New Capital Values demonstrate an archaic system

by Alistair Helm in


Today, the 10th November thousands of Aucklander's reached for their web browser to witness the reveal of their latest Auckland Council Capital Valuation for their property. Far from horror or celebration the universal reaction was of frustration. Frustration because the majority could not gain access to the web server to discover their latest CV.

This experience in my view is unacceptable in 2014. We live in a world of ubiquitous, almost unlimited computing power - a world where you can through services like Amazon Web Services spin up unlimited servers to power any scale of usage at a fraction of the cost of most traditionally owned hardware environment, and only pay when you need it - like today as Auckland could have done to save loosing their whole website .

This experience is for me a demonstration of how archaic the whole Capital Valuation system is. I have in the past written about how we should get rid of CV's as they are a wholly misleading method of establishing a value on a property. Well now I think the experience of not being able to find out the latest Capital Valuation on my property demonstrates how we should re-examine the whole process.

I am not going to get into the political issues as to whether or not basing local authority rates on property valuations is right or wrong - but let's just say it is a fair method. How then could we improve it? 

The problem is that re-assessing values every 3 years is mad. Thirty years ago undertaking a re-valuation every 3 years was the best that could be done as the process to assess half a million homes took 3 years. Today algorithms can re-assess valuations every day if required. Zillow in the USA updates the estimated valuation of 100 million homes every couple of weeks - they are not a government agency - they are simply providing this insight next to property for sale to assist home buyers. 

Core Logic which is contracted to provide Auckland Council and most local authorities with a re-valuation every 3 years has a dynamic algorithm which re-assesses the property inventory of the whole of NZ at the flick of a button. They provide dynamic services to banks who use this capability to ensure they are constantly aware of the state of their lending portfolio. This algorithm takes input every day from recent sales, building consent data and registered valuers. It crunches these data inputs to create a re-valuation, house-by-house, suburb-by-suburb, district-by-district. This is the origin of the QV monthly report into valuation changes in property.

So why don't Council's use a 3 monthly re-assessment of capital valuations. The data is held by Core Logic they can simply take a feed of that data every 3 months. That way the "reveal" of new Capital Values becomes a less dramatic news story - I know the media will be disappointed in this as they have had a field day over the past weeks leading up to the latest reveal. 

For homeowners this new process would provide a genuine public service and demonstrate equitable rating apportionment as the annual rates would be based on a far more current assessment of relative value.

 

 

 


NZ Property Report

by Alistair Helm in


I fundamentally believe that access to better property data will empower property buyers, sellers as well as the real estate industry. Data needs to be timely, accurate, credible and ideally open (in the sense of access to the raw numbers).

This was my view back in 2009 when at Realestate.co.nz we put together the first NZ Property Report for March 2009. The concept of the report was to provide insight into the supply side of the property market. At the time we had insight into sales volumes and sale prices from REINZ and QV but we had no data as to number of new listings, the asking price expectations and the level of available inventory of property on the market. All vital indicators to the state of the property market.

This data is the core of a property portal, especially as Realestate.co.nz had the most comprehensive database of listings going back to 2006 when the site was launched. 

We cannot claim the credit for the invention of the NZ Property Report as ever the best ideas are shared, refined and developed. I was inspired by the Rightmove House Price Index from the leading UK property portal.

There were two key principles I set down at the launch of the report:

1. The data would be collated, analysed and published on the 1st day of each month for the month just finished. This was a principle of the fact that being a website the data was accessible immediately so the report could be produced so quickly following the close of the month

2. The core data would be made open and accessible to all, so that anyone could use it to make their own analysis

Five years later and the report has grown to be of great value to a wide audience. I have created the Property Dashboard from the data. The commercial banks use the data and I know from discussions I had with the Reserve Bank Governor at the time that the data was valuable as another indicator of the market for housing, not to mention the media interest (great PR!)

So it has been with growing frustration that I have awaited the May report since the 1st of June and today is the 13th, that is 9 working days. Now I would like to point out I hold no animosity to my prior employer. I am simply an independent property consultant, analyst and commentator who relies on this information, and I have people who also rely on what I produce.

I have been patient, I sent an email to Realestate.co.nz on Friday the 6th of June requesting an update as to when the report would be published. I have not had a response to that email. I spoke to a media colleague on Tuesday the 10th to see if he had heard any information as to a date of publication, he was told that "there would be further delays and this month's Report might be a bit brief".

