Our fixation of property as an investment is not healthy

by Alistair Helm in

The most popular story on the NZ Herald today is the "investor" who is selling his land in South Auckland for over $40m - having bought it in 1993 for $630,000.

By his own admissions he did not buy it as an investment - merely for his turf business.

The story is garnering huge readership and I would assume a lot of people will be associating this to the huge rises in property prices we have seen over the past few years and the extensive media coverage recently. Many may be wishing they had invested in land and equally they may be thinking about the next opportunity to buy land or property. 

It strikes me our fixation on property as the focus of investment is so narrow minded, and as many people too often comment a drain on the economic potential as it locks up investment dollars in unproductive assets.

There are a number of things that frustrate me about the coverage of this story.

The story is headlined as 'Investor sells land worth over $40m' - he states he was not an investor - just a business person making a business decision.

It is a single story of a single person who had $630,000 to spend on their business in 1993 - allowing for inflation that would be equivalent of over $1m today - no small sum. His options were many - he could have invested the money in many ways but he chose to invest it in growing his business. That part of the story seems to be overlooked as the focus is all about the price of land and the great investment return it delivers.

The inference of the story is that $630,000 into $40m is a stellar return - 40 times over 21 years - seems good. But hold on; if that sum had been invested in a safe and secure bank deposit it would be worth $2.3m today. So the $40m sale is actually a 20 times return over the average cost of capital rather than the simple view of a 40 times return that the original calculation shows.

A 20 times return or even a 40 times return is not stellar in the context of business investment. A 100 times return is stellar in business but unheard of in property or land investing. Investing in business is all about early stage investing - believing in the business. 

A great demonstration of the investment potential was coincidentally actually reported in the Herald today but does not capture the headlines. Sadly business stellar performance and investment just never makes the headlines.

Orion Healthcare is preparing for its IPO - launched in 1993 by its founder Ian McCrae the business is a stellar example of kiwi tech capability. It along with the likes of Xero and Vend are trailblazing global software solutions that are the best in the world in their respective marketplace and in the process creating billion dollar companies. Orion is likely to IPO at a valuation of $800m  - not  a bad return on the investment made by its early supporters and founding CEO who holds the majority of shares in the company.

This type of business is what we should see showcased  in the headlines to provide stimulus to the next generation of kiwi kids, entrepreneurs and investors rather than articles about perceived wealth in land. 

One property does not a market make!

by Alistair Helm in , ,

Last week somewhere around 1,400 homes were sold across the whole of New Zealand. In Auckland that number amounted to around 530. The vast majority of those properties would have been sold in a traditional manner with a face to face protracted negotiation between a seller and a single buyer facilitated by an agent eventually leading to a signed unconditional agreement. Most of those properties would have likely been on the market for many weeks or months before the buyer approached the agent and started discussing an offer. None of these properties were of any interest to the media as none of them makes for a headline story.

The single property sale from last week  that did make an interesting story and made the front page from among these 1,400 was the sale at auction of a Grey Lynn villa which sold for $3.28 million and as the NZ Herald rather simply implied "a staggering $1.1m leap since 2012"

The fact is that this property did sell for $2.12 million in April 2012. It was at that time a brand new house - a beautiful reproduction of a Bay Villa - a large house with a pool, but without much garden and no garage. I took the opportunity to view the property at the time and could not fault the craftsmanship and attention to detail. It was located interesting right next-door to a rather shabby rental property.

Just over 2 years later and without any improvements or additions (although with a considerably improved neighbouring property) it sold at auction for $3.28 million.

I did not attend the auction and I would love to hear from anyone who was there. My assumption though is that there was significant competitive bidding that pushed this price to this winning bid.

The fact is as I am sure you all know, is that this property sale is not reflective of the market. There will always be, just as there have always been, 'Outliers' - property sales for which conventional wisdom and financial logic shoot straight out the window.

The sale of this property at this price says nothing about property prices in general and certainly cannot drive any view that this is indicative of prices in Auckland or in Grey Lynn. There is though something that this sale does in my opinion tell us.

It shows us that in Auckland we have a global city, a vibrant dynamic city. A city that is attractive to talent and wealth. A city where those with capital to invest see a bright future. This property sale is a more important pointer to the future economic health and wealth of this country than to any view as to trends in the property market.

This property was bought at a price that I would challenge anyone to try and convince me was not far more than any respect registered valuer would have apportioned to the property. A significant amount over the valuation. That amount is the result of a buyer with the capacity to pay and the willingness to pay "what ever it takes" to secure this property. This is a unique property and the buyer wanted it and was prepared to pay that price to get it to the exclusion of anyone else. At that price level this was not a pre-approved mortgage borrower worried about servicing a large mortgage. I would believe this buyer  has the financial wherewithal to buy this outright with no borrowing. This is the confident decision of a buyer who knows what they want and they can afford to pay that price. This sale is a great indicator for the future of our country and has nothing to do with the property market.

Same data / different story

by Alistair Helm in ,

I remember hearing somewhere that it was bad news that sold newspapers - apparently not so when it comes to property!, or so you would imagine if you read the recent headline from the NZ Herald detailing the September results from Barfoot & Thompson.

The headline: "Auckland house prices rise to a record, as more million dollar homes sell".

Reading the article after I had reviewed the numbers from Barfoot & Thompson's report on their website got me thinking. How different the article and quite possibly the headline might have been if the reporter had reviewed the data rather than just the press release.

Here are the first 2 paragraphs of the article as published:

Auckland house sales rose in September, snapping three previous months of decline, as more houses with a $1 million price tag pushed the average house price to a record, according to Barfoot & Thompson.

The number of sales rose to 959, from 909 in August, although below the 1,105 sold in September last year, Auckland’s biggest realtor said in a statement. The average sales price rose 3.8 percent to a record $738,876, and was 12 percent above last September’s average house price.

