Trade Me Property adds School zones

Whilst Trade Me Property may still be grappling with issues of agent loyalty and patronage, the technical team appear to be focused on what is important - adding richer and more relevant information to the site. 

School zones are a much quoted detail in many property listings as agents recognise the importance (and value) of the 'in-zone' location of properties. Whilst no objective data is available on the added value of an 'in-zone' location for NZ property or any consumer research, I did find some insight from overseas. In the UK a recent report entitled "The Good School Guide" produced in association with the Estate Agency Savills has found that parents are prepared to pay a premium of almost 22% to buy a home close to some of the best state secondary schools in the country.

In the US a recent homebuyer survey from the National Association of Realtors. The survey examined factors influencing neighbourhood choice amongst the various generations. For those aged 34 to 48 years the quality of the school district was the third most important criteria after overall quality of the neighbourhood and the convenience to work.

So with this endorsement of the value of such information it is therefore surprising that it has taken over 5 years for either of the leading real estate websites to incorporate school zone data into the mix. Credit should be given at this time to Barfoot & Thompson who incorporated School Zones into their excellent iPad app last year.

The Ministry of Education has provided an open data platform of school zones for years and provides an interactive map to help the public identify the zones of all schools (those that define a catchment area).

Trade Me has just this week released an upgrade to their website that delivers an excellent integration of not only the the school zone data but all data on schools within the geographical area of the property for sale.

The functionality is within the map section of the site and delivers not just the details of which schools are in zone but also key facts about those schools - size and decile ranking as well as distance from the property. The selection of schools covers Primary, Intermediate and Secondary both state and private schools.

Whilst I think this is a valuable enhancement of functionality to go alongside the other recent enhancement of boundary view I think the user experience could have been better enhanced along these lines.

• The School information could have been incorporated into the primary facts about the property rather then making them a opt-in option of the map - simply listing the 'in-zone' schools would be a real pus and putting that up front.
• The schools by type could be ranked by distance from the property in descending order. Also using a colour scheme to differentiate between state schools (showing in/out of zone) separate from private schools.
• The addition of this valuable data to their iOS apps - especially given the level of usage of the mobile app environment when searching for property and the map-centric aspect of search.
• Probably the greatest missing component given the data integration is "search by school zone" within the search function so instead of searching for 5 bedroom homes under $800k in Onehunga and then having to look at each one to see which are in-zone for Royal Oak Intermediate you could add this requirement into the search options.

Overall though a great step forward and so good to see a step up in technology innovation from Trade Me Property.

How can the median price be rising when property sale prices aren't rising?

This is not a conundrum, it is in my opinion the reality of the situation in today’s market and has lead to these fairly striking statement by some leading economists:

Westpac's Chief Economist Dominick Stephens said “It is impossible to tell what is really going on with house prices”

New Zealand Institute of Economic Research (NZIER) principal economist Shamubeel Eaqub said “trying to forecast house prices has been a mug's game”

The reason behind these statements is the conflicting data coming out from REINZ and from QV - specifically the March median price data which showed an accelerating rise in price from 8.2% year-on-year growth in February to 9.2% in March set against a fall in sales of 10% and QV reporting that the rate of price increase was easing. In a single month REINZ reported the median price of NZ property had risen from $415,000 to $440,000!

There has even been questions as to the accuracy of the REINZ data. This is not something I believe, or have any insight into, but such comments certainly demonstrate the concern in the market as so much value is attached to the timely and accurate indicators of the property market by so many sectors of the economy.

I have long advocated the use of the REINZ Stratified Median price index as a more accurate methodology for tracking the true indicator of the price of property sales across the country, however even this measure, long trusted for its lack of volatility has of late shown some wild fluctuations. 

Tracking these fluctuations over the past 20 years as the chart below highlights shows that on a 3 month moving average basis the recent decade has shown a normal fluctuation range of around $3,900 from month to month, this was a higher level of volatility when compared to the 90’s when the volatility was less than $1,700 month to month.

In the last 3 months this volatility has spiked with the 3 months average for the 2014 year so far showing a volatility month-to-month exceeding $11,000 - a highly volatile situation.

So why is it that we are seeing this volatility?

In my opinion the impact of the LVR restrictions are having a greater impact on the property market than is currently being acknowledged.

Let's look at the facts:

• Sales of lower priced properties are down - the data is reported by both REINZ and in the Auckland market by Barfoot & Thompson. 
• Overall property sales have already come off their peak and are easing - 10% down in the year to March.
• The retail banks have demonstrated an ‘over-correction’ to the Reserve Bank imposed 10% criteria for high LVR lending, resulting in upwards of a 90% fall in the approval of 80+% LVR mortgages.

To better assist in understanding how these indicators might be contributing to the volatility in the median price I have developed a hypothetical scenario of the composition of the property market sales in a month. The by comparing this with a subsequent month where the underlying property prices remain the same year-on-year across all price sectors, where sales volumes remain unchanged across all price sectors, with the exception of the lower priced end of the market and let me show the impact.

Here is a hypothetical normal distribution of property sales in say March 2013 - 5,082 sales with a median price of $400,000 and for reference an average price of $507,000

Now let’s jump forward to March 2014 - let's reduce by 23% the sales volumes in the price ranges $225,000 to $400,000 - just these price ranges. All other sales volumes by price range remain identical to the year earlier.

