in a retail sense and richer installed base of Echos. Already more than 1 in 10 US homes has a voice activated home device and that number will only accelerate this year.

What is the goldmine for these two behemoths?   Well Amazon for one, has made that clear just this week – they are after the mortgage market. Real estate is at its heart actually just a vehicle for the far more lucrative finance industry as the largest consumer asset base globally. As for Google, well as an advertising company I think they can come up with ways to monetise the connection between the agent and the buyer that will boost Google’s stock by a healthy $100bn or more!

How do property portals defend against this future threat?

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The smart ones recognise it and are heading down ancillary market routes. Zillow has been after mortgage origination for years, they have recently tested the iBuyer market, but I think the larger bet which has been on their radar for a number of years signalled by their Premier Agent platform is to become Zillow Realty as a broker of scale supporting hundreds of thousands of agents with an infrastructure to allow them to be truly independent contractors with no franchise aside from the Zillow brand. Interestingly Zoopla in the UK has already started earning more revenue from their uSwitch business than the portal space, they can see that the business model of a property portal may just have been an opportunistic industry that is surpassed by the next tech revolution.

Interestingly for those that have the memory of the early internet period there will be a familiar ring to the word portal, after all there was a time in the late 90’s when the river of gold of the early web day flowed from everywhere to Yahoo. Every pre-dot com start up gave up huge equity and most of their revenue to Yahoo to be the access point for their category of product or service as everything for the consumer started at Yahoo – how that once invincible portal has deflated over the past 20 years to a shadow of its former self, valued in ’98 at over $110bn and recently selling to Verizon for $4.5bn. An object lesson for today’s property portals perhaps?


The battle for listings between Trade Me and Realestate.co.nz

by Alistair Helm in


A quiet celebration may well have been heard in the Trade Me office in Wellington earlier this week. Such an event will come as a welcome reprise, for when it comes to the Property division of the company, the last 5 years have not been an easy ride; I should know, as I spent the past 3 years working as part of the team to build out a comprehensive platform of tools for Trade Me members and real estate agents.

The celebration would have been for a milestone in the comparative inventory of properties for sale. As of Monday night the number of active listings of properties for sale (excluding bare land and building sections) advertised on Trade Me totalled 28,883, whilst for their competitor Realestate.co.nz it was 28,876 – a small margin of just 7 listings, but for Trade Me a major milestone. For the first time since late 2013, Trade Me has reasserted its mantle of leadership for the inventory of property for sale.

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The past decade in which digital advertising of property-for-sale has really become established as a critical marketing platform, has seen a somewhat chequered performance by Trade Me; but by no means a smooth road for Realestate.co.nz (I was CEO of Realestate.co.nz from 2006 to 2012).

The initial period up until mid 2010 was the most challenging time for Trade Me. Their initial launch in 2005 was not greeted warmly by the majority of the real estate companies with lacklustre support in the earlier years with the foundational move to get Ray White as an early strategic customer; this lead to key regional operators like Tommy’s and Leaders coming on board, as well as medium sized operators such as Professionals and First National before seeing one-by-one the majors of Bayleys, Barfoot & Thompson and then finally Harcourts bowing to the pressure generated by their agents to list on Trade Me. By 2010 the writing was on the wall that Trade Me was accelerating towards 100% inventory of all property for sale.

Between 2010 and the end of 2013 things could not have looked rosier for Trade Me. That period did see a significant tightening of the overall market, leading to a significant decline in overall listings, however given the fact that Trade Me's business model was a monthly subscription irrespective of listings, the money was rolling in as all offices around the country signed up to Trade Me. For Realestate.co.nz this was not an easy time, as given the unparalleled awareness of the Trade Me brand and its massive audience advantage, fighting for relevance was tough and despite the significantly cheaper subscription offering, offices were wavering on their commitment to this industry-owned site.

All that changed in September 2013 when as anyone with any knowledge of the history of this industry will tell you, Trade Me made a mistake. A mistake that has ended up costing them dearly and creating deep divisions within the industry. It was (if you don’t know) a price change for agents and agencies moving from a subscription to a pay per listing model. The consequence of this mistake was a much publicised boycott by agencies of Trade Me listings which saw a listings' leadership over Realestate.co.nz of 27% in mid 2012 slip to a deficit of 18% by the end of 2014 with overall leadership in inventory conceded in February 2014.

