The Unconditional Blog

The impartial voice of the industry

 

Archive for the ‘International’ Category

3

Grocery shopping and real estate – a match made in heaven?

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

Grocery aisle - real estate and grocery - a match made in heaven?This week has seen the official launch of a new real estate service in the UK, bringing the British public a real estate service packaged up with their weekly groceries.

Tesco logoTesco, the largest UK grocery chain has partnered with Spicerhaart, one of the UK’s largest real estate chains to establish iSold – what they describe as “The UK’s newest estate agency, iSold has taken the very best in estate agency and made it even better”.

The service offered by iSold appears from the website analysis to be a 3 tiered full service comprising an up front fee of £299 (NZ$636) for valuation and marketing including extensive online profile of the property across the main websites. A completion fee of £700 (NZ$1,500) is payable on sale. This basic package is complemented by a Premium package at a total cost of £1,119 (NZ$2,380) and Premium Plus at £1,299 (NZ$2,764) – no clear details of the extent of the premium services are yet available.

It is clear from the current site that a lot of focus is placed on the valuation and the right pricing to help you sell. The site states that iSold has their own locally-based valuation experts. The initial launch has been focused in Bristol before this week rolling out around a number of regional centers across the country.

This activity comes close on the heals of the move by RE/MAX real estate brokerage in New England (US) to open 17 micro real estate offices within a chain of grocery stores.

The question is – Is this likely to be a future trend for the real estate industry here in NZ as more and more real estate offices question their high street presence as more of the marketing moves online?

There is quiet a bit of precedent already established in this area of grocery chain diversification. It is worth reflecting on this to provide some perspective to this concept. Here in NZ we had an ambitious move by Foodstuffs in 2003 to establish a banking service (SuperBank) in their New World stores. That move which was itself modeled on the Tesco banking service in the UK ultimately failed to capture sufficient customers before the business folded in 2006 with all the customers being transferred to Kiwibank.

The fact is grocery stores are very high traffic outlets. They are very strong retail brands and they are always looking for higher margin offerings to supplement the high volume / low margin grocery business. So there is a possibility for such a move in the future. It is also interesting to compare this UK iSold model with “The Joneses” business model launched back in 2007 with a full service agency based on a fixed fee service instead of traditional commissions.

2

Larger than your average family home!

Posted on: October 30th, 2009 | Filed in International, The lighter side

The US real estate website Zillow has just highlighted what they believe is the largest house in the US. At 43,031 square feet (3,997 square metres) – that means this house has the floor area of just that bit less than an acre!

US largest home - NY state

As Zillow reports on their blog the property which has a very nice waterfront vista along from the famed “The Hamptons” took 5 years to build and is built on a section size of 63 acres. The property comprises officially 21 bedroom and 18 bathrooms. The unique Zillow Zestimate places an approximate value on this property of US$202,864,000 – roughly NZ$262 million!

The property makes a very impressive image as seen on Google satellite imagery as seen below

View Larger Map

In NZ we certainly do not have anything quite as grand, extensive or expensive!

The most expensive and most impressive property for sale as listed on the realestate.co.nz website at this time is this grand property on Waiheke island being marketed by Michael Boulgaris.

This 12,000 square foot property (barely a quarter of the size of its US sister) is set in 88 acres of land on Waiheke island. It is a very impressive property boasting 8 bedrooms and 6 bathrooms and three open fires, together with a private wharf, tennis court and boat shed.

Whilst Waiheke island may not be quite “The Hamptons” the NZ$33 million price tag seems pretty good value for an undeniably impressive lifestyle!

3

Could cheap money be driving the NZ property market?

Posted on: October 27th, 2009 | Filed in International, Money Matters

istock_000004562929xsmallThis is potentially the most staggering news story I have read in a long time.

The London Evening Standard last week reported that banks are ‘desperately’ seeking people to lend to so as to meet the demands set on them by the British Government who want to see a healthy and active banking industry that is stimulating the economy. The problem is that it appears that banks are not surprisingly kind of cautious as to who to lend to.

So when faced with this dilemma – we need to lend – but we can’t lend to those who most need it – those that are a poor credit rating – who do we lend to?? – they have decided that the very people who naturally have very good credit rating would make excellent clients – those with huge salaries in senior jobs.

It turns out that among the top CEO’s of London City companies most have been approached to borrow large sums of money at very attractive rates of interest in some cases as low as 1.5%.

