Leveraging digital property data to enhance the role of an agent

by Alistair Helm in ,


Photo by  Lukas  from  Pexels

Photo by Lukas from Pexels

Things have become busier over the last month or so in my role as a real estate agent. I’ve started to leverage the extensive property database I created 18 months ago which tracks all property activity in my target market of Devonport, providing me with unique insight and perspective on market trends and buyer behaviour online.

In addition, I’ve found real value in the data reports for the various listings I have worked on. This has been hugely satisfying both from a personal engagement perspective, working with buyers and sellers; but also allowing me to deep dive into the data to surface valuable insights that have given me the opportunity to demonstrate a new level of professional engagement with sellers and buyers. This I believe is the point of difference I want to establish and leverage.

When it comes to data reporting, there is really only one reliable and meaningful source, and that’s Trade Me. Realestate.co.nz does provide a weekly listing report on page views. However it’s not customisable and limited in data content and analysis. OneRoof has an excellent platform in their agent portal OneRoof Advantage, however as yet the data is not of value due to insufficient traffic to individual listings. Trade Me has OneHub; an excellent resource offering an agent facing portal for profile marketing and unique data analysis and reporting of listings.


This is where I feel I need to make an appropriate disclosure. I was an employee of Trade Me Property from 2014 to 2017, in that time as Head of Product I was responsible for the development and launch of OneHub, the agent portal provided by Trade Me. I ‘m proud of this product and the team that built it, however in the past few months I have become even more enamoured with it in a way I probably didn’t anticipate. I’ve started evangelising about it among my colleagues. So, this is in a small preamble to set the context in what I want to share. To be completely clear I am not in any way incentivised by Trade Me to write this article. I do though, maintain good alumni contact with people at Trade Me. That’s got the disclaimer out of the way.


OneHub provides at this time two primary products that are free to all agents. First, is an agent profile which allows any agent to build and manage their own profile with its unique page on Trade Me, as well as being featured in the search directory for agents. This is an invaluable profile opportunity for all agents. The Trade Me digital platform is massive and from a search optimisation perspective it’s gold. In my opinion all agents would be mad not to build a profile on Trade Me.

Second, is the ability to create customised marketing reports for all your listings. Sounds good, but the question I often get asked is “but so does Realestate.co.nz” and now OneRoof, or the page view stats get imported into my office system. Yes, but the key word here is ‘custom’ and the added fact that OneHub reports are insightful when you dig into them. Really insightful, and if presented in the right way in my view offer an excellent means to enhance the reputation of the presenter.


I think it is worthwhile to recap on the unique value of these reports.

1. Custom time period – OneHub reports can be created at any time based on any time period. The last 7 days / the last month / the first weekend / the full period of the listing. Any date range can be chosen. Each custom report is created as a downloadable pdf. The report details the daily activity of page views, as well as the number of Trade Me members who have added the property to their watchlist. Additionally, it shows the number of click-to-reveal telephone number reveals on the listing page and the number of email enquiries sent to the agent. Such insight is far more valuable than the competition, especially given the scale of the audience on Trade Me – by reference in my area of the country, Trade Me attracts around 3 times the page views of Realestate.co.nz and 7 times the traffic of OneRoof (the latter is based on a very small sample of monitored properties as the site does not publicly detail page views on listing pages).



2. Insight of watchlisters – OneHub reports track not just page views but also the number of members of Trade Me that save the property to their watchlist. This stat is a critical measure of engagement. Sure, the reason for people saving a property to a watchlist can be varied from the most logical – they want to see this house and may be buy it, to design junkies and also let’s not forget the smart agents who watchlist their own listings and competitive listings in their area. However, whilst the absolute scale may not completely reflect the true level of buyer interest, the relative scale will. If a property has 105 watchers after 3 weeks and another property has 40 then there is an inference of greater engagement as a surrogate for ‘interest’ with the first property.
The watchlist data is so important and unique as Trade Me users cannot use the watchlist feature unless they are logged in. The watchlist button is so intuitive for the Trade Me user; whereas for users of other websites saving property requires creating an account – a higher hurdle of engagement.



3. Regional insight – the Onehub reports drill down way deeper than just page views and watchlisters. They are able to detail the aggregated location of where those people live who view or save details on a property. This is invaluable in helping the vendor understand where interest in the property is coming from as a function of the marketing – local interest or out-of-town interest.


Now let me share a couple of examples of how I have used these reports and what I see as the real value.

