New Property Dashboard brings greater clarity to the state of the property market

by Alistair Helm in , , ,

The current Property Dashboard has proved to be of great value to buyers, sellers and agents alike as over the past 15 months it has grown to be one of the most accessed (and thereby hopefully valuable) parts of this site.

However I have felt that whilst its simplicity of design has been appealing, its measure of the market based purely on inventory was somewhat limiting. To really get a sense of "what's happening in the property market?" needs a view into two other key metrics to add to the available inventory of properties on the market. These are the pace of the market and the trend in prices.

I have therefore undertaken an upgrade to the Property Dashboard and extended it from a single gauge to 3 gauges.

I have in addition to adding these two new gauges for 'pace of the market' and 'price' adopted a consistent approach to the colour segments so a to ensure that each colour represents a consistent state of the market seen across the three measures of the market as detailed below:

Properazzi Property Dashboard - June 2014.png

I have at the same time undertaken more analysis of the 5 years of data from Realestate.co.nz from their monthly NZ Property Report and the REINZ data for the same 5 year period to ensure the segments of each gauge reflecting the Stable Market / Declining Market / Heated Market are reflective of the current state of the market. 

An important differentiation of the new Property Dashboard is that the core data-set for price trend and pace of sales uses 12 months moving averages. By use of this measure, the dashboard will not present erratic swings month-by-month but will reflect a trend that can be seen month-on-month providing a better evaluation of the current state as well as the emerging trend of each market across the country. 

The new Property Dashboard is published for each of the 16 regions of the country for where consistent data is available from REINZ and Realestate.co.nz. Unfortunately due to changes made to the monthly reporting by REINZ, regional data for dashboards of the Coromandel region, the Wairarapa and the Central North Island regions are no longer available.

The Property Dashboard will be updated monthly upon the release of the relevant data from REINZ and Realestate.co.nz which is likely to be around the middle of the month.

 

Property Dashboards for all regions of New Zealand

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%.

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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.

New builds and property sales follow a very close correlation

by Alistair Helm in

Recent data shows that new construction consents are growing at the fastest rate since 2002, with the seasonally adjusted "work put in place" up by 15% for the first 3 months of this year. This level is welcome news to the politicians who I suspect have been endeavouring to fast-track new consents and in so doing alleviate the shortage of housing we constantly hear about especially as Auckland's populations expands and Christchurch gets down to the rebuild.

For me the issue I was most interested in with this latest data is as to whether there is any correlation between the level of new builds and the level of property sales and if so what impact one can have on the other.

Diving into the data shows that based on the statistics of the past 12 years, it would seem to indicate as seen from the chart below that the trends of property sales and new construction consents track fairly closely.

The data would seem to suggest that there is a lag between consents and property sales. This turns out to be 6 months; which when aligning the consent numbers with property sales - 6 months in arrears shows an almost perfect correlation.

So having established that there is a correlation, and quite a close correlation at that (accepting that the past 6 months appears to be bucking this trend - more of that shortly) the question is why is that the case?

I can only make a supposition as to this correlation, but my hunch is that it all comes down to confidence. The property market in respect of volumes sales is a visible demonstration of economic confidence, at least in respect of the domestic residential economy. A rising level of sales creates the capacity for people to examine and progress on new construction whether that be custom construction projects (which typifies NZ home building) or group home builders. Increasing sales create liquidity in the property market are fuelled largely by easier capacity for finance and these combine to progress construction projects to the consent stage for design concepts that have been sitting awaiting a financial trigger.

Naturally with such a correlation the converse is also true and is shown through the data that a falling property sales market has a dampening effect on consenting of projects. 

The first quarter of this year as highlighted earlier is though very interesting, as we are for the first time witnessing a divergence of these two trend lines. Given the normal 6 months lag we should by now be witnessing the consent levels begin to tail off as property sales plateaued some 9 months ago. 

The clear assumption is that the construction rebuild of Christchurch and the extra focus on building on Auckland is driving this divergence. This may well be viewed as the successful adoption and implementation of policies at local and national government level.

Trade Me Property continues to struggle

by Alistair Helm in ,

Another month has passed and the continued impasse within the real estate industry as individual companies decide as to their commitment to Trade Me Property continues. This all began late last year and with each passing month I have the sense that the struggle for Trade Me Property grows. They still attract an enormous audience relative to Realestate.co.nz but losing support and loyalty of their customers - the real estate salespeople and business owners must be hurting.

