OneRoof - a 6 month review

by Alistair Helm in


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

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

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

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

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


CONSUMER AUDIENCE

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


COMPETITIVE RESPONSE

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

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



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.


Online Property Valuation Models – how accurate are they?

by Alistair Helm in


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As might have been anticipated, my recent article providing a guide to the current portfolio of providers of online property valuations models triggered the inevitable question – "just how accurate are they?"

So I thought I would do some desk research. However before I unleash a barrage of criticism stating that there are heaps of examples where the Automated Valuation Models (AVM’s) are so wide of the mark to make them laughable, let me simply say this. There over 1.5 million AVM’s or potential AVM's for NZ properties – there will always be outliers and extremes. I do not have time nor patience to review thousands of properties, or even hundreds of properties. I chose to select just 12 properties.

The method I have used, is to track the latest auction results as published by the team at Interest.co.nz as the auction year started after Christmas. I simply took the first 12 I saw which comprised 8 properties in Auckland and 4 in Tauranga. So again I acknowledge that my sample is hardly representative nor truly random. It is made up of auction sales only, the sales are only for those 2 areas of the country and represented a very quiet period of the year.

With these 12 property sales results I went to each of the 5 providers:

I knew none of these providers had updated their valuations to take account of any of these actual 12 sales neither would the sale records have been picked up through local council sales or agent reporting so there was no bias of an AVM being influenced by these recent sales.

Another point to note is the analysis compared the sale price at auction to the mid-point of the price range of the AVM.

So here is the table of results. The colour code used is blue where the AVM equalled the sale price exactly, red signifies an AVM below the sale price with green where the AVM is above sale price. Finally, grey indicates that the provider had no AVM for the property.

As you can see, the visual skew towards red indicates that based on this sample set most AVM’s were below sale price.

The original version of this article I used an average variance measure, after receiving valuable feedback I have now used the calculation of Gross Median Error.

All providers achieved a gross median error of less than 10%, with Realestate.co.nz achieving less than 5% which is impressive. I would deduce that a factor in their accuracy, is they benefit from the very latest REINZ data each month of unconditional sales, whilst all other provides rely largely on settled sales which come through at least a month to 2 months later.

Another perspective I was keen to examine in respect of the accuracy of AVM's was the indicative range they provide to reflect the level of confidence. For each provider, for each property I assessed the range as a percentage of the midpoint price.

This analysis is very illuminating. The provider with the tightest range (in theory indicating confidence factor) is MyValocity, closely followed by Homes, both just under 10%. This effectively meaning that their AVM range is 5% below the midpoint to 5% above which I would judge as fairly acceptable given this is a computer based estimation with no detailed knowledge of the specifics of the property.

Of interest in this analysis is the very wide margin in the range from Trade Me Property at close on 30% with their tightest range being for a single property at just 19%. Similarly Realestate.co.nz seem to apply a standard c.21% to all AVM’s.


For completeness here are the raw numbers

 


Making sense of online property valuation models

by Alistair Helm in


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Having cited the democratisation of property data as the most significant event to occur in the real estate industry over the past 3 years, I thought it would be a useful follow up, to provide some insight and perspective as to this new world of more accessible property data and by so doing provide more context as to these estimated valuations as compared to traditional valuation providers.

I do also propose in a follow up article to review each of these new providers and assess their relative strengths and weaknesses.

There are currently I judge five key players in the market offering online estimated valuations for NZ property. These are Homes, Trade Me Property, Realestate.co.nz, MyValocity and QV (a note, QV only provide a free estimated valuation model on their mobile app – their website still requires the purchase of an e-Valuer report at $49.95 per property).

All of these operations provide a free unlimited online automated valuation on pretty much all properties in NZ. Well actually not every property. The fact is all of these providers recognise that without sufficient proximate data from which to compute their algorithm they cannot attribute a reasonable estimate to every property, so not every property will have a valuation estimation. It is likely that the more remote the location, the more rural, the less frequent the number of local sales the less likely there will be for a estimated valuation.

Let me expand upon this as an insight as to how these Automated Valuation Models (AVM) work. Each of these companies leverage the now easily accessible massive computing power that only a few years ago was the reserve of major corporate and government agencies. The likes of Amazon Web Services, Google Cloud Platform and Microsoft Azure to name but a few, which offer massive computing capacity just when you need it – in this case allowing these local companies to rent a couple of hours of grunty computing power to run algorithms that analyse the impact of all recent local sale records for all properties. This is basically how the algorithm works. Each property record is assessed against recent sales of similar properties (similar by standard metrics of for example number of bedrooms, size of property being the two most important).