The outcome of this impact (the hypothetical impact of the LVR restriction) is shown in the chart by the marginal sales reduction in red across those price ranges.

That 23% fall in sales across those lower priced properties segment leads to an overall 10% fall in total sales to 4,567. The median price though went up by 8% to $431,000 and the average price went up by just 4% to $528,000.

This model is designed to demonstrate that what we could be experiencing is two components of the property market working in complete isolation.

The majority of the property market is plodding on unaffected with the no change in year-on-year sales volumes, and not experiencing any price appreciation. Whilst in those sectors directly affected by the LVR restriction the sales volumes have dropped by 23% but equally with no price change amongst those sales. The net effect though is that the signal being sent out to the market through the median sales price is that property prices overall are rising in an inflationary manner.

A classic situation where aggregated statistics belies the true situation.  

In a heated property market do sellers’ price expectations become inflated?

It is a commonly held view that people looking to sell their home and agents that act on their behalf, have a sale price expectation way ahead of the reality of what buyers will actually pay. It is logical. Why would a seller not pitch a price at least a bit above what they would expect to get. Additionally in a heated market one would expect these expectations on the part of sellers to become further inflated to the point of outright greed - Right?

Well it seems that in general across NZ, sellers seem to be demonstrating restraint and setting a price expectation that is actually moving close to the selling price - or seen from the other perspective buyers appear to be paying closer attention to the price expectations of sellers!

Is sanity creeping into the property market?

Here are the facts based on the last 7 years - a period that started as the property bubble peaked in 2007 and has taken us through a property crash and a property resurgence.

Over the past 7 years the median asking price as analysed by all new listing added to Realestate.co.nz has risen from $400,000 in January 2007 to $495,000 in March 2014; whilst the median sales price as reported by REINZ has risen from $327,000 to $440,000 last month.

As would be expected the asking price has remained ahead of the selling price, but that margin has actually decreased over the past 7 years from a premium of around 205 to 25% to nowadays around 15%.

UPDATE: I have at the request of a commenter added this modified chart of the variance of asking price to sales price using 12 month moving average data thereby removing any seasonality.

This trend is very clearly seen when the data of asking price and selling price is tracked on an index basis where the January 2007 data is set at 100. Here the rise in the median sales price can be seen growing faster than asking price over the past 7 years.

Asking price in the last 7 years has risen by 23% as comparing March 2014 with January 2007 whereas sales prices have risen by 35%.

Possible Explanations

So why would it be that asking prices has not kept pace with selling prices? - here are couple of explanations that I would put forward:

It's a sellers' market and buyers have to be price-takers if they want a property

The most recent 3 year period at least has seen a very strong sellers' market where inventory levels have been historically low coupled with low finance costs and ready access to lending, this has created the most recent property inflation spike which has set the media alight with expectations of a bubble. Such media coverage tends to invoke the 'herd mentality' which creates an environment where buyers loose negotiation leverage as the power switched to sellers - buyers then have to accept that they need to pay to secure a property they want or fear loosing it.

Agents are taking more care in appraising properties as a consequence of new legislation

The most recent changes to the Real Estate Agents Act came into force in 2009 and one of the requirements of the Act was to require all agents when undertaking an appraisal and before a signed License Agreement is completed, to provide the vendor with a written appraisal document which must include an indication of expected appraisal price for the property. This price is then often used as the listing price for website search range - the 'hidden' price which drives the search engine of the website without a specific price being published. This requirement of the Act is likely to have driven a behaviour amongst agents to be more accurate (and thereby less inflated) in estimating a sale price.

Agents are becoming more conscious of the role of the web and pitching prices to suits searching

In someways as a follow on from the last explanation, the last 7 years has certainly seen a significant change within the real estate industry in the appreciation of the role of the web in property searching and discovery. As this transformation has occurred agents have come to realise the importance of the price ranges and this may well have lead to asking prices entered as search prices being set to optimise the exposure of a property when people are searching. Whilst this alone may not have caused this narrowing of the gap between asking price and sales price, in the early period of the last 7 years the likelihood was that most agents delegated the task to office admins who may have been given a range of price search and taken upon themselves to enter the range of a specific figure.

Reliance on industry automated appraisal systems for that are powered by less timely sales data 

Most agents use one of the automated appraisal tools offered by Terralink with Property Guru or Property IQ offered by Core Logic - both of these are themselves powered by the database of settled sales from the LINZ database. This database is on average at least 3 months older in terms of data than the REINZ sales data which could cause a lag effect therefore depressing the potential price inflation factor evident in the market.

In my view it is likely that all of the above could be contributing to some degree to this trend of a convergence of asking price and selling price. I certainly don't expect them to converge however they are both key indicators of the property market with the measure of asking price being correlated to property sales as I analysed a couple of months ago in relation to the Auckland market.

Barfoot & Thompson - the powerhouse behind the Auckland property market

I admire and respect Barfoot & Thompson for many reasons, but most of all because they take a professional and open approach to data.

On their site they publish facts. They share valuable insight into the property market. You can easily see how many properties they sold in a month, by price range, type and location. They also provide rental data as one of the leading property management companies.

This insight into their business should be celebrated, not so much for what it says about the company, as what it does to help us better understand the property market in Auckland - the powerhouse of the NZ economy and the hotbed of discussion of the property market.