Scenario 1 – Additional promotional products

The reality of online marketing on property portals is that there is a natural decay of viewing. This is something I have written about over the years. Thankfully all of the main portals offer a product to effectively ‘jump back up the search results’ – the Refresh product from Realestate.co.nz and Boost from Trade Me. Actioned whenever, and repeated as often as needed, this product is well priced to be included in most marketing campaigns.

The power of the product is best showcased when seen in the viewing stats. The product drives incremental traffic and engagement on the day it is actioned and in the subsequent days as the listing profile is enhanced being higher up the search results.

 


Scenario 2 – Event based activity

Recently, as much a function of the more challenging property market, asking prices have been placed on listings, if after the initial auction or tender campaign has failed to uncover that critical unconditional buyer. Such events are so easily judged through the daily traffic to a listing covering both views and watchlist activity. This is so valuable when providing feedback to vendors in regular reports to be able to show the impact of such activity.

As an added benefit Trade Me undertakes email alerts to people who have watchlisted a property which has a price reduction, this again as an event based activity is easily tracked on the custom reports on OneHub.

 


Scenario 3 – Comparative analysis

I’ve benefited recently in assisting with a number of properties on the local market at the same time, through this I’ve been able to provide real insight for vendors to help them appreciate the level of interest and engagement of their property compared to other properties on the market at the same time.

This data engages clients in some encouraging and challenging conversations. It’s great to be able to showcase the scale of audience and level of engagement for a vendor when their property is performing ahead of competition and the market. Equally it’s great to have meaningful conversations where the data is clearly showing that their property is simply not engaging buyers. This is often in my opinion the better conversation as it leads to the question – have we got the right message to the market? Is that message wrapped up in the right price expectation? Have we really demonstrated the best attributes of the property – should we re-promote it and change the headline and photos to shift the focus of the target audience?


This is where I feel most valuable in my role as an agent. Able to use data and insight to assist vendors to really feel a part of the process of marketing. Managing their expectation right through the process even if it means telling them the truth “your property is not attracting buyers.. certainly not at this price expectation!” I fear all too many vendors are sold a marketing campaign and then are left in a state of limbo ‘hoping’ the marketing is working such that on the deadline date the property will be sold. I am not disparaging the work of the thousands of real estate agents out there in the market,

I simply want to showcase how data can be such a valuable tool to really engage with the client in the selling process and ensure that you can show that you used every resource at your disposal to market the property to the best effect. At the end of the day the agent does not decide to sell, only the vendor makes that decision as to whether they are prepared with the offer presented on the day. The agent’s role is to bring these parties together. Bringing buyers and sellers together may be the outcome, but the hard work is targeting and communicating with the buyers and that’s where smart marketing and analysis are proving so powerful, and enhancing credibility.


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.


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’.



Realestate.co.nz and the crumbling marketing strategy

by Alistair Helm in


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

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

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

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

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

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

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

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

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

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

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


The Crumbling Inventory Advantage

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

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

The Future

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

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

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

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

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

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

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

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








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

by Alistair Helm in


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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

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


Technology could be the saviour of print media for real estate

by Alistair Helm in


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I find myself in my new role, as a licensed real estate agent in the Auckland suburb of Devonport developing a healthy pragmatism of the age-old decision as to the choice of print, or digital media when it comes to property marketing.

Ten years or so ago, I recall standing on-stage at numerous real estate conferences as the CEO of Realestate.co.nz confidently stating that at some time in the not too distant future our lives would have been so transformed by the evolution of digital media, that the humble newspaper would be dead. I foresaw a time when all forms of real estate advertising would be digital. Fast forward those 10 years and clearly that is not the case. Digital is certainly critical; valued by the real estate industry and consumers alike. However our daily newspapers still survive, somewhat depleted and sadly sullied by the race to the bottom, chasing advertising dollars for general advertising heavily driven by eye-catching headlines and lifestyle celeb stories.

However for the real estate industry print media retains a true relevance. As an agent, I value its ability to deliver passive buyers and the even more valued serendipitous buyer. The story can be easily told of buyers (unknowing it at the time) idly flicking through a weekend property supplement or Property Press at the local cafe or friend's house on a quiet afternoon, only to be enthralled by a property that they suddenly become captivated by.

The value of the print media lies in context, and the fact of strangely imprecise targeting - let me explain. The ubiquity of the newspaper places these adverts in close proximity to everyday news thereby potentially interrupting the daily read with an unexpected opportunity to present a property. It also acts as a reinforcement of a property advert to active buyers who may have seen the property online, thereby reinforcing its appeal and relevance, maximising frequency of presentation.