I believe that Realestate.co.nz has a professional responsibility to this report. If they are having trouble or have other issues they should inform their audience. They have a website to which they could post an update. They could publish the raw data to assist those who rely upon it. What I think they should not be doing is going silent.

I hope that the report will be published - today ideally. Sadly this will make it the last report of the month given we have had the Barfoot & Thompson report, the Harcourts report, the QV report and likely as not the REINZ report today - from 1st to last!


UPDATE

In someways not surprisingly as I was writing this piece the May report has been published 9.30am Friday 13th June. I did think that I might delete this article but I feel the comments and opinions expressed are still valid and need to be heard by Realestate.co.nz - I will leave you as the reader to judge whether thats is the case or not


Property price trends become harder to forecast

by Alistair Helm in


I was surprised by the statement made by Westpac's Chief Economist today

It is impossible to tell what is really going on with house prices

His comments refer to the growing volatility in house price measures, especially from the latest REINZ stats of both median price and stratified median price index. The latter a measure designed to provide a more accurate and stable measure of prices as it balances out the impact of high price suburbs vs. low price suburbs to ensure neither unduly skews the data.

This chart above shows the trend in both median and stratified price over the past 7 years - most noticeable is the rise of the recent 3 years. You can also see the volatility in recent months from what has historically been a smoother trend in stratified price measure as seen in the red line.

In the Auckland market the volatility is more pronounced and also what is very striking is the direct correlation of prices (especially the median price) with the timeline of the implementation of the Reserve Bank LVR restriction.

The impact after the 1st October implementation has seen median price shoot up directly as a result of the significant fall in sales of lower priced property thereby pushing the median price up. The fall in January prices is a seasonal issue which can be seen regularly through the past years, although the scale of the fall this year is surprising.

As Westpac's Chief Economist Dominick Stephens says in his Home Truths report for April the fundamental issue is that the raw data of house prices is not a case of matching apples with apples, more its an apples with oranges comparison. On the REINZ Stratified House Price Index (HPI) he makes these comments reflective of the charts above:

As I have written in the past I believe that REINZ should take on the challenge of collecting and aggregating more granular statistics on property sales - they are in the best position to do so as they are the incorporated society with almost all real estate agents as members who collect data on every sale in NZ at the time the unconditional agreement is reached.

Even without changing any collection process they could today provide far more accurate and valuable information on property prices.

One of the fundamental problems with there data reporting today is that they currently aggregate all property types together - be it a 1 bedroom unit, a studio apartment, a 5 bedroom home or a 20 hectare lifestyle property - to the Real Estate Institute they are all just a house - that is dumb!

Take a look at the divergent make up of property in Auckland across the major districts as defined by REINZ as seen from the composition of listings on Realestate.co.nz today.

Certainly across Auckland two thirds of properties for sale are houses, but within Auckland city over 1 in 3 of all properties are apartments. One in ten of all properties on the market across the Auckland region are units or townhouses - these certainly have a very different price profile than regular houses or lifestyle properties. In the outer areas of Auckland Lifestyle properties make up more than a quarter of properties. Think on the fact that within Manukau a $4m lifestyle property in Whitford is seen by REINZ as the 'same' as a $219,000 single bedroom unit in Papatoetoe.

All sales records remitted to the data system at REINZ currently have the following fields (some of which are completed by the selling agent - certainly all should be mandatory)

  • Unit Number
  • House Number
  • Road Name
  • Suburb
  • List Price
  • Sale Price
  • List date
  • Agreement date
  • Unconditional date
  • Type - Residential House / Apartment / Home & Income / Unit / Lifestyle
  • Bedrooms
  • Land Area
  • Floor Area
  • Valuation
  • Valuation Year

This is the data set for existing data - upon this set of data, better more accurate sales and sale price analysis could be undertaken to allow economists, property buyers, property sellers, investors, real estate agents and other could make better informed decisions. 

Maybe then we could avoid the statement that an Economist feels that its virtually impossible to know what is going on with property prices.

 

 


Better data could assist our collective understanding of the property market

by Alistair Helm in


A couple of news stories today prompted me to call for the access to better information on buyers in the property market to dispel what amount to pure speculation on matters such as the extent of overseas buyers buying investment properties in NZ.

