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Archive for the ‘Buying / Selling a home’ Category

6

Analysis of the Auckland property market

Posted on: March 9th, 2011 | Filed in Buying / Selling a home, Featured, REINZ Monthly data

Last week Barfoot & Thompson, Auckland’s leading largest real estate company published their monthly sales statistics. The headline from B&T was “Housing market resilient, sales jump in February” – interestingly from these monthly statistics the the media commentary varied between “Auckland housing market improves” (NZ Herald) to “No housing glut in Auckland – agent” (TVNZ). I thought that a deeper analysis and visual representation of the data for the important Auckland market would be of value.

Property Prices

The price of property is always of interest to buyers, sellers and property owners. Barfoot & Thompson figure for February showed an average price of $521,887 recording a 1.2% increase from January. The average sale price in February last year was $521,324 indicating that prices are in the main flat as judged by the sales made through the B&T offices. The chart below tracks the average selling price (3 month moving average) for Barfoot & Thompson sold properties over the past 4 years. The calendar years of 2007 / 2009 and 2011 are shown as red part of the line with 2008 and 2010 as blue part.

The chart ably shows the peak of the market through 2007 before the property market collapse. Two years later in 2009 it shows the return to the peak before seeing in 2010 a further fall in the sales price with some erratic movements.

The data from B&T can provide a good early insight into this key market, as their data is released earlier in the month than the REINZ sales data. At the same time the B&T data is based on the average sale price which is naturally influenced by the mix of high vs. low price properties. In recent years as volumes have fallen so the data of average price can be affected by the mix of properties sold. It is for this reason that I favour the REINZ based Stratified Price analysis carried out by the Reserve Bank. This analysis seeks to remove the influence of the mix properties sold in a month. The chart below shows this analysis of the stratified mean price for Auckland over the past 4 years.

The chart has been highlighted to show the peak of the market across the Auckland region in July 2007 at $510,197. Through 2008 the price of property sold dropped to a low of $435,700 before recovering in 2009. Since early 2010 the sale price has slipped to a current level of $464,425 still off 9% from the peak over 3 years ago.

Property Sales

The health of the market is often best represented by the number of transactions, as confidence in the market stimulates both buyers and sellers. The February sales by B&T totaled 619, up from the 563 in January and pretty close to the February 2010 total of 626. The chart below tracks the prior 3 years of sales by B&T.

From the chart it can be clearly seen that sales in February lifted from the lows of December and January. The key question will be whether the early indications of 2011 result in a lift for the remainder of the year as was seen in 2009.

The one factor in property sales which can distort the sales trend is the seasonality – the reality is that more properties are sold during the key summer months than the winter months, this can tend to distort the numbers per month. Removing this seasonality factor provides a clearer picture as to the underlying trend in the property market – a truer picture of the health of the market. The seasonally adjusted sales for the B&T sales of the past 3 years are shown in this chart below.

The chart better represents the trend of sales which is showing a steady monthly level for the past 12 months of around 600 per month. This compares with c. 500 per month in 2008 and 0ver 700 per month in 2009.

Inventory

The number of properties on the market also provides a valuable assessment of the health of the property market. The monthly NZ Property Report tracks the inventory in relation to the rate of sale, thereby providing a perspective based on equivalent weeks of sale of existing inventory. The chart below shows real levels of inventory of property on the market over the past 3 years.

The chart speaks to the media story of there not being a glut of properties on the market – that would certainly be substantiated by the chart, however the market continues to hold a relatively high level of properties for sale, at this time there are 13,720 properties for sale in the Auckland region being marketed by licensed real estate agents.

5

Economic outlook for 2011 with a focus on the property market

Posted on: December 17th, 2010 | Filed in Buying / Selling a home, Featured, Money Matters

Stockmarket screenI was delighted recently to have the chance to sit down and chat with Shamubeel Eaqub. Shamubeel is the Principal Economist with the New Zealand Institute of Economic Research and as such is a respected economist and often quoted and interviewed personality.