The imprecise targeting is a very interesting counter-logical argument. The very appeal and efficiency of the digital platform which enables for the specific search for 'this number of bedrooms' in 'this price range' in 'this suburb' is the same process that excludes a perfect property that matches all the requirements but is in another suburb that the buyer never thought about. In the case of Auckland, Wellington and Christchurch there are many suburbs that are close substitutes, yet people have fixed mindsets until they are exposed to a house they love the look of, only to find it is located in a suburb that was not on their list, but they go on to buy. That is the power of the print media. Or put another way that is an opportunity as yet not exploited by the digital media players.

So what other capability can print media offer and how might the very latest technology assist them?

Well I came across a very interesting post on Twitter over the weekend in praise of Apple's new ARKit. This is the latest software Apple has released at its recent developer conference to power Augmented Reality. Here's the tweet that peaked my interest and got me thinking about AR a little bit more - watch the embedded short video to get a sense of this capability.

So this example created the sense of an embedded sports video coming to life within a newspaper, leveraging the capability of an iPhone or iPad and the Augmented Reality software. Where you see a sports image and video on a newspaper page, imagine it being a property listing. Simply view the property page with your iPhone and the listing comes alive showing the video of the property or the slideshow for the property.

In someways this is just another iterative step that started years ago with URL weblinks on print adverts, progressed through QR codes and lately encompassed the NZ Herald Homes app that used image recognition that took the user to the listing on the web. All of these technology steps by today's standards seem clunky, especially when you see and imagine this in action (A crude representation made by me shown below roughly visualised).

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This really appeals to me. I have so often sat with people who flick through print publications for property listings and want that bit more information but end up frustrated by trying to find listing numbers and search for them on the Trade Me Property or Realestate.co.nz app.

This clearly is a golden opportunity for NZME's OneRoof - the perfect intersection of print and digital. They have the digital content and the print media platform - it'll be interesting to see how long it takes them to develop this and monetise it!

As for Realestate.co.nz and Trade Me - this presents an opportunity, but would require a partnership with a media company. The logical path being Property Press unless the appetite is big enough for Trade Me to make the ambitious move to acquire NZME, a relatively achievable acquisition when you see that NZME market cap is just $165m and Trade Me sits at $1,900m - something for Jon McDonald to think about as a parting shot of for the new Trade Me CEO.


The rise and rise and rise and rise of property portals

by Alistair Helm in


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The announcement last month of the acquisition of Zoopla the #2 property portal in the UK by Silver Lake Partners, the US private equity firm for £2,200 million (NZ$4,180 million) was a clear statement as to the confidence the financial markets and their investors have in the business models of digital real estate marketing.

Zoopla is not the leading UK digital property portal. That accolade goes to Rightmove which according to its own stats has 70% of the UK total audience for property searches. Zoopla was only launched in 2008. At that time Rightmove had been in operation for 8 years and had gone public two years earlier. Rightmove in 2008 was generating over £50m in revenue.

Zoopla though was never one to daunted and was ever ambitious, lead by the charismatic and driven CEO Alex Chesterman. Through the first 6 years, the business grew through acquisition of other real estate websites and property publications building a formidable position as the #2 player leading to the IPO in 2004.

The IPO valued the company at £990 million, half the then value of Rightmove. In a savvy move Zoopla offered real estate agent customers the opportunity to buy shares at a 20% discount; a smart move to side step a challenging move by a new industry owned start up OnTheMarket which required loyal agents to sign up to only one of the other commercial portals to try and break the duopoly. Those agents who did and hung on to their IPO shares will likely see a return of 177% in 4 years.

This stellar rise and exit for Zoopla is not an exception in the market of property portals. I thought it would be interesting to do some analysis of the key players around the world to see just how valuable these businesses have become over the years. Many of the leading portals have been in operation now for close on 20 years.

Restricting this review to the UK, Australia, USA and New Zealand is not truly reflective of the global market that sees many massively successful operators – the likes of Seloger in France, Scout 24 in Germany, Zap VivaReal in Brazil to name but a few; however I have observed and researched extensively these key businesses over the years, so feel comfortable commenting on their performance and strategy.

 

3 Leading Property Portals - NZ$30 billion in value

The top 3 portals in my opinion globally are the REA Group, operator of Realestate.com.au in Australia (and other countries), Rightmove in the UK and Zillow in the USA. Together these three businesses have a collective market value currently of over NZ$30 billion. Five years ago those same 3 portals had a market value of just NZ$11 billion. I have for reference included New Zealand’s own Trade Me for reasons that will become obvious as I proceed.