The first such article in the National Business Review was by Jason Krupp of the New Zealand Initiative titled "Housing needs a flaming brand!" and then Bernard Hickey weighed in on the same topic "An ugly housing vacuum" - both articles decry the lack of hard data. Both good articles, however both bemoan the lack of good data on which to make critical decisions.

This desire to seek hard statistics resonates so well with me and it is something that I have long argued for. However I do not advocate the proposal from Jason that we should let the demands of a political organisation spearhead this information request, nor as Bernard advocates seek the input of the Reserve Bank. No, the request should be made to the organisation best placed to collate such information, yet which seem so oblivious to the value it would generate, I speak of the Real Estate Institute.

The current BNZ / REINZ survey is an embarrassment in my opinion. Whilst well intentioned and clearly a source of some data, it is weak. Look at the facts. The email survey is sent to 10,000 real estate agents and the response varies between 300 and 600 per month - that's barely 5% of the agents. The key question has to be asked why is this and who is responding? - is this survey completed by active successful agents or those simply with time on their hands?

The Real Estate Institute currently collects monthly sales data for every property sold in NZ by a licensed agent who works for a licensee company who is a member of REINZ (estimated to be 95+% of all licensees). Sadly the data set required in this current process is woeful at best, comprising:

  • Property Address
  • Property Type
  • Number of Bedrooms
  • Sale Price
  • Sale date
  • Listed date

What is also appalling in my opinion, is that this data is not aligned to the original listing data which is submitted when the property goes on the market to the property portals, especially Realestate.co.nz in which REINZ holds a 50% stake.

An integration of listing and sales data into a single database would avoid duplication and provide rich data. It has been a discussion point within the industry for many years (over 3 years to my knowledge). Such a database could open up new data sets such as:

1. How long property really takes to sell - the current "days on the market" stat produced by REINZ is actually only  a reflection of how long it took to sell the property by the current selling agent, bearing no relevance to when the property was first marketed which may have involved a number of agents before its eventual sale

2. Asking price to eventual sale price index. All properties require an inouted price range to activate property portals search price function and this drives the asking price data

3. Asking price modifications during the period on the market

4. Property marketing methodology analysis - auction clearance rate / passed-in action to subsequent sale data

5. Buyer interest measured by page views & enquiry emails to sales time and price performance

6. Property marketing to sales performance analysis

7. Inventory data at suburb / school zone level

 

As well as this potentially beneficial data integration the Real Estate could instigate an email survey in a confidential manner (organised by a 3rd party company) based on the vendor's email supplied by the selling agent. In this survey the data that is so urgently required could be sought:

 

1. Profile of buyer - demographic

2. Profile of buyer - 1st home / investment / retirement

3. Reason for purchase

4. Financial arrangements

5. Prior address - indications of migration data

6. NZ national living in NZ or international investor / ex-pat kiwi

In addition to this valuable data, by the use of a confidential 3rd party company, the survey could also evaluate in an objective manner the performance of the agent as is done by some real estate associations in the US, notably the Houston Association of Realtors

By effectively distancing this survey from the selling agent (they would not be the best people to collect data) the data confidentiality could be ensured and the aggregated data anonymised which would be of huge benefit.

In my opinion these incremental data sets would serve to add value to better understand the property market and allow economic issues to be discussed in an objective manner rather than be hijacked by political organisations. Added to which this rich data would be of great value to the Real Estate Institute in building credibility in the industry and the organisation.

 

 


Living with greater transparency - the challenge for real estate

by Alistair Helm in ,


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Two articles this week prompted my thoughts about the challenge that greater transparency plays in our lives and the impact it will have on the real estate market. I have commented in the past as to the use of obfuscation by some commentators from within the real estate industry when talking about the market, a behaviour that I sense will have no part in the future.

The first article that caught my eye was a tweet which came into my stream as a retweet from a person I do not know but the content certainly made me sit up! 

rental Wellington.png

A person using social media to reach out to as wide a community as possible to ask a question - a very relevant question as to the condition of a rental property. A question they could have asked the letting agent or the landlord, however they chose to reach out to an open audience to see if anyone could answer the question. This 'reaching-out' to people's connections whether on Twitter or on Facebook or any other medium is what the internet allows us all to do. Rather than historically relying on controlled channels we can look for trusted connections to help us evaluate products and services.