No let me using the source data from Barfoot & Thompson September report and provide an alternative 2 paragraphs:

Auckland houses sales continued to fall in September, the 8th consecutive months to see sales fall on a year-on-year comparison. Significantly sales of properties in the $400,000 to $600,000 price range saw falls of 22 percent.

The number of sales at 959 were 13 percent below September last year, Auckland’s largest realtor said in a statement. The median sales price continues to go sideways at $635,000, a trend that has been seen for 4 months now since a peak of $645,000 was reported in May.

The facts are simply the facts. It is just that the NZ Herald decided to copy and paste the press release from Barfoot & Thompson and I chose to spend a bit of time looking at the key facts. 

When it comes to reporting on the property market and presenting facts there are some key points to bear in mind that are critical to helping make a more informed decision as to the article:

1. Sales data is only relevant when compared with prior year. Property sales are seasonal. There is no value in comparing one month with the prior month unless it is seasonally adjusted data. Here is the representation of Auckland sales by Barfoot & Thompson to demonstrate the state of sales:

2. Average sales price is not an accurate and trusted measure in property sales reporting. The range of property for sale especially to the high end of value can have a significant impact on the average price. Let me show you. Lets say that the September 2014 sales had been the same - 959 but instead of 161 sales over $1m there had been just 146, 15 less properties sold over $1m (that 146 sales is how many properties sold for over $1m last September) and then lets say that an extra 15 properties sold at say $700,000. This scenario would have seen an average price of $710,000 - that is $28,000 less than the actual all for the sake of 15 properties! - that is how misleading it is to quote average prices.

3. Median price or better yet the Stratified median price is the most respected and trusted method of tracking house prices. Here is the median price for Auckland properties sold by Barfoot & Thompson measured by median price which shows the levelling off.

4. Real estate companies have a vested interest in presenting favourable articles based on statistics. They want to be seen as selling more than other companies or reporting higher prices or indicating that it is a great time to buy or a great time to sell or that there is a shortage of listings or a massive selection of listings. All of which as you can judge are often conflicting situations, 


As a final thought, researching the quote that 'bad news sells newspapers' I came across this article from The Guardian ( a media source I trust) who in a 2007 article on just this subject made the observation "peoples' interest in news is much more intense when there is a perceived threat to their way of life". It got me thinking - of course rising house prices, especially at the level they have attained in Auckland are what might be thought of as a "perceived threat to their way of life" - so maybe in the case of property news good news is actually bad news and the team at the NZ Herald are the smartest guys in town!

Property headlines continue to promulgate misinformation

by Alistair Helm in

Misinformation shutterstock_182720795.jpg

Too often over the past few months I have taken to Twitter or Facebook to express my frustration at the flippant manner in which newspapers (and as this is Auckland, NZ I can really only reference The New Zealand Herald) have created inflammatory stories related to property with no other intention that to create a eye-catching headline through which to succour eye-balls and through this to satisfy advertisers or to sell newspapers to again satisfy advertisers.

Just today the article reads "Frantic Auckland buyers rushing in to snap up homes"

Here is the conversation I started on Facebook on this topic promoted by the Herald article.

To often the response I generate from the online comments are typified by this one today “Never let the fact get in the way of a good story”.

Well I am not going to apologise for stating that I think, that when it comes to the property market and people’s largest investment and financial liability we should expect to see a more balanced and well researched insight into articles on the state of the property market from what the media likes to refer to as professional journalism, especially at a time when they seek to differentiate themselves from what they like to refer to when it suits them as bloggers.

We don't see eye-catching headlines which “never let the data get in the way of a good headline” when it comes to the NZX analysis of listed companies, yet the total value of NZ property ($725 billion) eclipses the NZX by a factor of 8 times so why should we accept it from articles on the property market?

At the core of the problem in my opinion is the fact that the real estate industry at all levels and all structures can’t seem to help itself in talking-up the market as if the industry itself was the oxygen of the market or that in someway they had to justify the performance of the market.

When was the last time you read an media article either from a real estate company, quoting a real estate company or even from the organisation representing the industry where they accepted that the market was down in sales volumes or price and was likely to stay that way for sometime to come? Too often these articles are full of justification - its because of the election...., there were more holiday this month......, the weather caused..... , a shortage of stock caused…., at this time of year sales always fall.

It is well known that real estate agents fair poorly in any rating of credibility or trust - the most recent poll had agents at 44th place out of 50 professions, rubbing shoulders with journalists (there might be the issue!) car salespeople and sex workers. When might this ever change? 

The reality is it will never change as long as the industry continues to believe that they must coat every piece of data in a very sickly dose of sugar coating. Don’t they realise that the public are more and more able to access insight and knowledge themselves and make objective assessments that leaves the industry looking somewhat like a fraud. As for the media and their complicit support. I have expressed concerns as to the potential for influence by the real estate companies who let’s not forget plough million of dollars into the coffers of media companies (the newspaper companies) every month and who directly or indirectly could believe that they therefore have some right to have their opinions and sugar coated perspective promoted.

Property, rightly or wrongly as we all know is our largest asset class in NZ - a vast number of people judge their wealth and financial stability upon their family house and the small investment portfolio of rental properties they own and manage. Largely as a function of this people still continue to be attracted to this investment strategy to “support retirement” and will unfortunately continue to be influenced by these type of media articles and property reports. Let’s recognise this and see if we cannot seek out some more balance in these articles, that’s all I ask.

Could it be time to celebrate housing unaffordability?

by Alistair Helm in


The latest Demographia International Housing Affordability Survey was published earlier this week and here is the surprise! - nothing has changed in each of the 10 years that this report has been published.

The top cities of the world, be it San Francisco, London, Hong Kong, Sydney, Melbourne or Auckland are assessed by the survey as severely unaffordable. These cities (24 in total from the 85 major markets with population over 1 million) are classed as having a ratio of house price to income of over 5. The past 10 years has not really seen much change. Certainly not in the line-up of the cities judged to be most unaffordable as well as those at the other end of the spectrum, being those cities assessed as being most affordable as the chart below shows.



