Property musings on Facebook - 7 November

by Alistair Helm in


Here are the articles posted on Facebook over the past week - short, spontaneous insights and observations which I felt needed immediate discussion and didn't warrant long-form articles written.

Better selection of property for sale than a year ago

 

 


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.

 

 


You are a savvy buyer!

by Alistair Helm in


Newspaper reading vintage.jpg

I should qualify that statement; you are a far savvier buyer than your parents. The fact is buyers and sellers in today’s property world are smart, well informed and able to make informed decisions far in excess of what previous generations could hope to achieve.

This is such an important fact to consider when you first start thinking about stepping onto the property ladder or taking a step up. Consider for a moment the things we take for granted today in the property buying and selling process that would have been merely a dream a couple of decades ago.

Twenty years ago say, there were only 2 ways to find out what properties were available to purchase. You would go visit the local real estate office. Not just one thiugh; you would have to visit them all to ask what properties they had for sale. Alternatively you would wait until the weekend to check out what properties were advertised in the local paper or property magazine. No such thing as email alerts or live updates of new listings then. You had to do the hard work, a regular visit to real estate offices to collect printed sheets of property for sale, if you were lucky the local property magazine was dropped off at your house.

Details on an individual property was sketchy to say the least. In the paper you might get a single photo – more often than not, a black and white photo. It was not uncommon to have just a few lines of description as properties were listed by suburb under general classifieds – pages of them! To get so see more of a property you had to visit the home. Yes open homes were, as they are today a valuable means of assessing a property. Alternatively you had to succumb to the company of your friendly local real estate agent who would drive you around a number of properties encouraging you to see this one… or this one… and maybe you should consider this one!

As for background information on recent sales prices or the current rating assessment from the local council, that data was safely locked up behind government departments with stern looking counter staff who reacted to official compliance request at glacial pace as box files were referenced to provide answers.

So every time you flick up a browser window, receive an email alert, click a smartphone app or download a property file give a moment’s thought to how lucky you are to have so much insight and information to hand to make you such a savvy buyer!