 

Apples with Apples

The figures I have used in this analysis, being the number of listings of property-for-sale, does have one glaring issue which lives under the classic phrase of “comparing apples with apples”. The Trade Me total inventory includes private-for-sale listings and of course Realestate.co.nz being an industry-owned site does not list private sellers . Not wishing to rain on their parade, the sad news is that when an adjustment is made to remove private-for-sale listings from the Trade Me inventory the slim advantage disappears and Realestate.co.nz retains leadership of the market of agent listings of property for sale.

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Thanks to Core Logic I have been able to estimate the extent of private listings from the total Trade Me listings inventory (an estimate based on proportion of private settled sales to total settled sales as a surrogate at least). This revised picture shows that Trade Me still lags Realestate.co.nz for leadership in listings, the margin represents some 2,500 listings with Realestate.co.nz having 9% more agent listings than Trade Me.

 

Regional picture

As ever with real estate there is never a single market, there are multiple markets on a local basis and so it is when it comes to inventory.

Analysing the regional inventory at this time shows that Trade Me can take comfort from the success they have had in the Auckland market, where as of today they hold a leadership in inventory of 3% with 10,277 properties for sale in a market. Adjusting for private-for-sale listings (which are low in this region) means that Trade Me has practically 99% of all the agent listings across Auckland.

In contrast looking to those markets where the 2014 boycott was strongest. Trade Me continues to lag significantly behind, specifically in the Manawatu / Wanganui region as well as the Hawkes Bay. Trade Me in these regions have between 60% and 70% of all agent listings.

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Technology empowered real estate solutions - the low price operators

by Alistair Helm in ,


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My recent article questioning (and answering) why real estate agents had not been killed off, as the internet has disinter-mediated so many other businesses; was published on the NBR website and generated a number of interesting comments. Amongst the more predictable with a focus on private sales vs agents, this comment grabbed my attention:

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The article I wrote, specifically focused on the role of the agent, and how this component of the real estate process continues to be successful, and in my judgement will be so in the foreseeable future. There will be challengers within this industry. In fact there have been challengers in the past, and so I thought it worth examining some of these technology empowered aspiring challengers, so as to more fully answer this comment, and thereby provide a broader picture of the new more digitally focused real estate landscape internationally.

Researching many operations across the main markets of the UK, US and Australia / New Zealand, has highlighted what I think are three key categories of challengers to the (traditional) real estate process. These are what I call 1. The low price operators / 2. The true innovators / 3. The opportunists

Given the number of models to examine, I propose to separate this analysis into 3 separate articles. I'll start here with the first being the low price operators.

Low Price Operators

The commenter in the NBR, cited two UK based real estate operations - Yopa and Purple Bricks. These are but two of what are many operators in the UK market offering an online focused / fixed fee solution. Most charge around £800 for what they claim is a simple, and far more efficient model than traditional estate agents. Take your pick.

The UK top 10 online estate agents as reviewed by The House Shop - click to read full article

The UK top 10 online estate agents as reviewed by The House Shop - click to read full article

The key thing as ever in examining overseas models is context. The UK real estate market is very different to both the New Zealand and Australian. Firstly there is no equivalent of the Real Estate Authority legislating and overseeing the licensing of agents. More significantly though is the fact that the UK industry is what I judge to be 'low touch' service offering; meaning that as a vendor you engage a local real estate office to market your property (rather than a specific agent). They advertise the property online on the leading portals and handle enquiries and schedule viewing, but largely don't physically leave their office, as you the vendor, will host the interested buyer. The UK process is by comparison to NZ highly protracted (at least in England and Wales - Scotland is very different) in that an offer to buy is not legally binding until the settlement day and as a consequence often up to a third of all "sales" never settle and fall over in the final days and weeks leading up to settlement.

For this 'low touch' service real estate offices typically charge from 1% to 1.5% of the sale price and agents are largely employees of offices. For this reason the online service of the likes of Purple Bricks, emoov, easy property and Yopa are not that far removed from the traditional model. Instead of calling in at a local office, you sign up online and the service provider advertises the property and receives the enquiries and schedules with you the viewings. All this for around eight hundred pounds, compared to an estate agent charging say 1.5% of the average sale price of £225,000 amounting to just over £3,000.