I was keen to have the opportunity for Shamubeel to bring some insight into the broad economic outlook for the next 12 months with naturally a focus to the property market.

As someone who has by his own admission been a serious pessimist over the economy over the past 3 years, Shamubeel reveals in the interview a sense that we are beginning to see the early signs of a brighter future – by no means a buoyant one, but an outlook that holds stronger economic growth than we have seen lately.

The interview is extensive and at just over 30 minutes (we cover a lot of detail) we split the video in two parts.

Part 1

Part 2

13

Are we seeing some signs of improvement in the property market?

Posted on: December 3rd, 2010 | Filed in Buying / Selling a home, Featured, Media commmentary, Website searching

iStock crystal ballRunning the website of realestate.co.nz gives us some valuable insight into the property market – providing us with some hard facts, some interesting statistics and some anecdotal feedback from within the industry.

One thing I am keen not to develop is a reputation as a forecaster of the property market. Firstly; one thing about forecasting is that it is likely that you will be wrong more times than you are right. People then tend to remember the time you got it wrong far more than the time you got it right – I did once make this somewhat optimistic call back in 2008 “NZ property market may well see a brighter outlook sooner” – at least I used the word “may”!

Even economists are skeptical about forecasting the property market, and they make a living from forecasting!

However I am conscious that there has been a series of recent articles that show some general improvement in sentiment. The level of mortgage approvals brought some brighter comments from Interest.co.nz as did some greater competition among the banks with competitive activity around 2 year fixed rates. In addition First National Real Estate were quick to pinpoint some upturn as did Harcourts recently. Barfoot & Thompson have also just released their sales details for the Auckland market showing a considerable pick up from October.

The data I tend keep a close watch on, are unique stats from the web – a rich vein of real time information tracking real people looking at property. The two metrics which for me reflect the level of activity are (i) number of visitors online viewing real estate and (ii) the level of email enquiry to agents, the latter being closer to a lead indicator of future activity.

Usage levels on real estate websites

The chart below tracks the indexed web traffic to a basket of real estate websites monitored by Nielsen. The data is domestic traffic only and covers all of the top 10 real estate sites online. The blue line shows the performance of 2010 measured on a 4 week moving average, with the prior years of 2008 in black and 2009 in red.

Traffic_online_to_Nov_2010

The use of an index in the chart, rather than actual traffic, effectively removes the factor of the ever growing usage of the web – more people using the web, more of the time.

The conclusion I draw from this chart is that, as we have been aware, the past 12 months has been subdued. In many ways, very much like the depressed market of 2008 at the time of the Global Financial Crisis. By contrast the activity in the market during 2009 is very evident from the chart, showing heightened activity as buyer initially pounced on distress sales as prices fell, and then with limited stock, we saw some scarcity demand factors. This heightened activity did begin to seriously tail off towards the end of the year.

What we are seeing now though, is some relative sustained activity in searches during November, whereas this time last year the activity was really tailing off. The next few weeks through Christmas will naturally see a slowing down of viewing, but come that first and second week of January the level of activity online skyrockets!

Serious enquiry to agents

On a daily basis we are sending hundreds of emails to agents from interested prospective purchasers of property – these are warm leads and the tracking of this activity provides an insight into the market. As with the stats on website visitors, this chart below which shows weekly email activity is indexed to provide a more accurate view year-on-year as traffic and usage of the site keeps growing.

Realestate.co.nz_email_enquiry_to_Nov_2010

The blue line for 2010 clearly reflects the extent of the lackluster property market this year, with much lower levels of email enquiries. Whilst showing a tailing off in the past few weeks (which is only to be expected from a seasonal perspective), the tracking of 2010 does show a certain degree of relative strength, especially through that key period of late October through to mid November. The traditional lead time from email enquiry to property transaction would based on these strong periods, give sufficient time to complete transactions pre-Christmas. This might bode well for the sale figures for  November and December, this then ties back into the recent rise in mortgage approvals.

Classically we will have to wait to see if what we are seeing is a true trend or just a short term blip. What is certain is that we are seeing some key indicators begin to point to a brighter outlook. I am certainly not going to call it a resurgent market quite yet!

