Just how unique is the NZ Property Market?

by Alistair Helm in ,

We are all too accustomed to articles stating that NZ house prices are “amongst the highest in the world” / “over-valued as compared to rents” / “driven up by tax advantages” / “being inflated by overseas buyers

I read these articles and accept the often highly respected authors for their bullet-proof assertions. Clearly we must be unique in the world and standing by as we witness house prices spiral out of control as according to a recent Gareth Morgan article in the NZ HeraldNew Zealand is unusual in the world in that it pretends housing isn't an asset like bank deposits or company shares”. Again I respect Gareth Morgan as a credible economist and a broad thinker, I may not always agree but I do respect his views.

So set against this backdrop of opinions and analysis I decided to seek out some data to compare NZ with other countries. The natural partner for comparison are the markets of Australia and the UK. I am grateful to the assistance of an excellent UK property commentator who helpfully pointed me in the right direction for UK data, thanks Henry Pryor.

The UK data provides a mix adjusted house price index which mirrors the REINZ Stratified House Price Index and fortunately the data extends back into the 1970’s whilst REINZ data goes back to 1992. Using the index of the 1st quarter of 1992 as the base the two markets track through the next 22 years in what is a surprisingly aligned growth path matching each other for the 22 year rise of 280% to both reach the index level of 383 in the 1st quarter of 2014.

It is worth remembering that the UK has capital gains tax, inheritance tax as well as stamp duty - none of which seem to have either depressed that market nor preferenced the NZ market by comparison. 

If we add in Australian data which provides a valuable benchmark of a similar country albeit of greater scale closer to our trading partners of Asia and the US. Australian data is not accessible back 20 years but a comparable Property Price Index is available from 2002. Given the property bubble that all markets experienced in the mid 2000’s I decided to approach a comparable index for the three countries not on an aligned time period but rather indexed on the starting point being the peak of their respective property price index before the property crash caused by the GFC in 2008/9. For NZ property prices peaked in the 3rd quarter of 2007, the UK peaked in the final quarter of 2007 with Australia in the 1st quarter of 2008.

What transpired next is ably demonstrated in the chart below which shows the shallow fall experienced in Australia before a very strong recovery at a time when the UK and NZ markets continued to weaken. The UK market suffered the worst seeing the index fall 18% before rising whilst NZ fell 10%. 

It took Australia just 5 quarters for prices to recover from the peak of the pre-GFC collapse compared to 4 years for the UK and close to 5 years for NZ. Subsequently all 3 markets have experienced resurgent price inflation that now sees the Australian market 26% up on the prior peak of 2008 as compared to 16% and 18% rises for the UK and NZ respectively.

Such clear alignment of pricing trends despite the very different tax policies designed to milk the property market or stimulate the property market would seem to point to the view from the analysis that the NZ property market is not that unique, if anything it is incredibly similar to these other markets and despite the best intentions of politicians the market would seem to move aligned to factors well outside of such policies.

The real estate industry's transition to digital marketing

by Alistair Helm in , ,

Walk past any real estate office and you will likely see a couple of wire framed baskets chocked full of the latest copies of the local property magazine - in Auckland these tend to be for Property Press, The Herald Homes and then there are some other local options and usually these days a Chinese language real estate magazine.

I don't need to procrastinate on the visual pollution these create on the high street or the lack of value they represent, nor the fact they never seem to diminish in number of copies until the next week's edition rolls in. The fact is the world over real estate marketing is going digital - it's only a matter of time until we see less of these publications cluttering up our footpaths.

The scale and pace of this transition is something I am often asked about when providing advice and consulting to businesses. I hold a fairly detailed and what I think is accurate picture of this for New Zealand. So it was with great interest whilst reading the Prospectus for the IPO for Zoopla Property Group the operators of the UK property portal Zoppla that I found data for the UK market on just this subject.

Quoting from the report:

According to Ender’s Analysis, total UK classified property advertising spend was £389 million in 2012,
comprised of a 45 per cent and 55 per cent split between digital and print advertising, respectively
— Zoopla Property Group prospectus (page 48) - June 2014

It is anticipated that during the current year in the UK year the total spent on digital marketing by the real estate industry will for the first time exceed that spent on print advertising. In total the UK real estate industry will spend  £427 million on advertising this year. The future trend estimates for the next 3 years clearly show an accelerated divergence between print and digital with digital set to grow by 50%.