Their ability to share openly their sales performance is a lot to do I suspect, with the family ownership; thereby allowing the directors to make the decisions that they believe are in the best interests of their employees, their self-employed real estate agent contractors and their wider community, as well of course of their business.

The Barfoot & Thompson business is huge. In 2013 they sold around 4 in every 10 properties in Auckland. A total of 13,123 transactions with a total transaction value of $8.5 billion.

2014 has so far been an even better year for them with sales in March exceeding a value of $1 billion in a month - a record very quietly celebrated internally I am sure, a staggering success. In March their total sales of 1,392 properties equated to 19% of all properties sold in NZ and they only operate in Auckland! (& Northland) although their data is based on Auckland.

Their success over the past couple of years is a testament to a classic marketing strategy I remember hearing in my early years in marketing. Increase your marketing investment in the downturn period of the economic cycle - just when your competitors are retrenching to save costs and secure shareholder dividends, that is when the smart company invests. As the economy improves as it has done in the past 3 years, then your investment pays off as your brand is well established with strong emotional triggers to ride the economy upwards.

Barfoot & Thompson are experts at emotional triggers being passionate supporters in the community - whether it be sporting, the arts, charities and of course their support of Starship - they wear their heart on their sleeve and back it up with resources to invest back into the community.

Their business model is smart - do what other competitors do, but makes your presence felt. They charge a commission rate just less than the competitors - not so much to be seen as a discounter but enough to provide a point of difference and a sense of being with the community. They invest in their physical presence. They have more offices than any other brand in the region - over 60 offices, so there is a presence on every high street in the region. They invest in people and they support them, offering salaried apprenticeship scheme to get people into the industry. They invest in brand marketing - you don't have to travel far to see a billboard or the back of a bus to get that recall of the brand.

All this investment is paying off, their market share in the Auckland market is growing, topping 46% in March alone to deliver a 12 month average of 42% up from 38% coming out of the recession in 2011. Almost all of this growth undertaken without buying up other franchise operations or building new offices (bar a very few exceptions) very much unlike how their competitors operate.

Barfoot & Thompson also deliver higher metrics than the other franchise groups in the country based on a per office or per agent basis.

They achieve almost twice the rate of sales per office per annum as their main competitors and deliver a higher gross transaction value per agent.

They are also innovative being the only real estate company to release an iPad app in NZ - an app that in my opinion is the best user experience for property viewing of any of the apps on the app store at this time - its only weakness being the range of listings, limited to just their own!

Returning to my opening remarks, the thing I most admire from the company is their publication of data, at a time when we need greater insight into the property market to assist us to make better informed decisions as to the state and trends in the market I am pleased we have such a forward thinking company in our leading city.

Is there really a shortage of properties for sale?

We have been seeing statements in the media for years now, stating how we have a shortage of properties for sale - ever since the property crash in 2008 in fact. However the question I constantly ask (myself as much as anyone) is, if this were a real issue then how come it could continue to be a real issue 6 years later?

I wonder if this issue is as much a function of available data as an intrinsic problem. Prior to 2008 there was no available data on inventory or new listings - the supply side data of the property market. Up until that time the only available data on the property market was transaction data on sales volumes and prices. Then in April 2009 Realestate.co.nz published the first NZ Property Report covering the market in March 2009 looking back 15 months to January 2007. This report provided a whole new set of data particularly centred around new listings and inventory as well as asking price.

The data set of the NZ Property Report covered the period from January 2007 as this was judged the most accurate starting point, due to the fact that the database for the website was truly reflective of the whole market from late 2006 - the inaugural year of the website.

The problem is that without data from say the nineties and early years of this century we have difficulty in accessing what a normal market was, as 2007 was the last of the froth of the property market before the crash and subsequently the market has moved into very different modes over the past 6 years.

I thought I would look at the core data and see what components are valid and what we may be able to shine a light on to see a clear picture of the market to be a true indicator of trends and to answer the question as to whether there is a shortage of property for sale.

1. Inventory data

The actual level of available property for sale on the market over the past 6 years has not changed that much.

It has been as high as 53,000 properties and as low as it is today at 39,000 properties - but then at 39,000 properties that is nearly half of the total current annual sales. Certainly buyer and real estate agents would love to see more properties on the market, but 6 months stock is a pretty good level and in relative terms the availability is pretty consistent.

Inventory on its own does not really help us understand the trends in the market

2. Sales and New Listings data

The supply side data of inventory and new listings, takes on a greater relevance when assessed against the rate of sales through the addition of the monthly sales data which provides a greater contextual insight.

This chart whilst a little confusing with dual axis tries to capture the key data sets and align them to provide insight. Inventory as per the previous chart is measured in actual monthly levels in the grey area at the base of the chart. The red and blue lines measure listings and sales respectively - both are reported on a moving annual total basis. This method of reporting removes the seasonality, so much a component of property data.

The take out from this chart is the almost flat level of new listings coming onto the market over the past 2 years - steady at around 130,000 per annum. Whilst at the same time sales have risen over the same period from an annualised total of 55,000 to 80,000. This shows clearly the component of demand in the market. That demand has not driven more listings to come onto the market despite all the communications from within the real estate industry and yet despite this, inventory has not actually fallen that drastically. This indicates more of a 'liquid market' where sales occur more quickly.