The lesson for the real estate industry from such examples is be open, be ready to engage and answer all such questions and better still, be proactive and provide as much relevant information as possible. If as the case in this example there really is a water-tightness issue with the property (and I have no idea) then take steps to discuss with the landlord to be ready to answer any such question, after all the agent is just that, the agent, not the owner. 

 

The second article was actually a link I saw to a random listing in the US on Zillow. A house that had been on the market for a couple of months. Now; with well over 2 million homes on the market this house is not remarkable in anyway. What is remarkable, and it is not for the first time that I have seen this, but in the context of this issue of greater transparency this property caught my eye because of the richness of valuable information available on the property that we would never see on a property in NZ.

Let me highlight these insights and in so doing provide an explanation of why I think we are being short-changed in regard to valuable property information, not so much from the real estate industry but from at heart the property data industry.

 

5410 Ocean Mist Loop, Blaine, WA 98230 is For Sale - Zillow.png

1. Sale Price - this property much like most in the US and in fact most countries has an asking price. Not a sticker price, but a price which based on comparable local sales would indicate that it should be worth as judged by the listing agent, thereby providing prospective buyers with a guide. This property may sell for more than the $339,500 if there is sufficient demand just as would be the case for property in Auckland at the moment. To put a price on a property, every property for sale in NZ would not be extra work for real estate agents, it would not diminish their role or devalue the sale price, it would though I think build respect and openness!

2. Last Sale Price - this property sold for $390,000 just over 3 years ago - FACT. A fact that is true of all houses in NZ, yet we are not given open access to this information, it is locked away behind payment walls by government entities (local/ national) - it is public record and should be openly accessible to assist the property process. 

5410 Ocean Mist Loop, Blaine, WA 98230 is For Sale - Zillow-1.png

 

3.  Days on the market - valuable information, thankfully we do have this insight on both Trade Me Property and Realestate.co.nz in the form of a listed date; although somehow this data structure seems more telling.

4. Estimated valuation - in this case the proprietary Zestimate. A complex dynamic algorithm developed by Zillow to place an up- to-date estimate on every property in the US. Now in NZ you can buy such an estimate from QV for $50, but in the US the data is free, dynamic and referenced as to when it was last updated. QV is joint venture between the Government owned entity Quotable Value Ltd and the US company Core Logic. It's NZ public record data being managed through a US technology company's algorithm to be sold back to us at $50 at a time!

It is interesting to see that QV report an accuracy of 10% variance of sale price to estimate 65% of the time and 20% variance of sale price to estimate 93% of the time, Zillow goes further by reporting 5% / 10% and 20% variance by major city with accuracies of up to 73% at 10% variance and 93% for 20%. So the data model of QV is good - we just have to pay the government and the US company for the pleasure.

 

5410 Ocean Mist Loop, Blaine, WA 98230 is For Sale - Zillow-2.png

5. Price History - not only do property buyers in the US have an asking price and a 'last sale' price they also have an incredible insight into the historical price movements of both sale and asking price as cited by this example.  Here we can see the historical transaction record (a bleak picture in this case as the US property market tumbled and continues to struggle). Two public record sale prices together with details of when the property was listed at what price and price changes as well as by which agency.

I can sense a loud cry from the real estate industry about this data, that it should not be exposed as to do so would be to diminish the appeal of the property. However if all property was laid bare with the true facts, buyer could make informed choices. Property transactions would not collapse. Quite possibly we might not have the rampant property speculation and price bubbles built off the back of sketchy information and hyped frenetic auctions. Maybe, just maybe this greater transparency like sunlight could help us all better understand and operate with greater confidence in the property market!

 

 


More insights on the property market and property buying

by Alistair Helm in , ,


In addition to my articles here on Properazzi I am also working with John Bolton at Squirrel, the property and mortgage experts. I am contributing some regular articles on subjects of interest to property buyers and sellers.

I thought I would highlight my most recent articles which I think are of value especially to buyers at this time and state of the property market: 

 

What does a Real Estate Agent actually do?

Love them or hate them real estate agents are as much a part of the real estate market as lawyers, mortgage brokers and open homes!

Each year around 80,000 properties are transacted in this country by licensed real estate agents as compared to around 9,000 properties being sold by their owner without the assistance of an agent.