In New Zealand the make up of the spend by the real estate industry is somewhat different. Print media has done a laudable job of defending its position and through its relationship with the major franchise groups has constrained the digital media spend to less than 20% at this time, although it is, like the UK forecast in my estimation to grow significantly in the coming years. It is though not expected to exceed the print media spend in the next 3 years.

Clearly the drive for the cannibalisation of the print media across the globe holds the prospect of a significant pot of gold for the challenging companies in each country which more and more these days are publicly listed companies of significant value; be that Rightmove and Zoopla in the UK, Trulia and Zillow in the US or REA Group and Domain in Australia. Each is fighting for an ever greater share of the cake of advertising dollars of its customers - the real estate agents of each respective country. In New Zealand we have the challengers of Realestate.co.nz and Trade Me Property - a duelling pair, however the pot of gold for which Trade Me aspires may not be the same reward sought by Realestate.co.nz as an industry owned portal.

Comparing such data of advertising dollars between countries is hard to undertake unless some benchmark can be established. For this analysis I have chosen to index the NZ and UK real estate digital marketing spend by an index to the number of property transactions in NZ$ terms. Presented below is this analysis showing the extent of advertising spend per country over the past 7 years per property sale. In the UK total property sales over this time peaked at 1.23 million in 2007 before falling to 616,000 in 2009. In NZ over the same period sales peaked at 92,000 in 2007 before falling to a low of 56,000 in both 2008 and 2010.

Interesting to see the NZ real estate industry spends more per sale than their UK counterparts. The relative difference in the digital spend is staggering - a two and a half times factor. It makes the whole discussion around the relative cost / value of a charge of $159 per listing from Trade Me seem a bit moot!

The other point to note in this index comparison is the fact that the total of NZ$1,065 spent per property sale by the UK real estate industry comes straight out of their commission margin where average commissions on sale are around 1.5% whereas NZ agents who charge around 3% commission on sale price secure around an average of $200 per sale of vendor marketing contribution to offset their average spend of NZ$1,244.

We still know so little about overseas buyers of NZ property

by Alistair Helm in , ,

This week we have seen two supposedly insightful pieces of data helping to provide insight to the extent of international buyering of NZ property - one from Labour and the other from National. Irrespective of the validity of the data (I'll come to that in a minute) it clearly shows the fear and/or uncertainty surrounding the extent of international buyers' activity in the NZ property market. Certainly from a political perspective at least.

The first set of data released was from Treasury analysis of IRD data into tax returns filed by rental property owners. The data showed that from amongst 200,000 such tax returns around 12% (24,000) were from non-residents.

This data is certainly robust as there's somewhere around 400,000 privately held rental properties in NZ - allowing for multiple ownership this would cover most of the tax records. However the question has to be asked - what relevance has this data?

Included in this total of 24,000 would certainly be ex-pat kiwis with homes or investment properties here in NZ, and with the overseas ex-pat community somewhere close to a million people by all accounts, this group could account for all of it. Also the data provides no insight into the changes in the make up of this group of the years and thereby any inference of proportion of sales. The only trend analysis (Figure 1) shows that this segment had not actually grown significantly over the past 15 years during which time the NZ resident ownership base grew from 110,000 to 180,000 whilst the non-resident (as well as "unknown" whom the analysts suspect are likely to be non-resident) actually fell from around 28,000 to 24,000. 

The second set of data released by Labour's Housing Spokesman Phil Twyford presented the statement that based on data from a Chinese real estate website New Zealand is the 5th most popular place Chinese buyers look to purchase residential property behind the US, Australia, Canada and the UK.

The website to which the statement refers is SouFun - the biggest property website in the world, whilst not publishing traffic figures to its site, it is a listed company on the NYSE generating EBIDTA of US$360m on revenues of US$640m - this is a significant company operating in a massive real estate market. A market with annual transactions in the multi-millions of properties.

However whilst the audience and presence of the website is enormous in domestic Chinese terms, the capacity of it to attract an audience to NZ listings is tiny - no correct that microscopic.