These charts which to me provide insight I know are to many confusing and I have been looking for ages for a simpler indicator of the overall sentiment of the market in regard to supply and demand - something that better answers the question as to the pace of the market and whether there is a shortage of supply. I will note here that I hold the view that price is a lagging indicator and as such tracking the market sentiment of supply and demand will provide the key to future trends in price.

I recently saw this chart from the UK property market showing actual inventory (green bars) matched to monthly sales (blue line).

It got me thinking that this measure had relevance tracking the effective rate of sales each month as a proportion of the available stock.

Producing this chart for the NZ market shows somewhat of a different chart. The seasonality of home sales in NZ seems far more pronounced than in the UK and therefore it is harder to determine easily a trend, whereas I would judge that there are key trends easily determined in the UK data - significant rising sales in the past months matched to falling inventory.

So how to present this data in a meaningful and simple way was the challenge, as I sensed the data contains the core insight needed. Especially at this time where I see the property market slowing and a lack of inventory is not the real issue or the driving factor. 

It came to me! - inventory and monthly sales - what we are really looking at is "Property Clearance Rate" - what percentage of the available stock of properties on the market in a month are sold in that month. A quick analysis produced this chart which shows the ratio of sales to inventory.

Again the seasonal volatility makes it hard to see a trend - the dotted line is a trend line overlaid, but as we all know applying a different fundamental equation to the trend line could produce a different picture! 

Then it came to me - take the 12 month moving average monthly sales and apply it as a percentage to the available inventory and I think we have what to me is a very relevant picture of the NZ Property Market.

Now I could be guilty of endlessly seeking data to fit a story, but in my mind this is a visual of the property market that to me makes sense. It uses the current rate of sale (adjusted to remove the seasonal fluctuations and short term movements), combined with the available stock which is itself the function of existing unsold inventory, new listings and sales.

The telling image from this chart is the sharp rise in the clearance rate once the property market got into gear around 2011 - that rise, from 9% to 19% speaks to the dynamic market we have seen over this past two and a half years. However what this chart graphically shows which I have sensed is that the market has turned. It turned even before we saw the LVR restriction introduced in October as this chart shows the turning point in August / September of last year and the latest data from REINZ on sales in March only reinforces this fact. 

So in my opinion given this declining clearance rate is the key trend and talk of a shortage of properties for sale is nothing but a red herring!

Choosing the right Property app for the iPad - a review of the NZ options

It’s just 4 years since the iPad first entered our lives and despite the view of some commentators, that sales might only top a couple of million, the product has become a legend and total sales to date far exceed 100 million and are likely to continue to accelerate in the coming years.

The device fulfils a role that is far removed from the functionality of the smartphone device or the classic desk-bound computing device. The device is tactile and is as likely to be found on the couch or kitchen bench, as on an office desk. For this reason, the iPad (and the other Android based tablet devices) is in many ways the battle ground for property apps, as property searching is largely a ‘lean-back’ experience undertaken in times of rest when you want to immerse yourself into a world of escapism with dreams of a new home.

For these reasons I would contend that the best property iPad app almost bears no relation to the iPhone or smartphone app. They provide platforms for very different use cases. The smartphone is all about proximity based discovery and routing to viewings as well as alerts to new listing - functional activities requiring key information, easily and quickly accessible. The iPad is all about browsing in a mode that the traditional laptop or desktop could never deliver to the needs of the buyer or renter. The experience needs to be more of a magazine experience - rich in imagery and immersive in context. The iPad is an intimate device that is held close and in effect caressed and so the experience of an app needs to bear that in mind.

For New Zealanders however I have to sound a note of cautions for the options here are limited and to be honest none of the 3 I have reviewed really deliver to the experience of some of the best in the world and for me some of the best are found in the highly competitive US market with the app from Redfin being a great example.

So let me share my thoughts on the 3 options for New Zealanders, from Trade Me Property, Realestate.co.nz and uniquely a real estate company app from Barfoot & Thompson. I propose to deliver this review in the similar manner as a car review, scoring points based on key categories. These categories are ease of use, content, search and overall user experience.

Just for clarity this review is based on these versions of the various apps:

Trade Me V2.0.13 March 27, 2014

Realestate.co.nz V2.0.2 April 1, 2014

Barfoot & Thompson V1.5 April 2, 2014

Ease of Use

In overall terms, all of these apps are easy to use and fairly intuitive. However to start with extra marks go to B&T for the new overlay intro tutorial which in a couple of screens gives you a great overview of the functions so nothing is left to chance. 

Both B&T & Realestate.co.nz choose to begin the user experience with a map defaulted to your location devoid of any filters. In my view this is the best landing screen for a property app on the iPad. Realestate.co.nz does things slightly better in having a right hand column of listings from the area ranked by latest listed date - a missed opportunity would be the contextual reference numbering which could show the location of these properties on the map.

Trade Me on the other hand defaults to a list view of properties ranked by latest listing but based on the whole database of NZ making the initial experience woefully irrelevant as context is everything! To get to the same experience of a local map as the other two apps takes 3 more taps - a tap too far!

When selecting a listing from the map to view details, B&T chooses to take you to the listing and ignore the location context of the map, whereas the other two provide a hybrid screen of map and listing details. Here there is a vast difference between Trade Me Property & Realestate.co.nz in terms of the amount of screen space given to the listing vs the map. Way too much focus on the map by Realestate.co.nz diminishes the viewing of a listing.