0

Partnering with Westpac adds value to the new Realestate.co.nz iPhone app

Posted on: November 27th, 2010 | Filed in Buying / Selling a home, Online marketing, Technology

Westpac New ZealandThe new iPhone app has been undertaken as a partnership with Westpac bank. There is, in my mind, real value in being completely open and up front about this as it is vastly different to the traditional sponsorship model, where a large branded company pays money to “get their brand” on some other product or other. Often resulting in a sense of “selling out”!

The partnership with Westpac could have been with any bank. We chose to work with Westpac due to their pro-active, open approach from their marketing department. It also speaks to the logical synergy (ahh – marketing speak!) – banks, mortgages and property buying are all one inextricably linked event or activity and cannot for the vast majority of home buyers be unbundled.

Westpac have been a partner on realestate.co.nz for over a year now with a smart mortgage calculator on the property-for-sale side of the website and also another calculator on the rental side of the site, offering renters an insight into what their weekly rental payments could afford them if they put that towards a mortgage payment. This rich integration which pre-populates the selling price / rental price of property into calculators, is judged (based on feedback) as valuable and an added-value service. What is great news is that Westpac are delighted with the lead generation from these tools and the partnership.

Westpac site calculatorsWith the iPhone app we wanted to go further than just a calculator. The app has the ability to let the user call the real estate agent or email the agent from the phone when reviewing property from right across the street. So why not allow people to contact someone to discuss the mortgage? Westpac have mobile mortgage managers out and about in most areas of the country and these can be contacted through the virtual bank branch on the app. Just locate the closest branch on the map and dial up the mobile mortgage manager based there.

As well as accessing finance help and advice through the app, Westpac naturally have a vast number of ATM’s around the country and adding these to the map view of property search makes total sense – we all need to top up cash reserves, and knowing that there is one round the corner from the cafe seems to make sense and add to the interactive ability of the app.

Finally Westpac has the ability to communicate really effectively with our target audience in a way that benefits both of us. They have very highly trafficked website and featuring the app on that site reinforces the values of innovation with their customers. Their email campaign also accesses a large database of property prospects and then lastly their latest TV commercial being aired over the summer enables them to reinforce the value of this partnership and showcase the app.

0

Webcast – NZ Property Report Oct 2010

Posted on: November 3rd, 2010 | Filed in Buying / Selling a home, NZ Property Report

The following 3 videos provide a webcast of the content of the NZ Property Report for October 2010. We have broken the report down into three shorter 5 minute videos to assist in focusing on relevant content. The first video covers the big picture of trends across the country in the past month. This is followed by a specific video covering each of the North Island and the South Island.

North Island Summary

South Island Summary

1

Global property price analysis places NZ at the median spot on the podium

Posted on: October 29th, 2010 | Filed in Buying / Selling a home, Featured, International, Money Matters

Digital GlobeWe seem to be a nation that loves to benchmark ourselves to the global market and so it was naturally of interest to see the latest analysis by The Economist of the trends in global house prices.

The analysis is very timely as there has been some very interesting articles recently on both the NZ and Australian property market and the speculation as to the emergence (in the case of Australia) of a property bubble and in the case of NZ the continuance of a bubble.

The data utilised in the Economist article provides insight across 22 countries, across all continents and highlights recent price trends as well as long term trends and an insight into their evaluation of whether property prices are overvalued or undervalued and by how much. Certainly the picture of NZ is not certain as to future trends, but measured against other developed western economies our position is not out of line.

Recent price movement

The past year based on Q3 data for 2010 vs Q3 data for 2009 shows that from the chart below a large number of countries have seen property price appreciation. NZ has seen a 3.4% appreciation (QV data). The comparable REINZ stratified price data shows just a 0.47% appreciation based on actual sales price.

Economist global house price analysis Oct 2010 - Q3 py

The comparable position of Singapore, Hong Kong and Australia is significantly different with appreciation over the past year of over 15%. At the the other end of the spectrum the woes of the Irish property market continue to be felt with a 17% year on year decline.