The key data point here is recent sales; the more recent the sale, then the more accurate the estimation. Naturally there is a lot more sophistication in each company’s algorithm than I have outlined here, including self-learning tools to assess the system’s accuracy by effectively going back and estimating a property sale before the actual sale is confirmed and then reviewing actual sale price against estimation.

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AVM’s tend to be displayed on these various platforms as a price range with a mid-point. This is the result of statistical convention rather than a true sense of a predictive range. In my view look at the mid-point of the range as an indication of the AVM rather than the upper price! A range can often be as broad as 15% or even 20% either side of the mid-point which at times makes them seem very inaccurate. The fact is, the computer algorithms compute a single figure together with a confidence factor which then drives the scale of this range.

That is the complex part of Automated Valuation Models (AVM). The key question though is, can you, and should you, trust these estimation valuation models in the marketplace as a guide to better inform you as to an indication as to the likely selling price of a property?

Before I go into that, it is really important to lay out the difference between a number of data points that you are likely to come across in terms of assessing the value of a property. I have detailed below the 5 valuation data points in descending order of accuracy.

The Selling Price – this is ultimate statement of the true value of a property. This is the price at which a willing seller accepted an offer from a willing buyer. This valuation is 100% accurate, but at the same time ephemeral, as it is a moment-in-time judgement and will never be repeated because circumstances with the property market at a hyperlocal level change all the time.

A Registered Valuation – this is the most accurate estimate of a property's value and that is why it is insisted upon by banks and lending institutions who are prepared to take on the risk against which they lend. Registered Valuations are undertaken by a professional valuer, a person who has undergone extensive training and education spanning many years. Such valuations, often cost many hundreds of dollars. Registered valuers use recent sales and local knowledge to provide a very detailed written assessment of what a property is worth in today’s market. There is also professional indemnity that lies behind the valuation report.

A Real Estate Appraisal – a licensed real estate professional will provide a client with an appraisal as to what a property would expect to fetch in today’s market. Under the guiding rules of the Real Estate Agents Act 2008, it is a requirement that a salesperson provide a client with such an appraisal before signing an agreement to list and market their property. Such appraisals need to identify a price or a range, ideally not exceeding 5%. Such an appraisal is computed using a comparative market assessment of what properties of similar size and features have sold for recently. Additionally an appraisal will look at the hyper-local market conditions of supply and demand which a local agent is uniquely able to assess.

An Automated Valuation Model – as outlined above this computer based model is undertaken by the leading five online providers and is based on raw data with no human intervention or local insight.

A Rateable Value – this is a valuation developed for local authorities and undertaken every 3 years in order to provide a benchmark upon which local rates can be assessed. The Rateable Value is judged to be the likely selling price at the time the assessment is made and therefore this estimation decays pretty quickly afterwards. Largely the model used by the providers of this service for the local authorities matches the computer based AVM.

As a prospective buyer or seller the question is, which of these data points should you look at, when and why? Here is my opinion.


What a property seller should do?

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If you are looking to sell a property it is very useful to keep an eye out for local sales results – many agents nowadays will provide such report at open homes, and of course Homes / Trade Me / Realestate / MyValocity can provide this data although not all provide email alerts of recent sales in your area (Homes does a great job of this). In addition, it does no harm to review the AVM estimate for your own property, it’s a valuable guide. Again Homes offers the ability for you to ‘own’ a property record and receive monthly emails of the latest valuation and market trends.

When you are ready to go to market with your property choose your licensed real estate salesperson and get them to provide an appraisal which will give you their valuation estimation which will be most likely based on selected comparable recent sales of properties that best match your property. Their appraisal report will identify these comparable properties thereby allowing you to discuss and debate the merits of your property versus others. This appraisal is the best indicative valuation you can get without investing in a registered valuation.

The estimated valuation in an appraisal will be either a single figure or a range and in this case best practice says that the range should be no more than 5% overall, which means between 2.5% above and below the mid-point. So for example a range of say from $535,000 to 560,000 would be acceptable.