When in this mode it takes just a single tap on a listing pin on the Trade Me Property app to shuffle to another listing - very intuitive. Realestate.co.nz makes you work hard with a required 2 taps to get to a new listings.

None of the apps provide what I judge to be a logical interactive functionality - that being a map with a list of properties whereby the selection of a property on the list highlights (by changing the colour of the map marker) where it is on the map and visa versa - here's this in action on the Redfin app - not a perfect execution but valuable functionality.

The B&T app provides one form of functionality that the other two don't and I love it. It is a flipboard style image viewer which lends itself to the casual, elegant flipping through properties in a magazine style - great execution and a powerful point of difference.

Content - Listings

Listings are what powers these apps and each have the same core data regarding their portfolio of listings. Clearly in richness of content the B&T app can only showcase their own listings thereby pushing them down the rankings however because they originate the content of the listings they show they are able (or have chosen to develop) functionality that is richer; I speak specifically of videos and floor plans.

Trade Me has the most comprehensive portfolio of listing, especially considering the dominance in rental listings the site enjoys as a function of the private landlord market. Talking of rentals, a point of note is the fact that the B&T app does not feature rentals, only property for sale.

The most important component of all listings are the photos, this is key whether you are viewing on a handheld device or a laptop, but to fulfil the desire of a lean-back browsing based couch device the iPad has to have stunning images. The raw data of image files for each app is identical (although B&T has the advantage of the original raw image files) but sadly Realestate.co.nz lets itself down by what looks like the use of compressed image files designed to be viewed on an iPhone. The sequence of images and 'blow-ups" below graphically illustrates this.

Content - Complementary data

I added this category to make a point. That point is School Zones which is the differentiator between the B&T app and the others. Neither Trade Me Property nor Realestate.co.nz offers any complementary data other than listings. But that is what we want! - I hear you cry!

Well there in theory could be so much data that could be of value:

• Crime stats
• Flood zones
• Postcode
• Sun angles
• Walk score
• Transport routes
• Parking zones
• High Speed Fibre coverage
• Flight path routes
• Rateable value
• Property valuation estimate
• Council Zoning

Many of these sets of data are simply not available in NZ or only at prohibitive cost. However the point is valid and I think important. School zones are public data and easily incorporated into an app and yet the two leading players choose to ignore the details. Good on Barfoot's for showing the way.

However B&T don't stop there they also have a tab in the listing view that includes the StreetView from Google - beautifully integrated into the full screen view - beautifully executed!

Search

The Realestate.co.nz app is the only one of the 3 to use aggregation of listing 'pins' which on the zoom out function reverts to a number to show the total of listings in an area. Trade Me uses red pins which cluster on zoom out until they disappear with a notice instructing you to zoom in - not a very friendly experience. B&T adopt a kind of mid solution - red pins which don't cluster but when you click on them on zoom out show a number of listings for the local area.

Only Realestateco.nz uses differentiation in the pin design to highlight 'New' listings, in my view a valuable feature it is the only app allowing you to also filter the search by 'days-on-the-market'. Both B&T and Realestate.co.nz do display 'Open Home' flags on listings with B&T offering an ability to filter the parameter of open homes by 'any time / this week / today / open in next hour' which I find really useful.

In terms of search filter the Realestate.co.nz and Trade Me apps rely on the iOS format scroll wheel for price and tick boxes for other criteria. As noted in the review of the Realestate.co.nz iPhone app the somewhat restricted search ranges especially on price and on bedrooms as compared to the website is surprising. B&T adopt sliders for price, bedrooms and bathrooms, something I find difficult from a user functionality perspective as the finger tends to obscure the slider and there are no visual cues to the gradations on the slider.

A key part of search on any device is the context of location presented by maps - real estate is always conditional on location and therefore despite the fact that the use of the iPad app may be on the couch the map view is important. Here the 3 apps differ, with in my view Realestate.co.nz taking top honours by using the Google map application layer whereas both B&T and Trade Me Property have defaulted to the Apple Maps layer. This is so evident as a drawback when viewing in Satellite mode - the resolution on the Apple Maps layer is so inferior to the Google Maps layer. These images below show the highest zoom in you can achieve in each app before losing resolution - a vast and significant difference.

Overall User Experience

Getting to use these apps begins to show their respective strengths and weaknesses. In reference to my earlier comments, in my view Realestate.co.nz is the weakest, as simply this iPad app is the iPhone app adjusted to fit the format of the iPad, and sadly as noted earlier the issues with screen resolution makes it the least likely app for 'lean-back' browsing. Too often the majority of the screen is taken up with the map view which does not interact with the property or list view in an intuitive manner. It does have the value of the higher resolution satellite imagery but this is not enough to make for the shortfalls.

Trade Me Property delivers a better solution, however given the resources and capability from a company of their size and knowing how critical the property sector is to the overall performance and long term value of this publicly listed company, I would have to say the app delivers at the lower end of expectations. Too much focus remains driven on the user experience of the web and too little time seems to have been spent on experiencing other property apps and other magazine apps in general as a benchmarking exercise.

The winner by a wide margin in my view is the Barfoot & Thompson app. A well executed iPad app that has been thought through and tested to deliver an experience that I would enjoy using - a credit to the marketing and tech team there.

The saddest conclusion though is that the best app is at best a great platform which will be so seldom used as fundamentally who will ever use it? - it showcases just Barfoot & Thompson listings - sure that is close on 4 out of every 10 listings in Auckland, but what use is that?