Long term property appreciation

Taking the period of 1997 to 2010 shows in the chart below a consistent global appreciation with the majority of countries seeing around a doubling of value. Clearly the performance of the past 2 years will have depressed some of these performance numbers. NZ sits again firmly at the median point with a period appreciation of 108%. Again using the REINZ stratified house price analysis this appreciation was 109.6%.

Economist global house price analysis Oct 2010 - 97 to 2010 appreciation

Relative pricing

The most interesting analysis is undoubtedly the evaluation as to how over priced (or under priced) each countries properties are. New Zealand is judged to have property prices over priced by 20% as shown in the chart below.

Economist global house price analysis Oct 2010 - over under priced

This places NZ bang on the median spot on the podium with Australia taking its usual gold medal with property prices accessed as 63.2% over priced. It is interesting also to see our often comparatively benchmarked country of Ireland being judged as 13.2% overpriced – that after seeing a year on year negative appreciation of 17%. Just shows the extent to which that country’s property market had bubbled up in the past decade.

0

September 2010 Property market video – Realestate.co.nz

Posted on: October 15th, 2010 | Filed in Buying / Selling a home, Featured, Market News, REINZ Monthly data

Video image header for blogThe latest statistics from the Real Estate Institute for September, providing insight into the residential property market are presented in this video.

The key charts to accompany the video are provided below:

The sales analysis of the 3 key metro areas highlights the impact of the Canterbury earthquake on sales in the region. The flat property sales market in Wellington is contrasted with a rise in sales in Auckland of 12%. The sales figures are seasonally adjusted to allow comparable month by month comparisons.

Key_regions_sales_Sep_2010

The Stratified price for the total of NZ shows the extent to which prices have continued to slide over the past year since November last year when they had recovered some of the early falls after the peak in mid 2007. The current stratified price across the country is $359,555.

NZ_Strat_price_Sep_2010

The Auckland property prices have risen sharply in September to $487,800 to edge closer to that long term peak of July 2007, currently that differential is 4.4%.

Auckland_Strat_price_Sep_2010

The Wellington property prices continue to see some weakness with the stratified price down in the month to $403,595 which is 4.3% below the peak of the market just under a year ago.

Wellington_Strat_price_Sep_2010

The Christchurch stratified property price continued to show weakness. It is likely that the impact of the recent earthquake and the resultant fall in sales could impact reported prices and the state of the market. For the month of September the stratified price was $330,750. This level represents a level 6.7% below the peak of the property market in the city back in October 2007.

Christchurch_strat_price_Sep_2010

7

New real estate business model emerging for 2011

Posted on: October 11th, 2010 | Filed in Buying / Selling a home, International, Real Estate Industry

Any business needs to adapt to survive – real estate is no different, and as such it should not be surprising to see new business models emerge to challenge established practice. Just such a new model is planning to launch across the Tasman in the early part of next year, and may in time enter NZ at some stage given the similarity of markets.

Refund Real Estate - Refund Real Estate

Refund Real Estate is currently advertising to attract new franchisee to provide a platform for a national launch. The business is a springboard extension from the company’s foundation of mortgage broking which began in 2004.

The business model for the mortgage broking service is to provide a ‘refund’ of part of the commission from brokering the loan with a bank or lending institution back to the person who has applied for and ultimately takes on the mortgage. This model is what has been called “less than free*” – given the fact that all mortgage brokers do not charge clients as they earn fees from the lenders, offering a refund or rebate is a legitimate means of establishing a point of difference. The lending institution is not overly concerned that its commission is being split with the broker, the broker has the marketing advantage and the client gets a discount.

The advertising on the new real estate website indicates that this will be the model for the real estate business. They state that “For the first time Australian customers, both buyers and sellers, will received a cash refund when they buy and sell property with us!”

In the USA there are business models in real estate that provide a cash back incentive for buyers to use a particular agency. This model works because the US brokerage model has both buyers agents and sellers agents. Each agent operates exclusively for their specific client and acts in their best interest. In the US it would be seen as a conflict of interest for an agent to represent both the seller and the buyer or at least broker the deal between them directly.