The appraisal you receive may utilise a couple of well recognised models as well as comparable sales. These being net rate / replacement cost or capitalisation of income. I won’t dwell on these other methods here, aside than to say a professional real estate salesperson will used their skills and knowledge to arrive at an estimated valuation that is the best in the market.


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What a property buyer should do?

If you are looking to buy, I would recommend the same approach of keeping a watchful eye on local sales and see what properties, like the one you fancy buying are selling for. Certainly, review the online service providers to see what the properties that come on the market are valued at based on AVM’s. Trade Me is great at this, in providing a link from most listed properties to the AVM on their Property Insights section.

I would recommend that when you get closer to the decision-making process of buying you chat with the agent for the property you are interested in, and discuss with them the view they hold as to price range and how that may differ from the AVM online – they will be only too keen to share the reasons why they view that their price judgement is more reflective of the local market conditions. Listen closely as they are working every day in the market and their insight is critical.

If as a buyer you require finance on the property you choose, you will likely need a registered valuation as the bank or lending institution will insist upon it, however I would take that lead from the lender rather than rush into requesting a registered valuation before you are certain on the property purchase. Remember obtaining a valuation as part of the financial conditions of a conditional offer for a property is perfectly acceptable.

The one estimated valuation I have omitted to mention in this process is the Rateable Value. The role of the RV has now finally gone. It can finally be ignored and retired from the lexicon of property transactions – interestingly something I suggested back in 2013!

 


Homes – New Zealand’s answer to Zillow

by Alistair Helm in ,


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The NZ real estate industry witnessed a significant milestone just over 2 years ago when Homes.co.nz hit the market. At that time the launch was significant. Today, two years later the service remains significant, and it is my belief that it will become ever more significant in the years to come.

Here is why.

Homes did just one thing when it launched, and it did it well. That is the mark of a business with big ambitions. It, for the first time allowed anyone, anywhere to see historical property sales records and estimated valuations for any property in NZ …. for free!

Sure, it was initially only for the main cities and it was not a great website and there was no mobile app. But for those who crave this type of information, all of those things were of little consideration. They wanted facts. Facts that had for decades been hidden behind expensive price tags. Remember for a minute, that back then in 2015 if you wanted to get the last sale price for a single property you have to dole out $10 on the website / $2.95 on the app of QV. To get a collection of comparable local sales, twice that amount; and for an estimated valuation $50.

Homes very quickly built a sizeable audience and become the chatter of meetings between friends, colleagues and neighbours. Marketing dollars were not needed when you have a source of information that is like cat nip to anyone who owns a property or wants to own a property or is simply curious about what your landlord’s place is worth!

Homes leveraged this consumer appetite with smart PR stories about every imaginable property fact and took on a smart and approachable marketing head in Jeremy O’Hanlon who was savvy and accessible. The word of mouth grew as did the traffic.

A bit of diversity wouldn't do them any harm!

A bit of diversity wouldn't do them any harm!

Homes is, and continues to be a privately funded start-up and at launch recognised the need to have a seasoned entrepreneur to seek out the initial funding and lead the company, this was when John Holt came on board to support the original founders being Jamie Kruger and Michael Gibbs.

Fast forward two years and whilst I don’t know the ins and outs of the company, I do know from extensive conversations with customers of Homes (agents and users) they are doing well and are on a fast track for the coming years to become a significant force in the NZ real estate marketing arena.

So why do I hold this confident position?

Simply put. What I see in Homes is what I witnessed with Zillow in the US from their launch in 2006 right through to their position today – a 3,000+ employee company with a turnover north of NZ$1 billion and market cap of NZ$7.5 billion. Allowing for the relative population comparison that would provide a potential comparable valuation for Homes in excess of NZ100 million.

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Zillow launched with a simple website (back in 2006 don’t forget there was no apps store, so the web had to do). It provided a simple offering – historical sales data and valuation (Zestimate) for almost every property in the US for free – the first such offering.

The site instantly became sticky (first day topped 1 million page views) as people had an insatiable appetite to see what their house was worth. That audience quickly generated a significant advertising revenue. As so with Homes who smartly set up sponsorship arrangements with key advertisers prior to launch as well as regular ads.