Given the clear advantage that the app delivers if I was in the role at Barfoot & Thompson I would make a smart decision. I would as a 22.22% shareholder in Realestate.co.nz* license the app to Realestate.co.nz and thereby benefit doubly - prove the credibility of the technical and marketing prowess of the team and at the same time earn a license fee whilst at the same time deliver to Realestate.co.nz as a championing industry owned website to challenge Trade Me a superior app to the current one - food for though!

Note * Realestate.co.nz is a joint venture between The Real Estate Institute of NZ (REINZ) (50%) and Property Page (NZ) Ltd (50%). Property Page (NZ) Ltd is owned by Harcourts Group Ltd (22.22%), Ray White (Real Estate) Ltd (22.22%), LJ Hooker New Zealand Ltd (22.22%), Barfoot & Thompson Ltd (22.22%) and Bayley Corporation Ltd (11.11%)

Trade Me Property vs. Realestate.co.nz - the debate continues

My recent article on the state of the online property space here in NZ has raised some interest in the media - clearly the issue is topical, but more importantly there is much at stake. The potential value at play here is anywhere between $100m and $1,400m per annum. The former amount being the total expenditure by the real estate industry on marketing; the latter being the total value of the commission based services charged by the real estate industry upon its clients - the sellers of residential property. Clearly Trade Me is not intending to disrupt the whole industry but equally the real estate industry feels threatened and so their value is under threat!

For Trade Me the goal of the lion’s share of the $100m a year in property marketing is critical. The most recent estimate would put their annual revenue from real estate (licensed agents, excluding private sales) at $15m, this would more than double if not triple if they can secure their new pricing structure. Trade Me is a listed public company and its ambition and its shareholder expectation is to dynamic growth and from that a healthy cash-flow based on an earnings-to-sales rations of over 75%. To achieve this, as they have said, requires a growth in its best performing sector - classifides of which property is the key.

For Realestate.co.nz its goal is to block the Trade Me ambition and in so doing wrestle control of the digital advertising platform from Trade Me so as to provide its shareholders (The Real Estate Institute of NZ (REINZ) and the 5 largest real estate companies) with a cost effective marketing solution; whilst at the same time transition advertising from print to online.

I very much appreciated the very detailed response to my recent article from Jimmy McGee, the Head of Commercial at Trade Me, who has been holding the reins of Trade Me Property awaiting the start of Nigel Jeffries who steps into the role as Head of Property shortly.

His response can be read in full in the comments to the last article. I have chosen to dissect the complete response and in so doing respond specifically to all of his comments, somewhat in the form of a Q&A.

Trade Me Property

1. We think things will settle down over time and Trade Me Property will remain an obvious marketing option for agents & vendors. Why:

• because it is the #1 source of buyers
• because it has a huge audience
• because it is great value at less than $200
• because of our private listings that buyers won’t find on industry websites

Properazzi

I would concur Trade Me will remain an obvious marketing option for agents and vendors. More people, more of the time use the web to search and research real estate. In many countries property websites are in the top 5 of all trafficked sites (UK & Australia) Trade Me is certainly a Top 10 website in NZ so it is logical all agents would see it as a valid option.

Anecdotal evidence from agents - in fact almost universal evidence from agents over the past few years from my experience is that Trade Me Property delivers far more buyer leads than any other medium (not just than any other website).

Trade Me audience is huge and brand awareness massive - no question

At a base cost of $159 +GST as recharged by an agent, the cost of a listing on Trade Me is stunning value for money. Nothing comes close - especially not print media with single page insertions costing thousands

The value of the private listings as a unique added content on Trade Me is huge. Up until recently with both Realestate.co.nz and Trade Me Property having the same level of agent listings the advantage to Trade Me has been key - the consumer will always seek out the richest content

Trade Me Property

2. Trade Me Property is a compelling marketing option for agents and vendors. It provides listings with huge exposure to a massive audience of passive & active buyers. We know around half of property buyers found their home on Trade Me Property – and realestate.co.nz was well behind with 2%. (These statistics are from a Perspective Research survey)

Properazzi

This statistic is not shared lightly and is massive. Trade Me is a publicly listed company and as such has to be carefully and prudent when making any claim - to claim then that a competitor achieves a level of just 2% of all property buyers (in a survey) as compared to Trade Me Property at around 50% is not done rashly or without careful consideration.

Trade Me Property

3. We’re not resting on our laurels. We understand we need to keep working hard to demonstrate the value and effectiveness of Trade Me Property as a marketing option for agents and their vendors – it’s not something we take for granted. As we’ve always said: “You should only use TMP if it helps you sell houses.” We’ve recently released aerial boundary images, will show school zones soon also. Plus well have map-based search for desktop out in a month or so. And last but not least, we’ve got some exciting stuff in store for our mobile products.

Properazzi

Now this is where I think that Trade Me Property has been deficient for a considerable amount of time. They have not been a significant innovator. Even today the user experience of Trade Me is of a single unified platform built around auctioning household items which leaves the properties section woefully underserved as compared to other property portals overseas. I would have to say Realestate.co.nz has not been that innovative, however their latest version of their iOS app is a good step forward, despite the stumble!

Trade Me Property has been weak in delivering a credible mobile experience - certainly as they cite later in their response, many people may well use the general Trade Me mobile app for property searching but it is not a step forward in property  searching merely a mobile version of the web search.

