Do tenders distort the property market?

by Alistair Helm in

Tenders_bad_for_buyers.pdf - Dropbox.png

This ‘letter’ to the Dominion Post headlined 'Closed tenders a disaster for buyers' was sighted this week on Twitter. It is, I judge from a member of the public, as I am sure that no real estate agent would make such a statement in the media.

I was taken somewhat aback by the statement within the letter that "tenders inevitably distorts the residential housing market". I disagree with this letter writers opinion, especially when I personally believe that tenders are in fact a much more preferable marketing strategy for a property than the much more favoured Auction.

At this time there are 283 properties for tender on the market nationally as compared to 1,820 for auction. that from among 37,443 properties on the market across the country as marketed on Within the Wellington region (as the home of the Dominion Post and the likely home of the author) the number of tenders is 89 with just 44 auctions. Put in context Tenders represent 4% of all property on the market in Wellington and just 0.7% nationally.

The letter claims that in a tender buyers will “offer as much as they can to ensure they beat everyone else” – well that is also true in auctions. In auctions however the pressure of the event (the theatrical event) adds even more impetus for buyers to act irrationally and bid more to beat everyone else. It goes on to say “the more desperate they are the crazier the price they’ll offer” – well in my view the heat of the auction adds to craziness precisely because the bid is public and the auctioneer constantly reminds bidders that “it's only an extra $1,000” to secure the house of your dreams”.

The letter makes the claim that “a few properties sold by this method in an area will upwardly distort price signals for all other properties in the area” – the fact is any sale that is legal and is between a willing seller and a willing buyer is a signal of the property market, regardless of the marketing process. To believe that tenders (or for that matter auctions) are distorted is naïve.

The statement that the winning tender has “no idea how much more they’ve paid than their nearest rival offered” is true whereas with an auction their is public knowledge, however in the most popular form of property sale being negotiated sale, there is no such public knowledge in the case where there may be multiple eager buyers. Further to this point I would contend that a tender actually does provide the seller with a price truly reflective of the true value that a buyer places on the property, entirely based on their belief of what that house represents to them. Whereas an auction only realizes at best, a thousand dollars more than the loosing bidder was prepared to pay.

The letter states that tenders are a “disaster for buyers”. I find this statement hard to wear. The property process is all about selling properties, as the reality is that buyers have to accept that they can only buy from the selection of property available for sale at that one moment in time, not from a choice of all properties. That being the case, buyers have to accept that the property market is and always will be focused on the sellers. They naturally want to get the best result, the highest price, the fastest sale, the least conditions. Tenders are thereby a great solution. They set a timeline, they allow all potential buyers to show their ‘hand’ when it comes to what they value the house at and to present their best and final offer. It affords them the patient time to consider and reflect on the offer, not be potentially ‘harassed’ and pressured at an auction room.

As a final comment to the writer of this letter I would draw their attention to the Scottish process for selling property. In that market all properties are sold by closed tender and have been for many decades. Properties are advertised (without traditional real estate agents) as being 'for offers over £X,ooo' - that system works very efficiently, I can attest as I have in the past bought and sold property in Scotland.

Watch My Street - Your property information (if you live in Wellington!)

by Alistair Helm in

If you are a Wellington resident or looking to buy property in Wellington then you are in luck – if however you live anywhere else in NZ then I’m sorry but the new property service of Watch My Street is not available to you (at this time).

This new property information service was launched a week or so ago and is apparently garnering a strong level of interest from residents of the capital. Helping people easily access what is basic property information in an open and accessible manner – the local authority rating valuation and other data related to the property.

The website has been built and is operated by the team at 200Square who operate a unique and innovative real estate business that is in their words is “reworking the way houses are sold in New Zealand, using clever technology, a better process and a fixed commission that puts more money in your pocket”

The team have smartly mashed together the data from Wellington City Council, Land Information NZ, combined with property listings from Trade Me Property, school zone details from the Ministry of Education and mapping services Koordinates.

This is exactly the example we need to see where public information collected by local authorities is made accessible by government agencies in a machine-readable format so that smart tech people who understand the needs of consumers can turn into a valuable service for the free – no point in wasting tax payer money getting government agencies trying to do the job, let the public decide how it should be used, after all this is our data collected for us by our government (national or local).

This is all well and good except that the following local governments do not provide such property data in a machine-readable format for free.

Far North District Council

Kaipara District Council

Northland Regional Council

Whangarei District Council

Auckland Council

Hamilton City Council

Hauraki District Council

Matamata-Piako District Council

Otorohanga District Council

Rotorua District Council

South Waikato District Council

Taupo District Council

Thames-Coromandel District Council

Waikato District Council

Waikato Regional Council

Waipa District Council

Waitomo District Council

Bay of Plenty Regional Council

Kawerau District Council

Opotiki District Council

Rotorua District Council

Taupo District Council

Tauranga City Council

Western Bay of Plenty District Council

Whakatane District Council

New Plymouth District Council

South Taranaki District Council

Stratford District Council

Taranaki Regional Council

Gisborne District Council

Central Hawke's Bay District Council

Hastings District Council

Hawke's Bay Regional Council

Napier City Council

Rangitikei District Council

Taupo District Council

Wairoa District Council

Horowhenua District Council

Manawatu District Council

Manawatu-Wanganui Regional Council

Palmerston North City Council

Rangitikei District Council

Ruapehu District Council

Stratford District Council

Tararua District Council

Taupo District Council

Waitomo District Council

Wanganui District Council

Carterton District Council

Hutt City Council

Kapiti Coast District Council

Masterton District Council

Porirua City Council

South Wairarapa District Council

Upper Hutt City Council

Tasman District Council

Nelson City Council

Marlborough District Council

Buller District Council

Grey District Council

West Coast Regional Council

Westland District Council

Ashburton District Council

Canterbury Regional Council

Christchurch City Council

Hurunui District Council

Kaikoura District Council

Mackenzie District Council

Selwyn District Council

Timaru District Council

Waimakariri District Council

Waimate District Council

Waitaki District Council

Chatham Islands Council

Central Otago District Council

Clutha District Council

Dunedin City Council

Otago Regional Council

Queenstown-Lakes District Council

Waitaki District Council

Gore District Council

Invercargill City Council

Southland District Council

Southland Regional Council

So thanks to Wellington City Council for showing NZ local authorities the way to approach this matter. If you feel that your local authority should participate in the same way then I suggest you follow the advice on the Watch My Street site and petition your local council.