In my view the judgement of affordability in this case is not actually true to the definition of the word. If these global cities were truly unaffordable then they would suffer a population exodus which would remove demand, free up supply of homes and drive down prices. That has not happened and will not happen anytime soon.

Scanning your eyes down the list of those cities that are least affordable as compared to those most affordable leads in my mind to a conclusion that people actually want to live in those cities that are unaffordable by this measure, and conversely don’t want to live in these cities that are affordable. The case in point in this survey are cities like Pittsburgh, Detroit and others in the US. In those cities properties are cheap due to low demand, whilst wages are around the median for the country overall leading to a low ratio of house price to income. The weak demand is a consequence of a weak economy as these cities fail to attract business and people.

This situation has parallels in NZ. There are many areas of this country where the ratio of house price to income is not 5+ but more like 3 but sadly these are towns that are struggling to maintain industry and jobs and are fighting to stop an exodus of workers.

The reality in my mind is that we cannot through any land policy (which this report’s authors place as the solution) influence what is a global shift of people to major cities. Cities that deliver jobs, facilities, lifestyle and opportunity. These dynamic and successful cities are growing and with growth comes pressure on demand for property and that leads to property inflation.

In my mind rather than bemoan the fact that we have ‘severely unaffordable' housing in Auckland that ranks us in the Top 10 most unaffordable cities in this report we should actually celebrate this fact. We are in the Top 10 because we have a vibrant economy in Auckland, we have a city that is attractive to business and immigrants to develop their lives. How depressing it would be if we were not in the Top 10, if our property prices were affordable. We would likely then be living in a less dynamic city with less economic activity and facilities, forgotten by the global economic tides and left to drift in the South Pacific.

We live in a global economy where mobility is the norm and where cities are the new brands that compete for talent. This new creative talent (have a read of Professor Richard Florida’s book ‘The Rise of the Creative Class’) is what is sought by businesses. This creative class wants to live and work in cities that offer the amenities and lifestyles that Auckland offers. Where this creative class goes, so business and money follow and so begins a virtuous cycle - one we need to be a part of to secure our economic future.

So whilst this may not be of immediate help to people looking to buy their first home, the trickle down benefit of the economic success for Auckland which defines us as severely unaffordable housing will assist the country. It is a case that ultimately equality should not be the end game - rather dynamic economic activity, placing NZ closer to centre of the global economy. 

What were the Top 10 articles of 2013

by Alistair Helm in


I thought I would start 2014 by looking at the 10 topics that most engaged readers in the past 12 months - it was the first full calendar year of Properazzi so in looking back it provides some valuable insight as to what people found engaging and enlightening in the past year.

The most read article was the subject of real estate commissions. The subject is clearly of great interest to property hunters as the key data on how much agents charge is in fact quite hard to find and as a result the search terms is widely used and that has resulted in the majority of the visitors to this article having come from Google.

Next was the highly related article on how much does a real estate earn? which used extensive analysis to identify how much agents actually earn on average across the country by region. Clearly of use to those aspiring new agents as well as to the public in general.

Switching from agents commission and earnings the 3rd most read article was about Auckland house prices and making sense of the data, clearly this hit the right note as an analysis as it hot the right note as Auckland house prices have been the topic of most social gatherings of the past year and making sense of the variety of data is key to being better informed, so I hope this article helped

The fourth most popular article took us right back to the first two by asking "Should real estate agents be paid $1.5m a year in earnings?" - this article certainly caused some heated discussion and debate especially as it was syndicated to other media.

At number 5 is the article I wrote as an opinion piece which was published in the NZ Herald looking at whether we should seriously get rid of CV's - that is the premise that it is misleading to constantly refer to sale prices as benchmarked to the ratings assessment valuation.

The next most read article was the opinion piece I wrote posing the question, are auctions the most favored method of sale or the favourite method of sale by agents. Auctions have been  a consistent theme of mine this past year as the super-heated market especially in Auckland has driven a record level of property marketing by auction as the method of sale.

The 7th most read article was a rather unusual one which I wrote having been alerted to the fact that in the UK the leading grocery store of Tesco were selling garden houses - effectively flat-packed homes from under $20,000 - this at a time when the general discussion in the media revolved around the affordability of home building.

Moving from topics regarding agents and property sales data the 8th most read article would most likely appeal to agents and business owners as I investigated the significant change Trade Me made to their advertising terms for real estate companies and agents - what I judged to be a radical change.

The 9th most read article was about the property market in Wellington, clearly whilst Auckland may garner the lion's share of public comment on house prices, those int he capital are as interested in their property market.

Rounding out the top 10 is one of my favourite articles in which I made the assertion that real estate is massively inefficient. I sought to demonstrate that the processes of real estate had changed little despite the advances of technology leaving opportunities for new initiative - maybe some of which we will see in 2014.

So all in all an interesting Top 10 - a mix of interest as I hope that I can continue to deliver in 2014.



TV3 - The Nation, How to address the Housing Crisis

by Alistair Helm in

I was invited to contribute to the TV3 programme 'The Nation' over the weekend to talk specifically on the impact on the Reserve Bank's LVR changes and the impact this is likely to bring to the housing market.

My contributions were matched by both sides of the political arena with Nick Smith - The Housing Minister and Phil Twyford the Labour Party Housing spokesperson.


I was asked by Rachel Smalley the question as to what would be the one thing that I would do right now, to bring some correction to the market in Auckland?

I highlighted the UK policy of New Buy. This UK government backed initiative seeks to provide a government underwriting of higher loan to value mortgages for the purchase of new homes - allowing people to buy with 5% deposit

This initiative launched earlier this year appeals to me as it provides a means of creating real demand in the housing market for new building, something that is seriously needed if we are going to meet the requirements of the future growth of Auckland. 

A core issue of the current building market as I highlighted in the interview is the fact that we lack scale in the NZ new-build market. We operate new builds as a craft industry, building to bespoke designs and thereby creating no real opportunity for scale. We need to build spec housing to create a supply upon which the demand can be satisfied. A government scheme which only requires an underwriting to cover default liability rather than grants, would allow accredited building companies to make investment decisions to get more houses built.