In total they host probably somewhere over 4 million properties for sale across China together with a tiny add-on of around 35,000 listings from outside China. Within that 35,000 international listings there are 23 NZ listings - yes 23, check them out.

Many real estate websites around the world host international listings. The most significant of which is probably the UK site Rightmove which hosts over 125,000 international listings from more than 65 countries. Rightmove hosts 3,476 NZ listings which would equate to over 8% of all NZ property.

The fact is that the SouFun international section of the site is not representative of the true listing stock of any country it showcases. The closest it comes is actually Australia where it hosts over 6,000 listings - yet that represents less than 3% of the more than 230,000 listings of Australian property on the market today. For NZ there are 42,751 properties for sale at this time across the country and SouFun showcases 23 of them - less than one tenth of one percent.

It is therefore at best misleading and more likely totally irrelevant to showcase this data as any form of indication of true Chinese interest in acquiring NZ properties. 

Having said that there is no doubt we still need to find away to collect and analyse the data of property transactions - something I seem to be constantly championing - is anyone listening?

NZ's aspiration for new McMansions wanes

by Alistair Helm in ,

At one time we seemed as a country to be building what the American's describe as McMansions - houses that take on the girth so much a part of modern society. Certainly through the early years of the 1990's we saw average size of new houses built rise from 125 m2 to 170 m2, but of late the average size has been waning.


In fact in the last decade based on building consent data we appear to be revising our ambitions or at least realising the impact of greater urban intensification we have hardly seen the average size of new homes change. For a time the average new home did break through 200 m2 but that did not last long.

Now compare this trend with the comparable data from the US over the same 15 year period.

In that time the average US new built home has grown from 204 m2 to the latest data showing that new houses have grown in girth to over 250 m2. A lot of this growth has occurred in the past 5 years - a time when US house building has been in the doldrums after the GFC - that might well identify as the article from which this data was collected identified that "Americans Are Increasingly Buying Bigger, More Expensive Houses".

Global property markets follow in step

by Alistair Helm in

Global connections shutterstock_98332517.jpg.png

I am a big fan of Twitter as my predominant news feed, far more a news media service than a social media service. It is easy to follow those people and organisations that are the pipe-fee of news that is contextual top whatever area of interest you hold. For me it all about property and the real estate industry in New Zealand and Globally.

It was through one of these followers that I saw this chart providing an interesting perspective on the comparative performance of US house prices over the past two decades on an index whereby December each year becomes the base for the growth / decline in house prices month by month through the year.

So for the US market which went through a major boom and bust in the past 20 years it is interesting to see that this year they are tracking to see close to the best growth in house prices (admittedly off a low base). The chart below shows the actual indicies of house prices across the major markets over that 20 year period.

Global house prices 1992 to 2012.jpg

Having seem this chart tracking the US cumulative change in house prices from December, I was naturally drawn to create a chart for the NZ market. Thanks to the data from REINZ Stratified Price Index I have (thankfully!)been able to produce a match as seen below: 

NZ Stratified Dec index chart.png

It is quite striking the similarity between the US and NZ house price index - the worst performance year is matched at 2008, the US slipping further down 10% vs 7% in NZ, the best year is very close; NZ is 2003 at 13% with US 2004 with 11%.  

This would certainly be a clear demonstration that whilst domestic property prices have a local market factor they do seem to follow in step to global economic effects that flow through to the property sector.


Potential impact of policies to address the 'hot' property market

by Alistair Helm in , ,

Real estate agents might be urging the government to "be careful what you wish for" in regard to any government or fiscal intervention  in the NZ property market -  especially if they have read about their colleagues in Hong Kong!

Bubble iStock_000006996157XSmall.jpg

With further evidence that the NZ property market is building up a significant pressure bubble – the ever-present question is whether that bubble will see the pressure released slowly or just simply burst with negative repercussions. 

Measured on a 5 year basis the REINZ Stratified house price index shows a 17% increase, with over half of that gain in the past 12 months! This has prompted extensive calls for some form of non-monetarist intervention via the Reserve Bank to focus on LVR and also calls for controls on overseas buyers.