A month ago I reported on the latest analysis of the differential in listing stock between Trade Me Property and Realestate.co.nz. At the time the total inventory advantage fell to Realestate.co.nz with Trade Me having just 92% of the listings.

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A month later and the relative advantage has moved further towards Realestate.co.nz. For the data presented below I have made an adjustment for the component of 'private sale' listings on Trade Me Property to thereby provide a more accurate reflection of the differential for licensed real estate agent listings. This adjustment revised the 92% figure to 83% of all licensed agent listings on Trade Me Property at the end of April.

The passage of the month of May has resulted in a weaker relative position for Trade Me Property now with just 76% of the listings stock of licensed agents as compared to Realestate.co.nz - close to 1 in 4 of every agents listings is now not being displayed on Trade Me Property.

A significant drop has been seen over the past month in the inventory of Barfoot & Thompson on Trade Me down from 95% to 78% whilst Ray White continue to shows the strongest support slipping just 3 percentage points from 97% to 94%. By contrast Harcourts, the largest NZ real estate company now has less than 2 of every 3 of their listings on Trade Me Property.

With the passage of time so the transition of real estate companies to the new subscription regime has progressed, my latest insight is telling me that almost all of the major real estate companies are now onto the new subscription plan of a payment of a single fee for every listing (rate card $159 + GST). However unlike the prior monthly subscription fee of an "all you can eat" model just because a real estate company is on the subscription plan does not mean all of the listings of that company are displayed on Trade Me Property.

New listings are a more accurate indicator of the level of support for the new pricing model and the data of listing numbers taken from the respective websites shows how the industry is acting in voting with its marketing dollars on behalf of its clients.

In the month of May Trade Me Property only displayed 3 out of every 4 of the new properties listed in the month on Realestate.co.nz. That disadvantage was even more significant when you look at the new listings in May from the largest real estate company Harcourts which displayed less than 6 out of 10 of it's new listings on Trade Me Property; for LJ Hooker it was only half of all new listings. Ray White continues to show what looks to be staunch support with 95% of all new listings in the month featured on Trade Me Property.

New listings are the life-blood of the industry and these figures certainly show that this impasse over listing fees may well have started out as a regional boycott with the mass-removal of all listings, but has now turned into a more damaging and potentially insidious erosion of new listings one-by-one, day-by-day, agent-by-agent.

 

Law change will effect the reporting of auction sales data

by Alistair Helm in

Auctions continue to be favoured by the real estate industry as an effective and efficient method of sale. In the past 12 months according to REINZ data a total of 15,865 properties were sold by auction representing over 1 in 5 of all property sales. In Auckland the numbers are far higher with over that same period 38% of all sales being by auction.

However underlying this data may be a correction “waiting in the wings” which may well have a significant impact on these numbers.

With effect from the 17th June 2014 an amendment to the Fair Trading Act as it applies to Buying and Selling at Auction comes into effect. The specific amendment that most interested me was this:

“The Fair Trading Act auction rules treat the property as being sold at auction if it is unsold at the end of the auction but the auctioneer accepts within one working day of the auction an offer from a consumer who attended the auction.”
— Fair Trading Act : Auctions in Action

I have long held the view that an auction sale should be defined only by the sale occurring on the fall of a the hammer, however the real estate industry continues to hold the view that a property brought to market as an auction and subsequently sold irrespective of when it sells - sometimes up to 7 days later is considered an auction sale.

It was only last week when Peter Thompson of Barfoot & Thompson made this statement in the monthly report of sales for May:

“Vendors are still choosing auction as their preferred method to go to market. The success rate at auction is around 80 percent within a seven day period. This is because we are experiencing a trend towards properties that are passed in at auction either selling later the same day or within seven days of the auction”

Next month such a comment would be judged to be misleading and inaccurate under the terms of reference of the Fair Trading Act. This advert for April auction results might well present a somewhat different picture.

This move will bring the reporting of auction results much more in line with Australia which publishes 'clearance rates' weekly within 24hrs and judges an auction solely by the fall of the hammer.

A further implication of the amendment is that once the working day period has passed then the transaction will no longer be considered an auction and therefore the use of the Auction Sale & Purchase Agreement will cease to be appropriate as the property becomes open for offers by private treaty between the vendors agent and the prospective buyer. This is of importance for buyers to appreciate as the purchase terms and conditions need to be re-stated on a new S&P Agreement.