For Zillow the relationship with agents was at first testy – loved by few and hated by many; but it was not long before the smarter agents started recognising that the ad units Zillow could sell next to properties records and Zestimates was a perfect place to pitch to prospective clients. For Homes they established the same service with free agent profiles and premium profile so agents could ‘brag’ of their sales success on individual property records.

With agents recognising the power of the Zillow audience it was not long before these agents started uploading active listings which instantly bore fruit with strong viewing figures as Zillow users started using the portal for property search. At the time, the market back in 2008 was not as well developed with pure property portals in the US. There was an industry site (ala Realestate.co.nz in the guise of Realtor.com which was not owned by the industry but a kind of de-facto industry site) so Zillow had competition, but sadly for the owners of Realtor.com traffic soon switched leading to Zillow fast becoming the most visited website for property even if it did not have a comprehensive source of listings.

However whilst agents wanted to upload listings, the issue for Zillow was the complexity of the listing process in the US – much like so much of things in the US it is simply best to say getting a source of listings is a nightmare with 900+ Multiple Listings Services each of which is unique and holds geographical monopolies that are political fiefdoms. Bottom line was that whilst agents started to love Zillow their broker business owners and these industry listing services were not supportive.

For Homes the issue was similar but different. Accessing listings in NZ is easy (in theory). There are 6 major franchise groups accounting for well over two thirds of all listings, who can in theory provide a data feed of all active listings at the click of a key so long as you have their support. These 6 major groups though are the shareholder owners of half of Realestate.co.nz and to date the support for listings uploaded to Homes is limited to Ray White together with some independent operators outside the major 6.

Demonstration of Homes listing in Auckland - almost all Ray White

Demonstration of Homes listing in Auckland - almost all Ray White

As far as Homes playing to the Zillow playbook, I would judge that they are, where Zillow was back in 2009. Which says they have a lot to do, but I would judge that they will probably start to accelerate to catch up pretty fast. Within two years I would see them being a credible and viable competitor to the key players of Realestate.co.nz and Trade Me and potentially the new entrant of OneRoof.

So, what can the Zillow playbook hold in store for Homes. In terms of property marketing there will come a whole suit of premium advertising products which agents will pitch to sellers as digital continues to grow in relevance in property marketing. In addition as a function of the owners flagging their own home on the site they will be able to actionsmart direct marketing to property owners and prospective vendors. In terms of agent advertising I think they are better developed than any other digital player in NZ today which includes Trade Me and Realestate.co.nz. On top of this then comes the ancillary business opportunities. Zillow created a mortgage origination marketplace, not something that really exists in NZ but certainly a deeper and richer relationship with key NZ banks and financial institutions could be mutually rewarding for Homes.

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A bit more lateral is the pivot from Homes adopting the Zillow playbook to adopting the Zoopla playbook. Zoopla in some ways the UK version of Zillow, has very successfully broadened its business from property marketing to price comparison services, originally around utility and finance services through the acquisition of uSwitch to recently pitching the acquisition of Go Compare a far broader and significantly larger player in the UK market for comparison services. The logic being that once you become a trusted source of information and services of the house as an asset, then you can leverage that to any financial transaction from or to-do-with the house, especially as the house is always the biggest financial asset anyone generally has.

So what if any are the roadblock which sit in Homes way?

Listings. If the real estate industry decided it was not going to support Homes and not syndicate their listings to them as a property portal then Homes will struggle. However I don't think it would be killer blow to Homes, if they can demonstrate to agents that their appeal to clients and customers is as good or better than the current portal players then the power of the agent against the force of the key real estate companies will be the real test.

I’m excited to see what happens over the next 2 years in the real estate marketing arena, there is a lot at stake and some well-established players with a lot to gain and a lot to lose.


So what's been happening over the past 3 years?

by Alistair Helm in ,


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I have been meaning to sit down and reflect what has happened in the NZ real estate market over the past years since I parked up Properazzi back at the end of 2013, and took on the role of Head of Product with Trade Me Property.

As would be expected, some significant changes, and some small changes. So here’s my thoughts.

 

Data

Back in 2013 the best property insights you could research as to historical sales prices and values without reaching for your credit card was at best the monthly aggregated median price by suburb or by region. At the end of 2014 a radical transformation occurred which must have sent shivers down the spines of QV and Core Logic, as first Homes.co.nz, and then shortly afterwards Trade Me Property liberated property sales records giving us for the first time the ability to search for sold prices on any property in the country.