The word agent is the colloquial term used to describe a group of professionals, legally known as licensed salespeople (as defined under the 2008 Real Estate Agents Act that governs and regulates the industry). What you and I call an agent, are salespeople who are required to work under the control and administration of a qualified licensee.

Read more.... 

 

Accepting the need to compromise is one of the lessons of property buying

As a prospective home buyer you are probably aware that there are three basic criteria that govern your choice of a house. No it is not the time-honoured and often quoted, Location, Location, Location. It is Price, Location and Size. These three criteria are equally as important in driving your buying decision; yet sadly it is often not possible to optimize for all three at the same time. So dealing with this dilemma is one of the keys to smart property buying.

The driver of location; where to live is often the most important decision for buying a property. This often results from the need to live close to work, or more commonly these days as a function of school zoning. We all naturally want to live in a great suburb or town; a safe environment with great amenities and friendly neighbours. Going on at this rate will make you believe that Wisteria Lane might actually exist and those Desperate Housewives may turn out to be your neighbour!

Read more.... 

 

Making sense of property data to help you know when to buy or sell

Lies, damned lies, and statistics" is a phrase describing the persuasive power of numbers, particularly the use of statistics to bolster weak arguments. That is how Wikipedia speaks to statistics and I sense that it is also a perspective that many people take when it comes to property data.

We seem to be constantly being bombarded with the latest set of data for what we are told is the true picture of the property market in New Zealand, however given the multitude of sources and names attributed to these statistics it is often difficult to know what statistics matter and what measures you should use to tell you when it is a good time to buy or sell.

Read more.... 

 


Changes in house insurance - will it change our view of property CV's?

by Alistair Helm in ,


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We still seem to believe that the CV or Capital Value of the property is the benchmark by which we should judge property prices. Such was the focus on the Campbell Live article this week when judging the rights and wrongs of the Transport Agency for selling houses at what some consider unacceptably high prices “as compared to their CV”. Houses which they had purchased to facilitate the process in the construction of the new Western motorway connection in Auckland. My views on this specific matter were perfectly aligned to those expressed and articulated on the blog post by Open2View – enough said.

It does though demonstrate a continued practice by the media fixating on the sale price as compared to CV. Well I sense a coming ‘rude-awakening’ for a lot of people when instead of relying on the computer algorithm of QV to establish a benchmark of ratable value as a notional 'valuation' we instead may well turn to a more logical measure – the cost of rebuilding an existing house.

Now I know that just as a brand new Toyota Corolla costs around $35,000 whereas a 5 year old one costs around $12,000. A new house costs more than an older house due to the current cost of materials and labour being the determinant of the cost of a new house, whereas a ‘second-hand’ house costs what a willing buyer is prepared and a willing seller readily accepts.

But given the changes to the way the insurance industry views property insurance in the post-Christchurch earthquake world, we all will need to look at our property measured against the cost of replacement.

The industry has been undertaking an advertising campaign to highlight just this matter and gain an appreciation by homeowners as to the cost of replacement of a house. Because you cannot simply ignore this issue as it will effect every person that owns a house and has property insurance.

Whereas in the past your insurance cover could be purchased as a replacement cost with no defining financial number – now all such policies need to stipulate the cost of full replacement. That full replacement also has to cover the costs of demolition and clearing the site ready for rebuilding. Your insurance premiums will be assessed on that replacement cost and should the worst event occur of a fire or other disaster the insurance company will only pay out to the maximum of the defined cost of replacement, which if you have under estimated will leave you to foot the bill for the balance to get your house rebuilt.

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Just to demonstrate just how this change will impact insurance and homeowners' appreciation of the value of their home, let me take you through an example of a property which I visited at an open home recently.

The home In the highly popular suburb of Grey Lynn has a Capital Value of $870,000 which is made up of a land value of $590,000 and improvements of $280,000. These improvements are defined as the building and all that exists on the bear land.

I went through the Home Rebuilding Cost Calculator to estimate the total cost of replacing this property. A highly detailed and lengthy exercise which does require a fair degree of appreciation of the details of your home’s construction.

The calculator came back with an estimate of $400,487 which includes GST and also an allowance for professional fees, demolition and removal of debris from the site.

 

Interesting that the CV for this property assessed the land at a value of $590,000 and the building at $280,000 yet the replacement cost of the building is estimated at $400,487. If the value of the land is appropriate (which is more likely to be the case) at $590,000 then the total 'value' of the land and building is very close to $1 million.