Latest B&T data reinforces impact of LVR

by Alistair Helm in

Barfoot & Thompson published its Housing Market Update for May highlighting what is a clearly a slowing property market with the year on year sales volume down 14% as compared to May 2013. The trend of property sales is downward, from a peak in October last year the moving annual total of sales by Barfoot & Thompson in the Auckland market has fallen from 13,232 to 12,572 in May.

Within the composition of sales for the month of May the most striking fact is that whilst total sales at 1,109 was down 14% compared to a year ago the sales of property below $400,000 was down 50% - the total sales in May 2013 of property below $400,000 was 301 properties, a year later this segment had fallen by half to just 151.

Just to reinforce these numbers, excluding the below $400,000 segment which still represents 1 in 8 properties in Auckland the remainder of the property sales, those over $400,000 saw sales volumes slip just 3% down from 991 in May 2013 to 958 a year later. So almost all of the 14% fall in total sales is as a result of the collapse of the sub $400,000 segment.

It can be no coincidence that this segment of the market has been the hardest hit by the withdrawal of funding for high LVR mortgages which are primarily for 1st time buyers seeking an entry level property which in Auckland has traditionally been this sector. 

The LVR restrictions came into effect in October of last year and since that time sales in the 8 month period for property at this lower price bracket of less than $400,000 has totalled 1,541 property sales a year earlier it was 2,123, nearly 600 less purchases over that 8 month period, at a time when sales volumes overall barely changed. The chart below very clearly shows the impact of the LVR - performance before October certainly showed a weakening in the lower price segment of the market; however after implementation the impact has been striking with the red bars for the lower prices segments showing the decline in year on year sales volumes. The retardant of LVR restrictions has certainly quelled the fire of the property market which  was burning brightly this time last year.


"Where is my property?" - Lost in Canada

by Alistair Helm in

We all know, or I would hope we all know that digital marketing is the primary focus for real estate; more people, spend more and more time online on mobile apps and websites searching for property to buy or rent. This is the mantra that I was extolling to the real estate industry back in 2006 and yet I still sense that the message has not got through to all of the community.

I am a fan of technology and love to explore new apps and gadgets but still rely on the ones that do the job and do it simply. The Realestate.co.nz app is a great example - it delivers a simple solution defined as "discovering property around me". I fire up the app and it shows me all the properties that are for sale or rent within a kilometre or so of where I am standing. Perfect for buyers, perfect for agents and their clients as it showcases the current properties on the market, especially good as it highlights open homes.

Or so you would think, until you discover that unless you were standing on the corner of Lloyd Avenue and Braidwood Avenue in Peterborough, Ontario in Canada.  If you were not at that exact point you would have no idea that the house being marketed at 1 Lloyds Close in Rolleston in Canterbury was actually open for viewing this weekend.

Confused? - well the issue is that the property listing in question, a nice single level 4 bedroom brick house has an address of 1 Lloyds Close, Rolleston, Selwyn, Canterbury has, through the computational programme at Realestate.co.nz placed the property listing on the world map in Canada not in Canterbury. The Realestate.co.nz system uses Google maps to locate this address with a pin on the Google maps on the website and on the mobile app. However as we all know technology can perform strange acts at times and in this case the Google maps programme decided that 1 Lloyds Close, Rolleston, Selwyn, Canterbury was actually 1 Llloyd Ave, Peterborough in the state of Ontario, Canada!

 

This is somewhat amusing, but actually there is a serious issue here as the agent in their role of providing services to the client is potentially failing that client as the property they are marketing is invisible to anyone standing in Rolleston using the app or in fact a person anywhere using the mapping function of the app - especially when you consider the app has been downloaded over 200,000 times and is being used actively everyday by buyers.

There is a very simple solution to this problem and that is provided by Realestate.co.nz who can go into the their database and overwrite the geo-locational address to place the location pin in the right place and hopefully for the benefit of the owner of this property it will be completed within minutes of reading this article. However the fundamental issue is one of agents 'owing' the online marketing and checking that all of their clients listing's content is accurate online - a very important process often overlooked.

In case you were wondering I found a total of 24 NZ properties on the app today that are in other countries - 1 in Tasmania, 1 in Illinois, 2 in Kentucky, 2 in New York, 3 in Ohio another one in Canada and 13 in the UK!

As a note the Google map on the Ray White website of the property is correct and places the property in Rolleston, but it further reinforces the need for agents to check content on all medium - mobile and web.