New built houses complying to the Building Code provide a vastly improved housing stock for the country, insulated, energy efficient and built around amenities that suit the communities that can be created around scale developments rather than piece-meal bespoke homes.

I went on in the interview to also highlight my concerns around the approach we have in this country to residential property investing, how we have too biased an incentive structure towards property investing as compared to other investing options, especially superannuation. I drew reference to the need for 'patient capital' to be invested into residential property to provide more secure rental accommodation of a higher quality and surety. In other countries rental accommodation is more the remit of corporations and institutional investors than "mum & pop" landlords. As an example in the UK again, Legal & General, one of the largest insurance companies with significant assets under management made a strategic move this year to invest in rental properties.

As ever there is never a simple single answer to the housing crisis, however whilst not wishing to believe that answers only lie outside of our borders there are always valuable lessons to be learned from examining overseas markets and initiatives. 

1st Birthday for Properazzi

by Alistair Helm in


Over the weekend this site passed its first milestone - it's 1st birthday. 

On Friday the 14th September last year I launched this website upon the world. At the time in that opening post I stated that I wanted to "fulfil my desire to provide a commentary on the market, some on-going analysis of the market and what I hope will be insightful and challenging opinion on the market".

In the past year I have certainly fulfilled that desire and passion. I have enjoyed the opportunity to write and share what in my opinion have been valuable and insightful articles on the property market and the real estate industry. I have enjoyed being free to state my view and shine a light on what I see as areas that need greater transparency.  

Being someone who loves data and analysis I thought I would share some of the stats of the past year.  

  • 163 articles have been published

  • 35,204 visitors have stopped by to read over 100,000 pages

  • On average they stay for just over 2 minutes and read 2.9 pages per visit

  • 83% of all traffic is from New Zealand with just under 5% from Australia

  • 38% of the traffic comes from Google as organic search traffic, just over 25% come direct; with Twitter accounting for 1 in 10 of all visitors

  • The split between people reading opinion pieces and insights is pretty even. The Property Dashboard is the most viewed single page

  • The most viewed article is the one I wrote on commissions it has been viewed over 2,500 times

  • The most valued referral site outside of Google and Twitter is the NZ Herald which has shared 2,200 visitors with me - a big thanks to them

  • I have not spend any money advertising the site over the past year - thanks to SquareSpace the site has cost me exactly $317 to set up and run over the past year

Property Market interview with NZ Herald - September

by Alistair Helm in

The beginning of each month spawns a whole new set of property data. The NZ Herald has invited me into their studios to chat through the key factors affecting the property market at this time. Here are the key topics discussed with Chris Daniels, the online editor.

1.         Latest property price data from Barfoot &Thompson the largest regional real estate company showed average prices easing over the past couple of months – indication of a continuing trend of easing or a restbite before a resurgence?

2.         The Reserve Bank LVR policy, what impact this will have on first time buyers, will its effect be on Auckland where the concern is or could the effect be felt greater outside of Auckland?

3.         The seasonal effect, coming into the Spring period when people traditionally think about moving – what impact will this have this year given the strength of the property market through the winter period?

4.         Auctions – the speculation around the continuing focus on Auctions as the preferred method of sale and the facts around some real estate companies offering incentives to agents when they succeed in securing a listing as an auction sale

The video can be viewed below or on the NZ Herald website


Property Market Update Video - August

by Alistair Helm in

I was today invited by the team at Interest.co.nz to participate in what they describe as a double-shot interview with David Hargreaves.  As is expected the community that follow Interest.co.nz are posting their comments to this video - worth checking out.

The topics we discussed were: 

  • The Reserve Bank's move to implement the LVR restriction

  • The state of the property market

  • The real estate industry's continual promotion of auctions as the method of sale and how this potentially might be undermining their inherent value proposition over private sales 

These are coincidentally topics I have covered in previous articles, but great to be able to discuss these issues with David face to face. 

Unintended consequences of macro-prudential economic policy

by Alistair Helm in ,

Is the policy from the Reserve Bank an accelerant to an already volatile property market?

Is the policy from the Reserve Bank an accelerant to an already volatile property market?

It may be too early to tell, but I have a deep concern that the Reserve Bank may have unintentionally applied a volatile accelerant upon the property market just when what they wanted to do was quell the flames of a heated market.

Property sales when measured on an annualized basis are this month edging closer to 80,000. The rise in sales has been steady and progressive from the low in year to April 2011 when sales bottomed out at just below 55,000. This is a far cry from the heady days of 2007 when the market was overheated at well over 100,000 sales.

NZ Property sales MAT.png

What is more interesting is that the rate of growth in sales is slowing and has been for 9 months, slipping from 21% year on year growth to 14% year on year growth in the 12 months to July.


NZ Property sales - rate of growth slowing.png

The fact is that price follows sales in property market cycles and as sales slow and inventory builds which we certainly witnessed in the July data from the NZ Property Report so prices will ease.

So just as we start to see some meaningful easing in the market the Reserve Banks screams “Restrictions from the 1st October” and all those in the property market rush to the bank to secure a mortgage based on their current deposit of less than 20%.

Armed with this pre-approved mortgage willingly offered by the friendly banks who are only too happy to lend before the deadline these eager property buyers will be pouncing on almost any property they can on the basis that at least they can get a foothold on the property market.

All of this is fine if it ends up that these properties meet the needs of the buyer, however the fact an added surge in demand placed upon a still listings-short property market mixed with an exuberant real estate industry hell bent on auctioning anything that looks like a house with a 2 week marketing period is very likely to lead to buyers panicking. That panic could well lead to lapse due diligence, rash purchases of property ill-suited to buyers true needs and over-commitment of mortgage debt.