With this as a backdrop it is worthwhile to compare and contrast the NZ market with the Hong Kong market given its topicality. Accepting the Hong Kong market is a very different market; the choice is a result of the fact that the local government has recently introduced far-reaching controls to bring some reigning in of a super hot market that has seen property prices rise 120% since 2008.

These new measures coupled with the tightened of existing policies is an attempt to make property, especially apartments more affordable – now where have we heard that cry before?

However to begin with there is an important perspective that needs to be seen when comparing the Hong Kong market with the NZ market. We are so often told that NZ and again particularly Auckland has some of the most unaffordable property in the world when comparing house prices to salary. The NZ ratio has house prices close to 5 time the average salary – that pails into insignificance as Hong Kong sits at a whopping 12.6 times average income!

The measures brought in include a doubling of stamp duty to 8.5% for property over HK$2 million (NZ$330,000) . I was interested to read in the South China Morning Post article of what I would consider as the most appropriate measure, being the requirement for banks to assess the ability of borrowers to manage a three percentage point increase in mortgage rates, up from the prior test at two percentage points. Additionally a stamp duty has been introduced to curb speculation payable by sellers if properties are sold within 3 years – the duty is now between 10% and 20% of the selling price. Lastly the measures also include (which will be of interest to NZ) a 15% levy on non-local property buyers!

All in all some very stringent measures, which from the data published in the article shows the policies appear to be making an impact as property sales collapse.

agents march in protest at moves to control sky high Hong Kong property prices  



 /* Style Definitions */
	{mso-style-name:"Table Normal";
	mso-padding-alt:0cm 5.4pt 0cm 5.4pt;

 Estate agents march in protest at moves to control sky high Hong Kong property prices

This collapse is having its effect on the industry of over 40,000 real estate agents in Hong Kong  which interestingly equate to 1 agent per 175 of population, compare that to NZ with 1 agent per 440 of population. These agents are up in arms as the slowing sales cuts their income – so much so that these agents association are marching on Government headquarters to have these policies reversed – could this end up being the case in NZ if proposed government and Reserve Bank measures cool the NZ market ending it backwards and jeapodising the income of 10,000 agents? – it will be interesting to see!


Property market interview - TV9 Finance Weekly

by Alistair Helm in , ,

I was recently interviewed by TV9 for their Finance Weekly spot with Brenda Lee. In this interview I cover a wide raft of property market related issues: 

  • Property prices, are prices becoming unaffordable?
  • International property trends vs NZ  
  • Forecast for the next 6 months - will the market continue to see prices rise?
  • Houses not unaffordable - we don't pay ourselves enough
  • Struggle for first home owners - plea for baby boomers to release equity to assist first home buyers
  • The auction selling process

Asian interest in NZ property is strong

by Alistair Helm in ,

The latest survey carried out by the BNZ through the real estate industry into the proportion of sales being made to overseas buyers shines a powerful light on Australians as the number one overseas buyer group. The survey found that Australians are the biggest single group of overseas buyers with 22% of all property purchases by foreigners. Chinese are second at 20% and British at 13%.

However there is further insight to be gained on this subject from within Asia through the real estate websites in the region who carry out their own surveys.

One such website group is PropertyGuru which is Asia’s leading online property group and operates in Singapore, Malaysia, Indonesia and Thailand. The company undertakes regular property sentiment surveys, the most recent of which is the Property Affordability Index for Q2 2013 which provides a benchmark for property affordability in PropertyGuru’s four key markets. The survey takes into account survey measurements for overall satisfaction, future price perceptions and intention to purchase property as well as perceived government effort. The survey also identifies interest in overseas investment sentiment based on the 1,282 respondents to the survey who indicated intention to purchase overseas properties in the next six months. This interest is especially strong for Australian properties amidst growing concern over expensive domestic property prices in Singapore, Malaysia, Thailand and Indonesia. The survey also includes questions in regard to New Zealand property investing.

The trend to invest in NZ is not as strong as that of investing in Australia, but there is still demand especially from Malaysia and Singapore. Out of all respondents from Malaysia and Singapore who are looking overseas to invest, 1 in 5 have indicated that they are looking to NZ.

In terms of ranking, Singaporeans rank NZ in 5th place after the perennially favourite markets of UK and Australia and the recently booming property markets of Thailand and Malaysia.