Trade Me Property

4. There’s a sense of back to the future: we’ve been here before. TMP was started from scratch back in 2005 at a time when the RE industry had their own website with thousands of listings on it. There are important philosophical differences between TMP and industry sites including::

• TMP is designed to empower consumers and puts private listings and agent listings on a level playing field.
• TMP is independent, not industry-centric, and aims to provide buyers with as much transparent information as possible.
• We believe that over the long-term, loyalty from buyers and sellers will come via TMP being an effective and good value marketing option, and providing users with the best experience. 

Properazzi

I would agree there is a sense of Back to the Future here. Back in 2008/9 there was a stand-off by the industry resisting the desire to have their listings on Trade Me. In 2006 only around 30% of licensed listings were on Trade Me. By 2008 that had risen to 65%, but some of the major groups held out, most notable Harcourts. By 2009 all groups were on Trade Me Property, not for the reason of negotiated buying rates, but simply because vendors demanded agents put their property on the site, these agents demanded that the business owners agree to list on Trade Me. Today we have the opposite effect of business owners telling agents to tell vendors that they don’t want to be on Trade Me - because they don’t want to pay $159 + GST to market their clients property!

I would agree Trade Me has always been about empowering consumers. However it has also always been about creating value and enhanced shareholder wealth.

Trade Me is independent as much as Fletcher Building is independent or any other publicly listed company is. It's a publicly listed company with shareholders and a board of directors representing those shareholders who hold the executive team to account to enhance the value of the company. It's there to make money - Trade Me is not a charity.

I think the comment “not industry-centric” may have been a mistake, for a property portal to be successful, it has to be customer centric where the customer in this case is the agent. Not the consumer, and thereby the business has to be 'industry-centric'. I think in someways this is at its core, one of the issues that has caused the problems in Trade Me Property this year.

Trade Me Property

It’s fair to say we’ve got some concerns about the flyer and the overall impression it creates that the industry-owned site has both more house listings and more traffic than other websites. We think this is off the mark.

Total listings:

The nationwide picture is distorted by the actions of some agents who withdrew listings in Hawkes Bay & Hamilton. TMP still has more residential for sale listings in a bunch of areas, including Auckland, Wellington & Canterbury.

This analysis includes lifestyle listings, where we have 1,000 fewer listings than RE. We’ve probably lost a bit of ground there to the way we’ve treated lifestyle listings, rather than agent backlash. We currently exclude lifestyle from residential search, which we’re looking to change soon. We expect this will make it a far more compelling proposition for agents and vendors of lifestyle properties.

Properazzi

Whilst Trade Me might have concerns over the flyer, my analysis shows the statements made have validity. At this time Realestate.co.nz does have more listings. 

I have gone back to examine the listings data as at the 6th April utilising the same methodology to compare each category of listing on both sites across the main metro centres.

Auckland sees Trade Me Property with 6% more listings overall, however when stripping out an estimation of privately listed properties to examine side-by-side licensed real estate listings Realestate.co.nz has 479 more listings - an advantage of 5%.

In Wellington the two websites classify the region geographically using differing boundaries, for the sake of comparison I have excluded from the Trade Me Property listing the districts of Carterton, Masterton and South Wairarapa which are not included in the Realestate boundary of Wellington, thereby as best as can be evaluated the listings data is like-for-like.

Wellington sees Trade Me Property with just 1% more listings overall, however when stripping out an estimation of privately listed properties to examine side-by-side licensed real estate listings Realestate.co.nz has 346 more listings - an advantage of 12%.

Canterbury sees Trade Me Property with 11% more listings overall, however when stripping out an estimation of privately listed properties to examine side-by-side licensed real estate listings realestate.co.nz has just 92 more listings - an advantage of 3%.

So it is fair to say that in the major metro regions of NZ Trade Me Property have more listings, however from a consumer standpoint to be able to examine the true comprehensive picture of all property advertised for sale you would need to use both websites.

As the analysis includes Lifestyle properties the comments about the display structure of these listings on the Trade Me Property site is more an internal issue for the company and its design team.

Trade Me Property

Audience: Trade Me Property’s audience (average daily unique browsers during March 2014) as independently measured by Nielsen, is more than 3x the audience of any other property website in NZ. Looking at data from the past 7 months, Trade Me Property’s monthly audience has included an additional 76,000 and 92,000 more browsers each month than any other competitor site. According to Nielsen, 77% of visitors to TMP didn’t visit RE (Feb ’14, NetRatings, total traffic).

Properazzi

I am grateful for the exact Nielsen data provided in the response. I have mapped the data and added it to the chart Trade Me Property also presents on its agent home page which shows data from April 2012 to March 2013. As can be seen the differential between Trade Me Property and realestate.co.nz is significant. Trade Me Property has 3 times the average daily traffic but a year ago the differential was 5 times and 2 years ago the differential was 6 times. In March realestate.co.nz average daily visitors were up 95% as compared to a year ago - Trade Me Property average daily visitors up just 8%.

Trade Me Property

Hawke’s Bay listing numbers:

Some agents are disregarding their vendors’ best interests.

Agents in some parts of the country are taking advantage of their role as a trusted advisor and using vendors as pawns in a real estate industry power play.

Not having listings on Trade Me Property means less people will see the house for sale which means the vendor is less likely to sell, or get the best price.