I hope this is not the case. I am not in the situation of being such a buyer, however when reading this excellent heartfelt opinion piece by Nadine Chalmers-Ross the host of TVNZ Business News, I was struck by the true feelings and anxiety of those who do feel disadvantaged by this new policy and who may be rushing as you read this to the bank to secure what might seem like a last desperate chance to grab a hand-hold on the property ladder. I just hope that the ladder is not engulfed in the flames fuelled by this latest move by the Reserve Bank, it would be a sad irony.

Are policies directed at the property market too little, too late?

by Alistair Helm in

Framing structure #2_SCG3582.jpg.png

The message from local and central government for the majority of this year has been that we face a critical housing shortage. Certainly it is more acute in Auckland but that fact is not surprising given the expected rise in the population to c. 2.5m in the next 30 years.

The Reserve Bank has made it clear that it is going to implement policies to take some steam out of the property market that will require banks to restrict lending for loans of over 80% loan to valuation ratio. Potentially reducing these high LVR loans from the current level of 25% of all new loans to below 10%, with the consequential effect of cutting off supply of funding for first homebuyers especially.

The political parties have rallied to the call of seeking to assist these first homebuyers. Labour’s view is that its all the fault of overseas speculators and will outlaw overseas based buyers. National has announced the raising of the dual thresholds of income and purchase price of homes eligible for the government deposit subsidy scheme through Kiwisaver.

In my view neither really are significant or well directed enough to address the fundamental issue. We have a shortage of housing – this matched to increasing demand fueled by record low interest rates is pushing up prices. Prices are rising at a rate that sucks in speculators – this virtual circle is dangerous and is the heart of a property bubble. To this is potentially being added the dangerous risks associated with alternative lending sources which will be keenly sought out by buyers who cannot meet the 80% loan / 20% equity criteria, likely to be set by banks. Be wary because this property bubble is going to pop.

How can this situation be averted? In someway I don’t think it can. Property cycles happen and keep happening. They build slowly, they gain visibility and media coverage, they explore and they then implode. Doing something today is too late in my view we have too much fuel being poured on the fire. My only hope is that we fizzle rather than pop!

So what could have been done? I think part of the solution could have been addressing all three issued cited above – build more homes, support first time buyers and reduce risk in the property market. To a solution, have a look at the UK government scheme – New Buy.


Put together a few years ago when the property market and the economy was on its knees the plan was to encourage group home builders to add new stock of home to by; encourage home buyers to buy new homes, and  thereby stimulate the economy and through government support underwrite the risk component of loans to make buying new homes attractive through a much lower deposit requirement.

New homes have additional benefits they are more energy efficient, they can be built to meet the growing intensification requirements of our largest city, and they add supply at the bottom of the market.

This last point is key because the vast majority of new homes built, particularly of the past 5 years has been tailored designed homes built for owners with a median size of at least 220m2 – 4 bedroom on a 500+ m2 section. We need more homes (apartments, townhouses, multidwelling units) – this is how younger generations want to live and can afford to live.

The government could have taken parts of the UK scheme. Created a loan guarantee for new mortgages on new build properties with a minimum 5% deposit. The government could then have incentive building companies to build homes faster and more affordable by fast tracking consents and discounting compliance costs based on property construction type. They could have partnered with group homebuilders to offer these New Build home loans. They could have even required citizenship or residency requirements to access this component. The key thing would have seen a more holistic integrated programme that would have seen investment funds flow to building companies to move ahead and create supply ahead of demand, create modular construction techniques with scale advantages and move our building industry from being a craft built cottage industry into a scalable industry.

Now the fact is the UK scheme is attracting a large amount of negative press as it is seen as a accelerant of property inflation however there is no doubt based on the reports by group builders that they are seeing big increase in demands for new homes – that means they are building more, that increases supply and that will in time affect underlying demand which can be the most effective tool to take the air out of the property bubble.


Video interview with NZ Herald

by Alistair Helm in

I was invited to an interview with Chris Daniels the Online editor of the NZ Herald to talk about the property market. In the space of 14 minutes I managed to share my thoughts, opinions and insights into the property market ably guided by question from Chris.

These are the 7 questions - for the answers you'll need to watch the video!  

  1. There’s a lot of talk of a property boom underway again – what are your thoughts – are we on the cusp of another irrational boom in NZ real estate prices – and how can we tell – are the monthly stats we get good enough to see when things are getting out of hand?

  2. You’ve been pretty critical of the use of CV – capital valuation in real estate ads – ie: sold for $100,000 above CV etc… what’s your problem with this?

  3. Is it possible to truly judge the impact of foreign – non resident buyers on the New Zealand real estate market and prices. What do you think of the Labour policy of banning the practice?

  4. You’ve talked recently about vendors being pushed into auctions with only very short listing times? What’s going on here?

  5. The Reserve Bank is set to announce restrictions on low equity mortgage lending soon – what sort of impact do you think this will have on the NZ property market? Would something like this really take the steam out of any bubble?  

  6. The crash really gutted the real estate industry with many thousands of real estate agents leaving the industry altogether  - are you seeing any signs of new people coming into the business? Are there enough people to sell all these houses?

  7. Prices seem to be going up – but we hear of agents constantly needing new listings –are people actually selling now? Is there still a real shortage of listings and what sort of impact does this have on prices and the sales  process?  


Ask me Anything?

by Alistair Helm in

I was today invited to participate in the NBR's "ask me anything" online chat session. An hour long chance to respond to readers questions on 'anything'!

It felt a bit like a mix between a school exam and that game where heads keep popping up as you bash them down. I think I got through around 20 questions in my allotted hour. The questions and my answers are hosted here on the NBR site. I enjoyed the experience and felt the questions were a rich variety and for that my thanks go to those who posed those questions. Also my thanks to Chris Keall of the NBR for inviting me to be one of the participants.

If there are any questions that you have a burning need to ask me then please feel free to post a comment on this article at the bottom or send me a note via the contact form.

Should we implement restrictions on overseas buying of NZ property?

by Alistair Helm in


There is certainly a lot of discussion on this topic across all media and it has certainly triggered extensive discussions online.