The thing is, most of these operations have been around a while - especially emoov and easy property. It was not until Purple Bricks started to talk about a stock market listing just over 2 years ago and at the same time, investment funds started investigating real estate as a new sector to find a home for large amounts of cheap money, did media pick up on the potential of these startups; and as we all know, where investment money flows, so marketing budgets explode and consumer awareness grows. However as reported by TwentyCI a UK based property data company, whilst these online estate agents have grown year-on-year in absolute terms they barely amount to 6% of the total market. By comparison the NZ private selling market is c. 12%. Added to this is the fact that Purple Bricks (now a listed PLC) and others have recently in the UK tripped-up over a lack of transparency around the fees charged which are not refundable if the property does not sell, as well as finance charges for the deferment of the fees, creating a flood of media coverage likely to impact their growth.

Returning to the comment in the NBR, as to the notion that Savills investment in Yopa is a sign of the burgeoning of this sector in the UK - I would judge it is simply a smart each-way bet by Savills to see if the segment does challenge the incumbents. As for LJ Hooker in Australia, I judge that they got a little too enthused or better put, 'carried away' on the belief that they needed to launch a low price service and that is why they launched Settl which based on the information at the time was due to launch in the second half of 2016, however as yet no service is available - possibly LJ Hooker have got cold feet.

As to any Artificial Intelligence (AI) integration which some of these online agencies purport to offer. They are largely leveraging automated valuation models (AVM) and a rudimentary buyer / seller matching AI which as anyone who understands the principle of a two-sided market place, is only effective when you achieve scale on both sides of the market and none of these operators have anything like enough scale. The smarter use of AI in my view as an example in the UK was the acquisition by Rightmove (the UK's leading property portal) of predictive analytics company The Outside View in 2016, this company's smarts will leverage Rightmove's massive scale advantage of close on twenty years of data to undertake deep AI analytics to be the best at predicting the future sellers in the market thereby powering agent tools as a new business for Rightmove.

Moving away from the UK, Purple Bricks launched in Australia last year and now offer a service through local property experts (who have to be licensed) and who are a point of contact with the consumer through the process for which a fee of $6,000 (VIC / NSW) is charged. A US entry for Purple Bricks is currently underway. Interestingly the recent UK issues of transparency around the liability of consumers to pay the fees even if they don't sell, has now plagued the Australian operation with a $20,000 fine in Queensland as a solution to the avoidance of possible court action after alleged possible breaches of the Australian Consumer Law and the Property Occupations Act.

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New Zealand is not alone and has low price models - 200Square currently has a fixed fee of $4,500 and Tall Poppy have a fixed fee - well actually a sliding fixed fee: $500,000 property price: $12,000 / $1m price: $20,000 / $2m price: $30,000. There are also many operations in NZ charging 1% - most of these price based competitors have been round for many years and of course you may remember the 2007 flash of "The Joneses" with their "flat fee.. not fat fee" of $8,000.

Regardless of whether these various operations are labelled as online estate agents or fixed fee operations, they all stand behind one positioning strategy - they are low priced operators. As any marketing or MBA course will tell you, being the lowest price player in the market is not a sustainable place to build a long term business. A low cost operator now that is a sustainable platform for sure, but these are not low cost operators. The true low cost operation in this industry is the traditional business (as far as in the NZ model) because traditional real estate franchise groups don't employ salespeople, they are made up of local teams of independent commission-only contractors. Low price operations have by their very presence always to be looking over their shoulder to new competitors trying to undercut them, instead of building long term value in their brand and reputation.

Technology has the ability to drive out cost and improve efficiency, but when it comes to the real estate process as outlined in detail in my earlier article, efficiency through technology comes at a cost to the customer, largely that cost is in the loss of a trusted individual deeply engaged in the process end-to-end. For the low price operators such individuals tend to focus on being a pure lister (in the case of Purple Bricks) or a generic customer service answering contact points in the case of the other online agents.

Next article will focus on The True Innovators and finally I will examine The Opportunists