Trade Me appoints new Head of Property

Trade Me today announced the appointment of Nigel Jeffries as head of the property division. This appointment comes after the decision by the previous head Brendon Skipper to take up the position of General Manager at rival property portal Realestate.co.nz.

Nigel Jeffries was previously Chief Executive of Property IQ, a role he has held for over 5 years. Prior to that he has been involved in the intersecting industries of technology and property data for more than 15 years.

This appointment may well come as somewhat of a surprise to many in the real estate industry as Nigel comes to the role from a very different level from that of Brendon.

I would firstly dispel any thoughts that this appointment portends to a move by Trade Me to migrate into the property data business. That is far from their desired strategy.

In my opinion this appointment is a very clear indication that Trade Me are serious about making the property division a powerhouse for the future. Clearly the executive team at Trade Me have an eye to the significant international property portals in the UK, US and Australia as benchmarks of the scale of the business opportunity.

The role they have been seeking to fill is not that of an account manager or purely a General Manager; what they have been seeking is an executive who can lead and develop the business to become many times its current size. The objective is clearly to become the most effective means of supporting the real estate industry in its requirement for marketing. Additionally a strategic partner in the process of the industry's turnaround from its reliance on print media as its platform for brand and client property based marketing to online and specifically the Trade Me platform. Whilst at the same time offering private sellers a platform that levels the playing field for the marketing of property. 

The potential for Trade Me Property is to become as effective a property portal as arguably the most successful operator in the world - the REA Group in Australia. To do so will be a challenge to Trade Me as a company.  REA operates as a dedicated, specialist property portal covering residential and commercial property. It thinks and acts entirely with the licensed industry in its focus. For Trade Me Property it will in my opinion want to continue to act within the brand experience that is Trade Me - that uniquely kiwi experience that ensures the action of auctioning a power tool, a car or advertising a house is a seamless experience to its vast audience; mucking around with this interface to suits the unique needs of property buyers will be a strategic challenge that the new head of property will have to bring to the executive table and fight for with conviction and intellect. Nigel is the best man for this job.

As to the reaction of the real estate industry? - I suspect they will naturally sit back and await the first indications of what this new role brings and how they will learn to adapt to a very different partner from the relationship they have previously had with the powerhouse property portal that is Trade Me Property.

Agents and portals - the differing approach of UK to NZ

The real estate industry is universal, and in principle operates under a similar business model of commission based services in many countries of the world. The migration from print to online is well developed in most countries and therefore it is always interesting in my mind to explore the different approaches to marketing property from country to country.

I was recently in the UK, visiting relatives in Scotland when my eye was caught by this “For Sale” sign outside a property in Edinburgh.

As a backgrounder, the UK model of real estate is somewhat different to NZ with real estate agents largely salaried off a lower commission of around 1.5%. For this the role of the agent is more as a facilitator of the contact and managing the listing. Most properties are sold by negotiation. In Scotland the model is more unusual with a lack of real estate agents as independent entities. All properties in Scotland are sold through solicitors who operate real estate services within their company and therefore provide what amounts to an end-to-end service including conveyancing.

The property I was looking at in Edinburgh was being marketed by McEwan Fraser Legal. The marketing of the property through the exterior sign board was what captured my interest.

The most conspicuous aspect of the sign was the lack of smiling face of an agent. The property is being sold by a company, not an agent - a specialist real estate team as part of the legal company ready to take your call up to midnight on weeknights!. The prospective buyer will enquire of the company rather than calling a specific agent.

The other aspect that caused me to pause and capture this picture was the brand references to the main real estate websites on which the property is being marketed. The UK has a dominant player in this space - Rightmove; a significant competitor in Zoopla and also the Scottish market has a regional portal S1Homes. 

The selling company has a website on which the property is featured but the pragmatic approach by them is to highlight that this property is being featured on the major UK property portals and a specialist Scottish portal - a clear demonstration to the interested buyers that the property can be found and examined exactly where they expect to find them. This makes total sense, buyers are used to the functionality of these dominant portals - why encourage them to a company website that they may not have used?

I ask that question rhetorically - NZ real estate has always seemed reluctant to advertise any other website on street signs other than their own; this despite the fact that the consumer has little interest in checking out the details of a property on the agents site, when the details will be on Trade Me or Realestate.co.nz - sites that the consumer knows well and is aligned to the functionality and established process for storing favourites.

I find in retrospect this example in the UK even more bizarre when you consider that in the UK the real estate industry is seeking to start an industry owned portal - Agents Mutual as a consequence of what they see as excessive fees and profits made by the leading portals of RIghtmove and Zoopla.

In New Zealand agents own a portal, Realestate.co.nz, yet they have never, despite the competitive pressure from Trade Me Property taken the decision individually or collectively to act to support this industry owned portal by advertising the brand on their “For Sale” signage or print advertising. The best they seem to be able to do is a discrete reference in the print media of 'contributor to realestate.co.nz’ - hardly a glowing endorsement. Such a missed opportunity!

Could it be time to celebrate housing unaffordability?

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. 

No paper - no news!

So the line used to go..  when there's no newspaper there's no news. How different it is today in our multimedia age for without newspapers we are certainly not without news - 24 hours a day 7 days a week.

Yet this acceptance that the newspaper has lost its pedestal of relevance in the new age of multimedia still fails to make a dent in the marketing choice of most real estate agents and their clients. The fact is that the vast majority of property searching is done online, the vast majority of property enquiries emanate from websites and mobile apps and yet everyday real estate agents encourage their clients to sign up to advertise in newspapers and property magazines that barely get read and on average cost hundreds, if not thousands of dollars.

It is fair to say that 3 out of every 4 dollars spent by the real estate industry in New Zealand either in the form of brand advertising or property advertising paid for by agents or clients ends up in the wallets of the print media companies - APN, Fairfax and Bauer Media in their multiplicity of newspapers and magazines.

So it is kind of amusing that during the Christmas period when there are no specialist property magazines published for 2 weeks and newspaper property supplements diminish to a mere slither of their former size the property market does not stop. Listings do not dry up - check out the number of listings added to property websites with dates aligned to the statutory holidays of Christmas and New Year. Four days that actually witnessed 353 new listings coming onto the market. These listings are being marketed without any print media by agents that recognise that the web is open for business 24/7 and delivers leads 24/7. 

The real estate industry could very easily manage without print media No loss of marketing impact would ensue. Certainly some major economic impact would befall the print media companies as savings were made by sellers and their agents.

So why is it that this industry continues to promote the role of print media and why does the print media continue to benefit so disproportionately? In other countries the role of print media in real estate advertisings has fallen to 25% or 30% of the total spend and those markets such as the UK, Australia and the US have seen no impact.

It’s very simple - brand marketing.

In this case the brand is both the franchise groups - the Bayleys, Harcourts, Ray White, Barfoot & Thompson and others as well as the brand name of the agent. Print media is loved and supported by real estate agents because print media presents content in branded sections. Just look at the 32 pages of Harcourts listings, 24 pages for Bayleys and 30 for Barfoot & Thompson. Each page identical in format creating a brand statement of scale and presence. Properties are not sorted by price and location as the web delivers much to the delight of buyers. Try finding all the properties in a single suburb within a price range in a magazine next time you see one!

Agents love print and real estate companies motivate them to seek advertising in print because it is  in their best interest. Its a brand marketing war being waged in the print publications with their clients’ houses as ammunition.

It’s time for the property owners to wake up to this misrepresentation of marketing value. To challenge the notion of print first and to realise that there really is no value in paper any more - that’s the news, delivered via online!

What were the Top 10 articles of 2013

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.