As ever I am keen to engage in the debate as it is important to the real estate industry, the property market and the economy at large.

There are as ever facts that need to be made clear and stated before debating the various sides of the argument.

New Zealand has a very relaxed, and I would like to say open attitude to property purchase. We would certainly be one of the few countries in the world not to impose a stamp duty in the form of a tax on property purchase, make no capital gains taxation on property sales, have no restriction on foreign ownership outside of the rules of the Overseas Investment Office. At the same time as this open regime to property asset purchase and disposal we offer interest deduction for property purchased for commercial purposes.

As ever we pride ourselves as a nation for having such an open and simple approach to doing business which includes trading, owning and funding property – low in bureaucracy and a positive, encouraging attitude to investment and savings in the form of property as an asset class. This very level playing field is in contrast to our neighbours across the region which impose restrictions and levy taxes on purchase and sale.

With this as a backdrop you have to ask yourself; is it any wonder that people want to invest in property in NZ?

On the one hand we should embrace this demand to buy NZ property. Property cannot be removed, disassembled and shipped overseas. People buying property in NZ are part of a positive decision to embrace NZ with the ensuing economic benefit as new residents or investors. Likely bringing fresh capital into the country rather than relying on domestic banks to fund their purchase based on overseas borrowing.

Our open attitude to property is a mirror of our wider economic presentation to the world – a trusted people with a world view, eager to contribute and trade with overseas partners, welcoming and inclusive, a diverse and highly developed nation.

This is the bright positive side to this growing demand from overseas and I for one embrace it; as to oppose it, would only put in place barriers that could discourage the very people we need to grow and develop our economy. However there are risks and I am not naïve to these.

The biggest risk and one we cannot ignore is scale. We are a minnow in the  world fish pond. A population of 4.4 million with around 1.8 million houses privately owned. We add or have been adding an insufficient c. 18,000 new homes per year. Compare that to China – China builds that number of homes every day. Yes, every day around 19,000 homes are built in China – 365 days a year adding around 7 million homes a year. China has recently imposed restrictions on purchasing second homes as they feared speculative investment would create a property bubble – something their economy could clearly do without, for the old adage of the US sneezing and the rest of the world catching a cold has been fair and squarely been transferred to China.

Now we are not likely to see hundreds of thousands of Chinese buying property this year (I choose to reference China, but there are many other large countries that could be interested in NZ property). The reality is that for NZ property to be of interest, buyers have to see value and benefit. There are many other investment options for property purchase around the world, let alone other financial assets. There are many much cheaper places to buy – look at the prices in US for example and other parts of Europe. Buy a property in Spain at the moment and you get legal residency thrown in!

As with any investment decision there are many factors to consider not least of which is supply and demand. At the moment the supply side in this country is very much constrained and this can, and does become a disincentive, as buyers get frustrated with lack of choice and fear of overpaying. Markets have a very effective habit of self corrected – more so for markets that are open and unencumbered with legal conditions and fiscals penalties.

I final note to bear in mind, is that this question of foreign buyers is not new. Here in NZ we have had foreign buyers for many decades, we saw the same questions raised a decade or more ago when overseas student number growth was exponential, we saw it in the 60’s and 70’s and we saw the post 9/11 exodus from the US and UK. We are a country built on immigration and we will continue to be if we are to remain an open and growing economy.

I believe we should not impose restrictions on foreign ownership. I believe there are long term benefits of foreign investment to our country in the form of property and the people that come along with property. I dispute the view that overseas buyer will leave property vacant - why would they, they are smart enough to see multiple benefits of ownership of a NZ asset including living here and enjoying our countries multitude of opportunities.

Are there really more overseas buyers snapping up NZ properties

by Alistair Helm in

Agent with phone iStock_000006146809Small.jpg.png

Today has seen a lot of discussion on this topic following the publication of the monthly Tony Alexander / BNZ Residential Market Survey.

The survey states that "The evidence (from the survey) does not support the anecdotes that Chinese buyers are snapping up properties".

The data says that 9% of all sales were to people offshore, with 40% of these buyers indicating that they intended to shift to NZ, by implication indicating that 60% of the buyers were buying and would not be moving to NZ to live in the property. In Auckland the figures were higher at 11% of sales to foreigners and 42% planning to move to NZ.

I have a problem with this data and the survey on a number of counts.

Firstly the methodology. The results come from an email survey of real estate agents. The survey is sent out by REINZ to its database of agents. There are c. 10,000 agents and for this month 355 agents responded - that means 96.5% of all agents did not respond. The response rate was well down on the January survey when over 500 responded.

If the data is to be believed 9% of all sales in NZ being made to foreigners that would mean that in a year over 6,500 properties would be sold to foreigners - that would be over $3 billion of sales largely supported by foreign funds - I don't think so. I think if we started to see 1 in 10 of all properties owned by foreigners we would really notice this.

The problem is that the survey has a natural bias. Real estate agents are very focused people, they are self employed and if they don't work they don't earn. If they are successful it is because they focus on their market, their customer base and are really not too worried about the big picture and the world of surveys and data analysis. To validate this just look at the volatility of the other survey questions. I fear that those that respond are either agents with time on their hands or branch managers who poll the views of the sales team and not in first hand contact with buyers.

The other issue I have from the survey is the view that 60% of these overseas buyers are not planning to move to NZ. The survey asked the agents to answer Yes / No / Don't know to the question: Did the overseas buyer intent to move to NZ? The judgement was made that the 'don't know's' were classified as NO and that is why we get the 60% - the more likely fact is the agent did not ask the buyer at the time and therefore the 'don't know's' cannot be inferred as No.

So I think the fact is, little can be drawn from this survey either way. It is however likely that we are seeing more foreign buyers, and we will see more in the future - why? Well NZ is attractive to overseas property investment - no GST, no stamp duty, accessible immigration, trustworthy society, good education, strong legal titles, great environment,  safe and friendly - who would not want to invest here?