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This scale of growth is spectacular. What is even more spectacular is the relative rise in the market value of these companies measured against their own domestic market index. I have simply indexed the growth in share price to the index at June each year.

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The performance of the REA Group is stunning, eclipsing the performing the ASX market by close on 4 times over the past 6 years. Zillow doubling the Nasdaq index performance and Rightmove outpaced the FTSE 100 by more than double. Sadly though our own NZ digital portal of Trade Me with a broader portfolio than just property has not attained such stellar growth and has fallen behind the NZX index over the same period achieving just half of the market index growth over the past 6 years.

 

Australian international benchmark

The REA Group is now not just an Australia real estate digital portal it has operations in Asia and now the US. This latter move driven by its largest single shareholder News Corporation (owns 60% of REA Group) which acquired the #2 property portal in the USA (Move.com) in partnership with REA in 2014.  However in terms of profitability at EBIDTA level the performance of REA relies almost entirely on the profits of Realestate.com.au, and they keep rising year-on-year with revenue growth in the last financial year of 16% - this is a 20 year old company that added A$92m of incremental revenue last financial year to total A$671m.

REA Group though are not alone in carving out a global powerhouse performance to better all comers, they are actually part of a triumvirate of Australian digital behemoths – REA Group, Seek and CarSales – each are the global benchmark for their category of property, jobs and motors. By no small coincidence the 3 core classified platforms of our own Trade Me.

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Just like the REA Group, Seek and CarSales have significantly outpaced the ASX market index over the past 6 years, close to doubling the ASX for CarSales and higher for Seek.

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Financial Indexing of Portals

Some further financial indexing provides valuable insight into the relative performance of these global leading portals for property and other classifieds.

In terms of absolute market value the comparison is staggering. REA Group still remains the most valuable property portal keeping Zillow at bay, and a significant 50% more valuable than its jobs portal partner and 3 times the value of the auto portal.

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The inclusion of Trade Me Property is purely as a means to compare the property operation of Trade Me with its peers in other countries. I have purely used the % representation of property revenue as a surrogate for value representation. Sure I know full well that a digital business based on a 4.7 million population of NZ is never comparable with the population of Australia, UK or US; I'll come back to that benchmark shortly.

When it comes to true grunt, any financial expert will tell you that value is only a reflection of profit and this is where the appeal of digital portals comes to light. The EBIDTA margin of these portals is impressive … if you turn a blind eye to Zillow.

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Rightmove is the king of money making – for ever £1 it receives as revenue it spend just £0.27 on running the business allowing it to reinvest 73 pence. Trade Me shows its might just as effectively, with a very impressive 58% EBIDTA margin, ahead of REA and its Australian counterparts whose 31% and 45% are still worthily impressive margins.

This metric of margin is critical in comparing digital portals. The very appeal of digital businesses is scale. The simple principle being that the core cost of a digital platform should cost no more to service for a million users than for 10 million or 100 million. That is why digital businesses can generate such EBIDTA margins. However this is where things get interesting. Why is it that Rightmove serving a UK market of 66 million people can achieve 73% EBIDTA margins whereas Zillow serving a 326 million population can barely scrape 1% margin? Equally how can Trade Me serving a domestic only market of 4.7 million hope to deliver 58% margin?

The answers to these two questions are complex and not directly related. The US market is nothing like Australia, UK or NZ when it comes to property marketing, there is no such thing as paid for subscriptions for listings or vendor paid marketing; leaving Zillow to monetise agent advertising and client leads.

As for Trade Me the very impressive performance of 58% margin may possibly be part of the reason that its market value has not attained the stellar rise of its peers, as a function of stifled ambition and lacking investment courage?

The final metric I will provide is the relative performance of these portals on a per head of population basis.

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Here we see the same stellar performance of REA extracting a market value which equates to over $500 per person in Australia. Trade Me as a group delivers an impressive $406 per person in NZ,  but the truer comparative metric is the equivalent market value of the property sector (based on share of revenue) delivering a market value of just one tenth that of REA. Having said that the surprise is the relative performance of Rightmove at $130 per person in the UK. This potentially portends to the view that the upside for Rightmove is still significant, although the danger is made in assuming the UK real estate marketing landscape is similar to Australia which it is not.

The overriding clarity that these data points highlight is the enormously successful digital property portal businesses that have been developed globally over the last decade, but more significant is the powerhouse operations of digital portals across the Tasman over the same period. What can we as NZ’ers somehow learn from this and more importantly what can Trade Me learn to help it chart a more dynamic path to growth as a true NZ icon in the digital portal space?


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.


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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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!

 


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.