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Homes got the early lead as Trade Me offered the data only on the mobile app, but the gap was quickly filled as Homes launched their app and Trade Me brought data to the website. Homes stepped ahead with an automated valuation model (AVM) for a majority of properties from launch with Trade Me matching with the launch of Property Insights in late 2016.

This is without doubt the game changing event of the past 3 years. Nothing comes close; and nothing has done more to assist buyers and sellers gaining a perspective as to an estimated valuation and historical sales records for all properties. It is appropriate to note that both Homes and Trade Me offer AVM’s only when there is sufficient comparable data. They have both employed sophisticated computer algorithms that churn through property data to create estimated values coupled with confidence factors which means that they are delivering around 60% of all AVM's within 10%. That is to say they can predict the likely sale price to within 10% in 6 out of 10 cases, which is pretty good as a global benchmark.

This democratisation of data has, as would have been expected, been a challenge for the real estate industry. However 2 years on, the majority of agents and agencies have recognised that a better-informed customer is an engaged customer; one they are happy to advise as to the local nuances of the market with the local up-to-date knowledge that can help steer them towards a much closer market appraisal than a faceless computer based AVM.

New Zealand has at last caught up with so many other countries that make available property sales information; thereby saving consumers money and alleviating uncertainty.

 

Digital marketing

This area has been on reflection slow to change (or stubborn to change?). The same two adversarial players of Realestate.co.nz and Trade Me Property are still the main players in town, but not for long I suspect. NZME are lining up their new portal OneRoof (more of this to come) and at the same time Homes, in mirroring the “Zillow playbook” has pivoted from property sales data and estimated valuation to now provide on-the-market listings of property for sale and rent from a growing number of agencies as they head to becoming a fully fledged property portal.

Whilst the Chinese language market is not large, it is relevant and in Auckland significant. Hougarden launched in 2011 has grown and grown to deliver a great digital service, especially as they severed their listings data-feed relationship with Realestate.co.nz back in 2015 and have now become a standalone portal.

In terms of user experience, I have to say that the key players have been slow to evolve, Realestate.co.nz has a new site which they seem nervous to commit to (more to follow on this matter) and I wouldn’t blame them. Trade Me Property has tweaked their website but their main focus has been on their mobile apps which continue to evolve streaking ahead of Realestate.co.nz which has hardly touched their apps in the past 5 years. I am clearly a party to this performance having had responsibility for all digital products at Trade Me over these year, whilst not a defense I would say it has been a learning experience as to the pace of product development at such a leading digital company (more to follow).

In the broader context of digital marketing, Facebook has made huge inroads, attracting the digitally savvy agents who seek to use the platform for marketing properties and more especially themselves as brands – many specialist marketing agencies have sprung up to assist such agents and clearly significant sums of money are now flowing into this area and likely to accelerate in the coming years.

Bottom line is that the past 3 years has not amounted to a radical step forward in digital marketing, more of small tweaks.

 

Industry structure

Little has changed in terms of industry structure. There are more licensed salespeople in the market today than there were 3 years ago. The latest data from REAA shows 12,714 salespeople in November, up from around 11,000 3 years ago. For these salespeople the market is a lot tougher, as back in 2013 annual sales totalled 80,000 and was on an upward path to peak at 95,000 property sales, today it is back down to 74,000 sales per year and heading down.

New players have entered the market mainly focused on trying to challenge with a fixed price model vs commission fees but the reality is that the top 5 real estate companies still represent close on two thirds of the market, a position little changed from 3 years ago.

One aspect of the industry of positive note is the stricter adherence to governance through the REAA and the complaint procedure process. The chart below tracks the annual total of complaints brought to the disciplinary tribunal (being the highest level of discipline within the structure of the REAA) – misconduct being the most serious finding, which for 2017 shows the lowest level since the organisation began. (The 2013 peak was probably more a function of the backlog workload throughput that the REAA took on in the early years and not so much a reflection of a single year).

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I guess the other elephant in the room that has focused the minds of the real estate industry over the past 3 years has been the investigation by the Commerce Commission into allegations of price fixing. This investigation was triggered back in 2013 by the actions and comments made by some companies in the industry in reaction to the decision by Trade Me Property to amend the pricing of listings. The outcome has been costly for the industry with close to $15m in fines levied against 13 regional and national real estate companies.