You are I am sure, interested to know the market value of the property today based on that well established notion of a "willing buyer and a willing seller". Well the property was sold recently for $1,395,000. This would therefore tells us that the value of land in this area is actually appreciated by 68% since the last assessment was undertaken in 2010/2011 – Auckland, or at least this area of Auckland is experiencing unprecedented demand.

Note:

I was prompted to write this article by the comment sent to me by a retired Quantity Surveyor who had read my article on why we should get rid of CV’s, he rightly asked the question as to whether people had considered what the long term effect will be on property / sales valuations once the insurance industry changes over to declared values for house insurance policies. He stated that as he had his own construction business engaging in construction of architecturally designed houses & spec housing. Many of the houses that he built had construction costs of more than double what the current CV values were & he rightly wondered once owners start realising that replacement costs far exceed the CV's for there property, that they will start to try & negotiate selling prices based on replacement costs.

He reflected that this might well apply more to expensive architecturally designed properties, but in his experience all building costs usually exceeds CV values due too as most property valuations are based on historical values & consequently out of date.

I am grateful for being prompted by this question and would gladly welcome any other such questions for future articles.

 


When is an auction not an auction?

by Alistair Helm in , ,


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The Real Estate Institute of NZ stated in their April property report press release that “Auctions are progressively becoming the favoured sales method in certain centres”. They went on to say that properties sold by auction represented just under 1 in 5 in April. In Auckland which they described as “dominating the auction market” 37% of all sales were by auction.

In Auckland their figures stated that 1,045 properties were sold by auction last month. As we all know Barfoot & Thompson is the largest real estate company in Auckland representing around 40% of the market. As their advertisement in a recent property magazine states they reported 593 successful auctions in April. That would mean that Barfoot & Thompson represented 56% of all Auckland auctions which clearly shows that this is without doubt their favored method of sale.

 

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However if you read into the advert a little deeper, the headline figure seems to be somewhat misleading.

The facts state that only 410 properties sold under the hammer. To this final total of 593 “Successful Auctions” they have added 15 properties sold before the auction; 25 properties sold on the auction day (but not under the hammer) and a further 143 sold after the auction (and not on the day of the auction).

I was interested to see if I could find a definition as to what is an auction in the context of real estate sales. I chose to turn to the government body tasked with regulating and administering the industry – The Real Estate Agents Authority. In their auctions information sheet accessible as a download pdf document on their website they state:

 

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My clear interpretation of this is that a property that is sold in a private agreement between a buyer and a seller after the “passing in” of a property at an auction is not an auction sale, despite the fact that the property was marketed as an auction. The same goes for properties sold before an auction. A successful auction is defined and assumed to be an unconditional sale on the fall of the hammer in an open process.

Therefore rather than the claimed 593 “Successful auctions" by Barfoot & Thompson in April, the reality was that just 410 successful auctions were achieved in the month. It further means that of the 707 completed sales which had been marketed as auctions in the month – 58% were sold successfully at the auction; whereas more than 4 in 10 of the properties marketed as auctions did not sell “under the hammer”.

The fact is that only Barfoot & Thompson publish this degree of insight into their auctions, I congratulate them for their openness. One only wonders as to the number of real estate companies who submitted statistics to the Real Estate Institute stating for auction sales in April making up the total of 1,045; as to how many actually sold under the hammer as a true auction. Maybe, just maybe, the statement made by REINZ should be restated as “Property marketed as auctions  is becoming the favoured marketing strategy in certain centres”.

 


Making sense of the monthly property statistics

by Alistair Helm in


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We are fortunate in NZ to be blessed with a rich and comprehensive database of property statistics. Many countries have to wait many months between data releases, which tend to provide quarterly trends. We have the benefit of insight into the property market with stunning regularity, all crammed into the first 10 days of each month.

However a common complaint is that the data is not consistent and it is presented using different metrics; for example median price, stratified median price, average price, valuation, seasonally adjusted truncated mean asking price, rental rates, to name but a few. So as a smart property buyer or seller it is important to understand what these metric can tell you and what you should pay attention to, to be ahead of the game.

There are 3 sets of data that I consider critical. These are property sales data (the measure of what is happening as a function of buyer activity), property listings data (the measure of what sellers are doing and how they judge the market) and then rental data (the measure of how landlords are pricing their rental properties).