In the case of Malaysia, NZ was placed fourth after Australia, UK and the neighbouring Singapore.


Property Guru Q2 2013 index.png

For Thailand and Indonesia investors are far more focused on investing within the South-East Asia region before considering NZ or Australia.

The commentary to the report indicated that demand for overseas investing is also driven largely by growing dissatisfaction about real estate in each of the local markets. In particular, 3 out of 4 respondents have highlighted overpriced properties and an expectation of further property price increases as the main reason that fuels interest in overseas investments. The exception is in Singapore, where despite prices for all property types are seen as costly, 40% of Singaporeans do not anticipate a further increase within the next 6 months as a result of the introduction of government policies on property in the country in Jan 2013.

Steve Melhuish, CEO of PropertyGuru Group “As South-East Asia becoming more affluent, increased property buying, selling and investing will inevitably drive property prices up and creates a ripple effect where investors will set their sights beyond their borders for cheaper alternatives”

PropertyGuru developed and started tracking the Property Affordability Index in 2010. In collaboration with Added Value-Saffron Hill, a Singapore based independent professional research agency, the quarterly survey aims to provide insights into the local property market through the consumers’ perspective and shed light into how property trends affect their property decisions over time. These perspectives are based on a representative sample of 4,062 online respondents aged 21-69 across Malaysia, Indonesia, Singapore and Thailand who are influencers or decision makers on property.


Overseas property websites report strong interest for NZ property

by Alistair Helm in

The leading property website for the UK Rightmove produces a very detailed report on the source of visitor traffic to their extensive selection of overseas properties. Over 3.6 million visitor sessions per month check out the more than 80,000 properties on their specialist selection of properties from around the world.  

The latest report for September highlights a seasonal trend that sees interest in warmer countries as the northern hemisphere winter approaches. One of the countries to benefit from this increase is NZ. Of all the countries profiled in the search content of listings NZ ranked at #11 rising one place with Australia in  6th place behind the leading countries visited by property seekers - Spain, France, USA. Italy and Portugal.

As ever seeing such a rich set of the data in the report got me wondering that given the sheer scale of the competing countries ranking higher up the league table, if the data was to be weighted on population for example the picture might look somewhat different.

Well the fact is when adjusted to reflect the population of each country the ranking looks somewhat different - especially when you see just how fascinated brits are for some of the smaller Mediterranean countries!

The weighted data of visitors to NZ property per million population pushes NZ to # 6 in the league of most viewed property locations - certainly reflecting the interest of potential emigrants to NZ.

The 5th anniversary of the housing slump

by Alistair Helm in , ,


It was 5 years ago this week that in the UK the first cracks started to appear in what was then considered the bedrock of the financial markets, when it was revealed that Northern Rock had asked for help from the Bank of England. Within days queues were forming outside branches and the UK government was forced to guarantee deposits.

What began in the UK and yet was already underway beneath the surface in the US was a financial collapse of a scale never before witnessed in history, and whilst we can say that a great depression was in some way avoided by the collective skin-of-our teeth the impact ripples of the global financial crisis that followed has been felt in every corner of the globe and today, 5 years on many parts of the world still feel its impact.

Whilst the housing market was not the root cause of the crisis; it was without doubt a critical component, as without the construction of financial instruments built around mortgages the crisis may never have occurred or at least not risen to such heights.

It would take a whole year from the Northern Rock collapse before the world would witness the collapse of Lehman Brothers, but back in September 2007 the property bubble was about to burst. The run up to that point had seen property prices in many countries treble over a 15 year period. Putting together data from the main countries of interest in the chart below shows the consistency of this trebling from 1992 to 2007.

It is noticeable, the extent to which the NZ bubble outpaced the other countries, almost reaching prices 3.5 times what they were back in 1992.

From September 2007 property prices fell across all of these markets, and many other around the world. Some of the falls were more significant than others. The worst was felt in the US, falling a third from 2007 to 2009. The UK fell by 17%. NZ fell by 11%, whilst Australia hardly missed a beat before taking on a secondary spurt in prices to overtake NZ by 2010, although recent prices have eased back.