I was interviewed on TV One Breakfast on this subject, the video is accessible clicking below:

Finance Weekly interview - Jan 2013

by Alistair Helm in

I was asked recently to share my thoughts on the housing crisis facing this country, especially in Auckland and Christchurch. This interview was undertaken by the Asian TV9 channel with the interviewer Brenda Lee.

The interview is around 25 minutes long and covers my views regarding the property market in the context of the impending housing crisis facing this country and the various implications that will impact buyers, renters and investors alike.

Housing affordability involves a multiplicity of issues

by Alistair Helm in


The government have now added their “two pennies-worth” to the question of affordable housing and the Auckland housing crisis, after the Productivity Commission report from earlier this year. The critics clearly feel that the government’s response is at best another example of “kicking the can down the road”, rather than grappling with what amounts to a massive strategic issue for this country.

There are a multipilicty of issue around affordable housing and the housing crisis facing Auckland primarily. The issue of affordability is not solely about cheaper land to build cheaper homes, it is equally about improving the income of the working population so the wealth of the country improves. This in a way speaks to the very foundation of this issue – our future as a country.

Put simply we as a country risk irrelevance on the global stage if we cannot grow. Grow our wealth, grow our people, grow our economy. To do this we have to attract and retain the best and the brightest talent to make NZ a home from which they can engage with the world. To achieve this we have to build the infrastructure – that is all about housing as primary infrastructure (not just roads, utilities, amenities) all else follows where people live or want to live.

The land issue

Yes we need more land – Auckland has to build 400,000 new dwellings in 30 years to meet the expected growth in population. There is a spoiler alert here which we should not ignore – if we don’t build what people want in terms of housing and enough of it at the right price, and then this incremental population may not eventuate in Auckland. This natural increase in population coupled with inbound growth may end up being dissipated around the country and thereby alleviate some of the problem and as consequence we may actually not need 400,000 new dwellings!

The current Auckland plan calls for 300,000 of the 400,000 new dwellings to be built within the current boundary of the city. If built at the density of terrace houses / low rise developments (25 dwellings per hectare) this would require 12,000 hectares of land – that is 120 square kilometers. The current land area of Auckland is 559 square kilometers, hopefully we can all now see the issue. If we tried to build single family homes instead to meet this need for an incremental 300,000 dwellings we would need 250 square kilometers (12 dwellings per hectare) – that’s close on half of Auckland land area! Impossible.

We have to adopt and embrace urban quality intensification. We have to grow up and realize that Auckland is not just a bigger version of Palmerston North. It is a city. It wants to be, and we want it to be a globally competitive world city, for that it has to stop thinking about single family homes. It has to remove the phobia of height. It has to build quality new developments of medium intensity – that means 3 to 5 levels. Think what defines other world cities, it is density, not in one area, but in many areas. Auckland sprawls and adding to the sprawl by opening up greenfield developments to single family homes will not do anything to sort out the issue – it is more than likely to have catastrophic effects.

Its not all about ownership

The other issue to address is home ownership – the fact is current ownership is around 65% - city dwellers of the future are probably less likely to be owners. For many reasons not least of which is costs, mobility, and convenience. It could be the case that in the future over half of all the new Aucklanders we need to house may be tenants, may actually want to be tenants – they may actually see renting as a viable long term solution – why not? when so many other cities have abundant tenanted properties.

This is where the issue of the housing crisis lurches to a whole new area that I think needs examining – our current attitude and incentives to rental property.

More than two thirds of our rental housing stock is owned privately and managed privately, typically comprising an investment portfolio that is judged to be the personal nest-egg for a large number of kiwis. I judge that this is actually a root cause of the housing issue. This form of investment has for too long been disproportionately icentivised. However this is not a viable model to deliver 200,000 rental properties in the future. We need scale and we need patient investment capital.

Imagine if you will a development of new apartments or low rise town houses as part of the Auckland of the future. All owned and managed by an investment fund (not a finance company, but superannuation investment company focused on long term value). This development was built for and designed for the long term – 50+ years, it is environmentally and economically efficient. It was built leveraging scale, using modular design and built with negotiated contracts of materials and labour that could never be achieved by individual builders.

The properties are rented, not with a 90 day notice period, but tenants are open to have longer tenancy right – 1 year, 3 year, 5 years. The key here is the tenant has the right to occupy and the right to vacate. The property is maintained and rated to recognise the use of services and required infrastructure. All parties are catered for – the investment owner has a long term surety of the building and the value of long term tenants, they built at a cost that is lower per dwelling and per m2 than traditional buildings by leveraging scale. They think to the future to lower operating costs by investing up-front in design specifications.

So does this cut out the private investor? – no, investors can buy shares in this investment company as part of a balanced portfolio. Certainly they can continue to gear their investment, not at the ridiculous levels of 5 to 95 as has been the case with residential property investment in the past, but at more appropriate levels that demonstrate better financial prudence. This will allow property to be better judged as an asset class not the only asset class.

I think our approach to rental property is actually a key component of our approach to building and housing and a core part of the future strategy for our bigger city – our global city of Auckland.

Auckland housing - a crisis in the making

by Alistair Helm in


This was the quotable opening comment from Doug McKay, CEO of Auckland Council speaking yesterday at the NZ Property Council conference on Residential Development for Auckland.

Naturally the private sector for which the Property Council advocates and represents judged somewhat more critically, that Auckland housing is already in a crisis. A little bit of tension between private sector and public sector is nothing new and hardly unexpected. However having said that, the conference did demonstrate a fair degree of collaboration and respect for each other’s role in delivering the future vision for Auckland.

I was invited to attend the conference as a guest of the Property Council and as someone who would judge themselves as not much more informed that the average Aucklander, I came away from the conference with a mix of feelings.

Auckland has to change, it has to grow, it has to build and it has to get going fast!. The question is – is the progress fast enough? as one speaker commented in a some-what off-the-cuff remark “or central government may take charge to ensure the development gets done, as is happening in Christchurch” – this was taken as a sober consideration, with much substantive foundation support for this view from many attendees.