Property Sales Data

This is probably the best-known sector of real estate data with both the Real Estate Institute (REINZ) and QV pitching their data to the market within days of each other. Data that on first impression appears similar, but on further investigation is somewhat different and the difference can be significant.

REINZ provides rich data on property sales, median prices and days-to-sell, across not just the major regions of the country but right down to clusters of suburbs. Sadly the full data set is not accessible online in a machine-readable format, rather it is published as a pdf with prior year and month comparisons.

The data is collated by the reported unconditional sales of properties by licensed real estate agents who are members of REINZ, submission (as I understand it) is not compulsory, but in spite of that it is very comprehensive, and its timeliness provides for the prior month insight within 10 days of the end of the month. The data goes right back to 1993 and using their online tools you can access databases for particular suburb clusters.

REINZ present the majority of pricing information in the form of median price, this is statistically appropriate as it ensures that extremes of sale prices within data sets don’t skew the data. However in preference to the raw median price I tend to focus instead on the Stratified Median price, this data set developed in cooperation with the Reserve Bank is sadly only published for the 3 major cities as well as the national figures. It is a far more accurate indicator of true price movements as it applies modeling to ensure that higher sales volumes in high price suburbs for example are normalized and thereby don’t result in an overall rise in prices.

QV produce a well-recognised set of statistics on the property market based on their rich database covering every house in NZ in their role as the government rating valuations organization. This database is updated on a daily basis by the transactions of settled sales as registered by LINZ. This process captures all property transactions irrespective of whether the transaction was undertaken by a licensed agent or a private sale (estimated at around 10% of all sales).

QV do not report selling prices, rather their business is valuation estimation and it is this index, which is published monthly. Their computational models analyse the actual sales prices for individual properties matched to prior valuations and thereby create an index of house price movements. This provides a good representation of trends of price movements rather than actual figures for property prices regionally or nationally.

One drawback to the QV data is that it uses a broad time period, each report is based on the prior 3 month’s settled transactions. This is further impacted by the fact that long settlement on some properties could mean the property sold unconditionally may not appear as part of the QV dataset for anything from 3 to 5 months. Despite this timing issue the trend indicators of price movements from QV are very useful and accurate.

Property Listings Data

Property listings data provides a vital insight into the supply side of the market and has only become available since the ascendency of the web as the definitive search process for buyers. The monthly data is provided by Realestate.co.nz in their monthly NZ Property Report published within a day or so of the start of every month.

The report details the number of listings coming onto the market in the prior month, the asking price of these listings as an indication of the sellers / sellers’ agent’s expectation, as well as the level of stock of houses on the market at the end of the past month. The report is very detailed in printed form and also provides the ability to download the full data sets with both raw data and seasonally adjusted data.

As the originator of this report during my time at the company, I believe the report  holds a unique insight into the supply side of the market, as a key lead indicator of the market. As an example of this is the fact that the current shortage of listings was flagged as early as April 2011 in the report by which time there was a clear trend as to how this would lead to price pressure in the medium to long term.

One key data set within the report that I think is worth focusing on is the Inventory as a measure of available stock of property on the market. This is presented not in absolute numbers but as a representation of the number of weeks that it would take (based in current rate of sales) in theory, sell all of the houses on the market. Nationally this has fallen from a high of over 52 weeks (a full years supply) to now barely half that at 27 weeks.

I have recently taken these key numbers and produced what I call a Property Dashboard - this simple gauge shows where each of the 19 regions of the country are at, in respect of experiencing a sellers market, a buyers market or a balanced market.

Rental Data

Weekly rental rates are published from the Department of Housing and Buildings (now known as The Ministry of Business, Innovation and Employment)

Tenancy Bond database. This monthly data is published in the NZ Property Investors magazine and provides great insight into the state of the rental market.

The Agency has recently opened up their data sets going back to 1993 by each local authority, so if you are keen to play with spreadsheets to analyse the data this is highly valuable.

Trade Me has also started providing some valuable data on the rental market. It is sadly rather infrequent, being on a quarterly basis and not as detailed as many would like, however I am sure that with the passage of time they will provide richer information, as they hold an incredibly rich data set of listings, rental prices and transaction pace, covering every property type, size and location.