We don’t believe these realtors have their clients’ best interests in mind as their clients’ properties are not being seen on the country’s best property marketing channel.

We think agents should do what is best for their vendor, and that would generally include using Trade Me Property as a way to get properties in front of the largest audience and helping them sell more property.

Properazzi

I believe some of these comments are valid. Given the significantly larger audience to Trade Me Property and the data on those who visit Trade Me Property and not Realestate.co.nz then an agent not advertising a clients property on Trade Me Property is disregarding their clients best interest. Further this action of refusing to advertise or telling clients that they don’t recommend Trade Me Property is using clients as pawns in a power play that is out of all proportion - a fee of $159 + GST is the cheapest form of advertising. It's time the agents woke up to demonstrating their role and either pay it out of their commission or re-charge it.

Stating that not advertising on Trade Me Property means less people will see the house for sale which means the vendor is less likely to sell, or get the best price, is a serious stretch. This can never be proved and as I have written recently property sales never have a ‘control’ environment.

Trade Me Property 

We understand why you’ve compared the iPhone app for TMP and RE, but it’s only part of the picture. This is because as well as the TMP app, heaps of New Zealanders use the TM app to browse for property on their iPhones. Nielsen’s research has also found that more people downloaded or used the Trade Me app to search for property than the Realestate.co.nz app.

Properazzi

Whilst the fact that ‘heaps’ of New Zealanders may well use the standard Trade Me app to browse property on an iPhone, that experience is not comparable to the inherent value of a mobile app for property which is what both the Trade Me Property app and Realestate.co.nz app deliver - the battle grown is now, and in the future the mobile space / app environment. If Trade Me Property want to win this battle they need to avoid relying on users engaging with Property on their main app. My advice would be to exclude property listings on the main app and create a mindset change that will get those users to download the property app.

Realestate.co.nz making serious moves on Trade Me Property

There has not been much commentary for well over a month on the tension between Trade Me Property and the real estate industry - up in arms over the new pricing structure. That was until this marketing flyer hit the digital wires today. Proclaiming that traffic and activity on the industry owned website of Realestate.co.nz has "gone through the roof".

These are some significant stats and naturally I am always keen to look into the numbers, where I can, to provide what I see as valuable insight.

1. More homes for sale than anyone else

Based on my own analysis as of today (2nd April) this is most definitely true. Not just more, but significantly more!

For the past 3 years at least Trade Me Property has had a subscriber base at least equal to Realestate.co.nz or close enough to make little difference and so from the perspective of licensed agents the two sites have been line-ball. On top of this Trade Me has an additional stock of listings from private sellers which on average have amounted to around  16% of the Trade Me listings which generally means Trade Me has around 18% to 19% more listings than Realestate.co.nz.

As of today that advantage to Trade Me has disappeared and Realestate.co.nz not only has more listings (a margin of 4%) but by applying an estimation factor for private listing, Realestate.co.nz has considerably more licensed agent listings (a margin of 18%).

In seeing this significant advantage to Realestate.co.nz I was naturally drawn to look at the hot-spot of the Hawkes Bay where the boycott against Trade Me continues and has seen a large proportion of agents listings only appearing on Realestate.co.nz. The actual make up of listings on both sites as of today in the Hawkes Bay are as follows.

This is staggering. In the Hawkes Bay Trade Me Property is only displaying 428 houses being marketed by real estate agents for sale as compared to 1,103 houses on Realestate.co.nz - I know where I would be looking for property for sale for sure in this area of the country!

2. More Traffic

The marketing flyer speaks to a lift of 30% in traffic over the past 6 months quoting Nielsen average daily unique browsers, certainly a very credible source of data. Not having access to Nielsen data I turned to a source I use quite a bit these days Similar Web. This service provides estimates of website traffic, by no means as accurate as Nielsen of Google Analytics but useful as far as seeing trends.

The trend since the start of the year has been of a significant growth backing up the more credible Nielsen stats.

No. 1 Property App

The Realestate.co.nz iPhone app was the first mobile property app in NZ, leading Trade Me Property by 18 months. Since that launch in late 2010 the app has been downloaded more than 200,000 times and rightfully can claim the mantle of the No. 1 property app in NZ.

The marketing flyer speaks to the download rank as the demonstration of leadership quoting "iTunes & app annie download rank of property apps in NZ". The source of this ranking data is App Annie which tracks the ranking of all iOS and Android apps. For the sake of relevance I have only examined the iPhone app download ranking as Trade Me Property does not have an Android app and the Realestate.co.nz iPad app has only just been launched.

The charts below show the past 12 months for the Trade Me Property iPhone app and the Realestate.co.nz iPhone app.

The Realestate.co.nz app is being downloaded at rate which consistently places it at around the 320th most popular app in NZ, whereas Trade Me Property app is further down the rankings at an average of 500th place.

These collective stats do provide (not that I was sceptical) a very clear demonstration that the battle for supremacy in the property portal space in NZ is actually not that clear cut and certainly in the past 4 months things have begin to change. I am not saying that Trade Me is wounded, but at the same time their is a clear demonstration that Realestate.co.nz is gaining. They do however need to make sure they attend to the detail, like for instance their version 2.0 of their iPhone app which was poorly tested before bugs were discovered which could have seriously undermined their credibility in that key space.

NZ's aspiration for new McMansions wanes

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".