Anyway lets dissect this Auckland Housing Crisis. The numbers are a great way to start.

Auckland City’s Plan sets out the 30 year horizon, a timescale within which Auckland is expected to grow from the current 1,500,000 population to 2,500,000. That extra million people will require an extra 400,000 homes to be built. Roughly 300,000 of which will have to be built within the existing boundaries of what they now call the RUB (Rural Urban Boundary) – the remaining 100,000 will be built in what is currently greenfield areas, specifically to the South around Pukekohe, the West out to Whenuapai and Kumeu and to the North up towards Warkworth.

This scale of development is daunting, 13,000 dwellings a year for 30 years,  match that to current run rate of the consents of the past 5 years at around 4,500 a year, and you have some perspective on the crisis (looming or real) – oh and by the way the clock has started!

The good news or at least the motivational incentive to get going, is the economic value that this will contribute to the local and national economy – as estimated by Martin Udale of Essentia Consulting a direct construction benefit of at least $150 billion with a 3+ times multiplier adding up to a total of $500 - $600 billion.

These numbers are all great, but the big question which needs to be grappled with and was to some extent in the ensuing sessions, was what type of building, where and at what cost?

The valuable data presented by Alan McMahon of Colliers pointed to the trend of the likely owners / tenants of these new dwellings of the next decades. They will be 30somethings who want convenience. Convenience in location, lifestyle and maintenance – they have no aspiration for cutting grass or general DIY. They do want quality and private space. They do want more than a shoe box sized apartment but they do not want the current serviced supply of 4+bedrooms homes of 218+ m2 at a price point of c. $1m which according to Todd Properties is what has been selling-a-pace at Stonefields over the past year.

This trend to intensification of future dwellings will reflect the cultural change, which will see Auckland become a minority urban area for European origin kiwis within the next 5 years.

To find the space to build these incremental 300,000 dwellings will require demolition of existing housing stock to allow density levels of the current 15 dwellings to the hectare to rise to over 25 per hectare and upwards of 50 – 100 a hectare in the city centers with high rise apartments. The question that is then posed is how will this demolition and rebuilding be managed to maintain cultural heritage and also to ensure appropriate urban design to ensure there is cohesion of amenities and communities so that we don’t end up with bland enclaves of dormitory housing?

The other critical aspect of the crisis and one that continues to receive significant press is the question of affordability. Reduced dwelling size and intensification will go someway to reduce overall cost, but the constant cries over development contribution as opposed to apportioned future general rates for these new developments did not seem to have found any favour with the public sector who clearly feel that with the capital costs of maintaining and upgrading existing infrastructure the added capital burden of shouldering the development costs for new dwellings is something better borne by developers (or as was rightly pointed out – property buyers).

Given the scale of this massive challenge and given the focus that it is receiving matched to the fact that this was the first full day conference on residential development held by the Property Council in Auckland, there is comfort to be gained by witnessing the participation of the major development companies who are members of the Council. Their strong balance sheets, long term perspective and collective vision for a quality solution in partnership with the Council could just have us achieve this vision. There is a clear view that with the outlook for commercial property not as rosy then their collective focus to residential could address the issue and match their business cycle need.

As was stated early on in the day the watch word for the future of Auckland in the context of residential development is “Quality intensification” – however you define it. My hope is that is delivers vibrant communities, served by robust infrastructure, that attracts and retains the best and most creative talent to make this city one of the most livable in the world.

Surge in forced sales of property is not as alarming as reported

by Alistair Helm in


The latest data released by Terralink International shows that the hangover of the GFC continues to impact the property market in the form of mortgagee sales.

TTheir report paints a very dark and ‘bear-like’ perspective with the commentary of Mike Donald (MD of Terralink) stating that “there’s no sign of economic recovery for ordinary New Zealanders”. Certainly the data shows 605 mortgagee sales in the second quarter of 2012 up on the first quarter and nearly identical to the second quarter result for 2011.

As I previously reported on Unconditional at the time of the last set of quarterly data on mortgagee sales, the interpretation of the data of mortgagee sales and listings, whilst both valid measures can be seen at the same time to tell a contrarian view.

The tracking of mortgagee listings as published on Interest.co.nz in one of their excellent interactive charts (shown below) clearly shows that active listings have fallen a long way since the peak of the financial crisis.

Now there is no doubt as was reinforced by Helen O’Sullivan CEO of the Real Estate Institute, commenting in the NZ Herald article, that part of the reason for sales remaining active whilst listings are falling is a function of the more active property market which is allowing banks to more confidently offload liability assets in the form of mortgagee properties.

However I think the Terralink data and commentary should be examined more closely. The headline in the Herald read “Mortgagee sales near 2009 levels”. Well the chart below which tracks the sales data for each quarter since 2008 clearly shows that despite the first quarter of 2012 being a very active time for the sale of mortgagee property the increase between Q1 and Q2 of this year bears no relations to the trend witnessed in 2009. It is far more likely that 2012 will end up looking more like 2011 than 2009.

The other comment I found interesting in the Terralink report was the statement that “There’s no good news here for so called ‘mum and dad’ property owners.  With properties that are likely to be family homes making up almost a quarter of sales, there’s no sign of economic recovery for ordinary New Zealanders

That statement and situation is actually nothing like as grim as the statement that followed the release of mortgagee sales data for June 2009 which stated that when it came to "mum and dad" type homes. "In June, that proportion doubled jumping to 39 percent of all forced sales”. I would judge 25% of the 2012 Q2 data is a lot less than 39% of the same period in 2009!

Whilst none of this is light reading for anyone burdened by such debt; the fact is come recessions or boom times people suffer from overleverage either on investment property or the family home. They may unwittingly become the victim of external factors – all such circumstances contribute to the background fact that mortgagee sales are not exclusively the domain of a recession; they are part of modern life just as are bankruptcy and other outcomes of capitalism at work.