Having begun by saying that we are fortunate in NZ to be blessed with a rich and comprehensive database of property statistics, I would actually conclude by saying that we are actually lacking real in-depth information and statistics. In a recent article I posed the question "Do we really have the property data we need?" I hypothesized as to what type of statistics would be really valuable, for example how would it be if we could for example understand:

  • What is the percentage of residential property buyers that are sold to first-time homebuyers, typically what are they buying, where and for how much; how has this changed over the years?
  • Equally imagine if we could understand how many properties in Auckland are bought as investment properties and how many of these are managed privately as opposed to being managed by a property manager?

Such rich data would provide so much more insight and assist consumers, economists and many other businesses to better plan and offer services.

This data is not beyond the bounds of capability. Real estate agents or the Real Estate Institute could capture all of this data in its capacity as the organization representing the industry and its professional practioneers.

This article is also published in the May edition of the NZ Property Investor magazine


Property data - do we really have what we need?

by Alistair Helm in


Property data.png

The question might be better phrased as do we have what we want or what we need? The fact is we are well served with property data in NZ as compared to some other countries.

We get monthly reports on sales volumes and median prices as well as valuations and listings volumes. Each month the data is published across all media and a regular flow of analysis is applied to give us a sense of what it all means. Economists and commentators (myself included) provide our take on the data and by the 10th day of the month we are back to other property stories until the next month comes around.

Just this week we saw a new quarterly REINZ/Fairfax media report on suburb level property prices and sales - headlined as "property news you can use" . Valuable information, but nothing new. The core data is what the Institute has been collecting and squirreling away for years.

Scanning the wider property media from around the world I am beginning to think we are fooling ourselves; as we are actually only seeing a very thin layer of data. The property market in NZ at residential level is worth $34 billion and supports over 9,000 salespeople who charge out a collective $1+ billion in fees each year. Should we not expect greater insight from the real estate industry?

Let me hypothesize some scenarios of property data that I think would be valuable to all and is not available at this time:

1. What is the percentage of residential property buyers that are sold to first-time homebuyers, typically what are they buying, where and for how much; how has this changed over the years?

2. How many of the properties sold each year are sold to people within a 5km radius of where they currently live and how many are sold to people who move from another part of the country or from overseas; if from overseas, then from which country, are they returning kiwi’s or new immigrants?

3. What is the median price for 3 bedroom homes in a suburb as opposed to a studio apartment in that suburb and how have these prices changed over the years?

4. How many sales in Northland last year were of holiday homes (as second homes) and what was the median price and how does that compare to the past 5 years?

5. How many properties in Auckland are bought as investment properties and how many of these are managed privately as opposed to being managed by a property manager?

6. Over a 3 year period approximately x% of properties are sold to a new owner. What is the true value increase of these properties in total, and also what change in value were the result of improvements or renovation and how much for properties that were not subjected to a renovation?

7. What percentage of property purchases were made without a mortgage and of those purchased with a mortgage what is the current mortgage to equity ratio?

8. What is the median advertising spend by price range of property by region of the country?

Such richer data would provide so much more insight and assist consumers, economists and many other businesses to better plan and offer services around the buying and selling process.

This data outlined above is not beyond the bounds of capability. Such data could be captured by real estate agents or the Real Estate Institute in its capacity as the organization representing the industry and its professional practioneers.

What would be needed would be a more comprehensive data collection system adopted by the industry. A report could be required as a mandatory part of the reporting for every sale completed by a real estate agent. Currently all an agent has to do is identify the address of the property, when it sold and for how much, when they listed the property and how many bedrooms etc. Much of this data is duplicate for the data held by Realestate.co.nz (a subsidiary of REINZ) anyway and therefore should share data

A new more comprehensive reporting system could capture all the necessary data identified above. An online system would intelligently align questions to known data sets regarding the property so for example questions for a property listed on Realestate.co.nz as a lifestyle property would be tailored to that type of property, and would pre-populate with historical sales data, listing information and analysis based on property identification.

In addition the Real Estate Institute in its role of upholding professional standards could implement a consumer survey for all completed sales which could be sent via agents to vendors and could collect information to supplement that collected by agents. It could survey professional standards and seek to provide the industry and the consumer with feedback and insight as to the professional services offered by real estate agents.

I believe the real estate industry needs to be more transparent and accountable for the services it offers and also to be a more valued provider of rich information and trend analysis. The challenge is once again made to the industry at large and the Institute in particular to step up and adopt some of these proposals.