Both agents to a deal are paid through a split in the commission (in the US the commissions – paid by the seller, are considerably higher at around 4.5% to 6%). In this way a buyers agency can offer a cash back to the buyer by splitting their commission and thereby offering a “less than free service” as the seller is paying for the overall service of the two agents.

It will be very interesting to see the success and reaction to this business model in Australia when it launches. Certainly a buyer may well be attracted to contact an office of Refund Real Estate so as to ensure they get a cash refund for buying the house through them. However certainly in the beginning without a large portfolio of listings it may be hard for them to convince established agents and offices that they hold value in this buyer, given the fact that buyers can talk to any agent.

Another interesting point highlighted to me when discussing this model with an agent was the fact that the service of real estate in NZ (and similarly in Australia) is solely  a service provided to the seller who pays the agent to act entirely in their best interest. Given this, how would a seller feel to see that their fees go to not only pay for an agent representing a buyer who will be motivated to negotiate directly against the seller, but then for some of that fee go to the buyer?

At this stage there is not yet a clear detail surrounding this new ‘refund’ model – when it launches to the public it will be interesting to see how it works and the reaction it generates in the media and the industry across the ditch.

* “Less than free” was a term I first came across when reading Chris Anderson’s book ‘Free’. The concept is that many businesses these days (particularly online) seek to attract audiences with free offerings – in many cases to then in time to upsell to premium charged services – this is called Freemium. The concept of Less than free comes from the idea of where do you go to compete with free? – well less than free is where you actually pay the consumer to use your product or service in the belief that the experience will be rewarding and ultimately profitable in the long run. In this case for real estate the value will not come in the long run as there is not likely to be repeat purchase so “less than free” has to be funded from another party paying enough to allow for this incentive.
5

Webcast – NZ Property Report Sep 2010

Posted on: October 6th, 2010 | Filed in Buying / Selling a home

We are keen to complement the written form of this website and blog with videos that provide an easily watched insight into “what’s really going on in real estate“. Here is a recent video produced to walk through the monthly NZ Property Report for September which was published last week on the 1st of the month.

We are still experimenting with the format and production of these videos and would really appreciate any feedback to ensure we deliver timely, relevant content that is of value to anyone interested in the property market, whether that is as a buyer, seller, investor, agent or business owner.

1

Putting your house on the market this spring? – 5 key tips

Posted on: September 27th, 2010 | Filed in Agent Tips, Buying / Selling a home, Featured

For sale signOver the next 3 months we are likely to see over 35,000 new property listings hit the market. Over the same period the likely number of sales will be around 15,000. That would assume that there is roughly a 50/50 chance of selling your house this spring, that would be right if it were not for the fact that today there is over 56,000 properties on the market. Now you can see the challenge – how to ensure that your house gets bought and becomes one of those sales stats and allows you to move on – as opposed to being part of the high inventory of unsold homes.

Success in real estate in today’s world relied far more on the web. Research from just a couple of months ago reaffirmed this fact.

We decided that we should provide some useful advice around helping sellers get the most out of online marketing and took the opportunity to quiz a leading global expert. Simon Baker was CEO of Realestate.com.au for most of the last 10 years and in that time built it into the leading Australian real estate website. In this video interview I ask him to share his thoughts  as to the best way to market your home.

Simon sums up the tasks in 5 easy tips:

  1. Check out your prospective agent online – do they understand online marketing? – how do they present themselves and their clients listings online? – how effective and efficient are they at responding to enquiries online?
  2. Make sure your listings are featured on a wide range of websites – every website should be available to all agents
  3. Make sure the online presentation is high quality with comprehensive information
  4. Standout from the crowd – take advantage to give yourself and your property an advantage – use premium listing adverts, they are incredibly cost effective
  5. Keep a close with your agent to web performance – viewing, enquiries, responses

Good luck with selling your home this spring – but don’t leave it to luck – give yourself the upper hand!

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