What is so clear from this comparable chart is the extent to which the NZ property market since 2007 has staged such a strong recovery, far outpacing the UK and the US to see prices now heading back to the pre-crash levels whilst both the UK and the US have experienced stagnant pricing.

Assessing the last 5 years in isolation as the chart below seeks to do shows the comparable performance across the 4 countries particularly well.

We are not alone when it comes to property prices

by Alistair Helm in ,

Election night crowd, Wellington, 1931 -   Photographic Archive, Alexander Turnbull Library, National Library of NZ

Election night crowd, Wellington, 1931 - 

Photographic Archive, Alexander Turnbull Library, National Library of NZ

Have a read, if you will of this article which was published last Saturday, the 15th September regarding the trend in house prices over the past 5 years.

"House prices have become so dull that it is tempting to think they are no longer the mainstay topic of conversation at dinner parties.

Since 2009, the two major yardsticks of house prices – QV and the Real Estate Institute indices – have been broadly flat, rising in mid-single digits in 2009, then seeing either small falls or rises in 2010 and 2011.

The lack of direction in the market has surprised many, not least the real estate industry and the banks.

At the start of 2009, there were those who predicted a 15 per cent fall in prices.

The REINZ Stratified Price index ended the year six per cent up. While market predictions proved closer to the mark in 2010, in 2011 the commentators expected a fall of more than six per cent. The index rose by 3 per cent.

But many commentators still predict dire falls. Sceptics say prices remain above long-term trends for affordability. The average house price on REINZ 2011 numbers was 4.7 times the average salary, against a long-term average of four.

The flat market also disguises two trends. Stripping out inflation, house prices have fallen. And there has been a well-understood divergence between prices in Auckland and elsewhere.

So where next? Analysts foresee a flat market followed by slow growth. This still means falls in real terms, but it is a lot better for homeowners than the nightmare predictions.

Mortgage availability is improving, though slowly, with lenders offering higher multiples of salaries and higher percentages of buying prices.

Meanwhile, with rents rising significantly, buy-to-let opportunities have become more attractive, bringing other buyers into the market."

Now having read this piece, let me tell you firstly that I did not write it.

This article was published in the UK last Saturday - it was not an article about the NZ property market. (I have ammended the article by inserting NZ stats and references).

The fact is that the original UK article which I have pasted in full below for comparison, was written about the UK property market. What is so striking is the similarity - line by line, fact by fact the parallels are uncanny. The UK property market would from this comparison appear to have gone through a near identical rollercoaster ride as the NZ market over the past 5 years. To be clear the article above has been changed by me to include the references to data sources (with links) and to the actual NZstatistics.

Now here is the UK original article.....

TAKING STOCK: Slow growth coming but house prices are set for real-terms fall


House prices have become so dull that it is tempting to think they are no longer the mainstay topic of conversation at dinner parties.

Since 2009, the two major yardsticks of house prices – the Halifax and Nationwide indices – have been broadly flat, rising in mid-single digits in 2009, then seeing either small falls or rises in 2010 and 2011.

The lack of direction in the market has surprised many, not least the City.

A report by niche broking firm Redburn this year highlighted the fact that the futures markets, set up to enable people to bet on the direction of house prices, had got things badly wrong.

At the start of 2009, futures traders predicted a 15 per cent fall in prices.

The Halifax index ended the year five per cent up. While market predictions proved closer to the mark in 2010, in 2011 the City expected a fall of more than six per cent. Halifax’s index fell just two per cent.

But many commentators still predict dire falls. Sceptics say prices remain above long-term trends for affordability. The average house price on Halifax’s 2011 numbers was 4.4 times the average salary, against a long-term average of four.

The flat market also disguises two trends. Stripping out inflation, house prices have fallen. And there has been a well-understood divergence between prices in the South East, particularly central London, and elsewhere.

So where next? The Redburn analysts foresee a flat market followed by slow growth. This still means falls in real terms, but it is a lot better for homeowners than the nightmare predictions.

Mortgage availability is improving, though slowly, with lenders offering higher multiples of salaries and higher percentages of buying prices.

Meanwhile, with rents rising significantly, buy-to-let opportunities have become more attractive, bringing other buyers into the market.