Of course these affluent individuals have the skills and capability to find many a home for such money which can earn easily a few multiples of the borrowing costs. This virtuous circle of course makes everyone happy:

  • Banks are lending
  • Banks are lending to low risk clients
  • The UK Government sees their role being exercised through stimulated liquidity
  • Money is flowing through the economy and driving up prices of shares and property – ??

It is this last comment that is of interest for in the Evening Standard article it actually cites the example of “carry trades” of currency investing whereby borrowed money in low interest countries (eg UK) can be invested in higher interest countries – example being New Zealand!

Could this flow of money from UK banks to affluent Brits be flowing into NZ property? – it would seem somewhat unlikely given the currency exchange between the UK and NZ of late. The long term exchange rate of around 0.35 has risen in recent months to over 0.45 meaning that our median priced house which a year ago at $430,000 would have cost £119,000 would today cost £153,000, whilst in NZ the median price has remained fairly static.

However despite this UK pound appreciation of our property prices; in just the last week we have witnessed a steady rise in the number of UK visitors to realestate.co.nz as a % of all traffic. The traffic has grown by over 12% – ahead of any other country going from 3.9% to 4.4% of all visitors to the site.

8

Hold or Fold – a single example of the madness of the US housing market

Posted on: October 9th, 2009 | Filed in Buying / Selling a home, International, Money Matters

istock_000005422577xsmallImagine listening to talkback radio purely on the subject of real estate – in some ways this is what a recent podcast episode of The Real Estate Guys felt like – as they provided advice to a questioner who was severely “underwater“.

For reference The Real Estate Guys radio show is a US syndicated programme which through the marvels of iTunes you can listen to via podcasting wherever and whenever you like. It is a weekly show on all things to do with property, primarily based around real estate investing. It provides some great insight, discussion and ideas – thoroughly recommend!

Anyway the question the  team were challenged with on this past week’s show “Ask the Real Estate Guys” was as they highlighted, not atypical of many properties in the US.

Mr & Mrs A had bought an investment property a couple of years ago in “an up and coming” satellite town of Merced, California. They were employed earning a reasonable salary and owned their family home with a good degree of  equity presumably not in Merced. This investment property had presumably been an opportunistic purchase to support their retirement income.

The investment property cost them US$198,000 and they bought it with a $190,000 mortgage. It has been rented out, however the rent falls short of the mortgage payments by US$400 per month – Ok’ish when the depreciation is taken into consideration – right?

NO ….Merced is unfortunately as described by Business Week as “Ghost Town”, USA and the property is now worth around $110,000. As the Business Week article states the median price in Merced in 2007 was US$230,440 and in 2008 it had fallen by 38%  to just US$144,000.

So the question asked by Mr & Mrs A to the Real Estate Guys was “what should they do?” – hold or fold. Stick with this devalued investment and the hope that in time it may be worth more than they paid for it, or foreclose and live with the repercussions on their credit score (and let the lender take the hit – this is California after all!).

The team provided guidance for the alternatives.

HOLD and based on 4% annual appreciation after 18 years and a US$4,800 per annum loss, then the net proceeds of sale in 2027 might just pay off the mortgage!

or.. try and finance someone into the house based on a sale and lease back deal based on the good mortgage that the owners had

or.. try and negotiate a short sale with the lender and in so doing mitigate the negative credit impact.

Whilst the team was not there to definitively advise the owners, there was a clear view that the best option was to FOLD - foreclose on the property. Hand back the keys and the title to the property- walk away not owing  a $. All that would eventuate, would be a negative credit rating. Something that could be rectified in time (c. 5 years).

However what I thought was very telling was the comment that in the context of this issue with the bad credit rating – if ever in the future they were to be asked about it “you could always say – but that was 2008/9 – remember how bad things were in that recession – everyone was falling over!!”

I find this a salutary example of the double whammy of the US housing disaster – houses that should never have been built, in areas with no demand – sold to people, who should never have taken the risk – financed by debt that was fictitious – then the debt was on-sold to people who were hoodwinked. Then when the house of cards collapses everyone runs for cover – leaving ultimately the government, and thereby by default all tax payers to pick up the pieces. Unfortunately the ripples from this debacle have washed up on most shores of the world and ultimately we all end up paying.

1

International house price movements over the past 2 years

Posted on: October 5th, 2009 | Filed in International, Other interesting reads:

The Economist has just published an excellent graphing tool to aggregate the house price index of the leading property markets for which data is available.

The Economist - House Price Index Q1 2007 to Q1 2009Covering 20 countries the chart allows for the comparative plotting of countries and their bubbles and busts especially over the past 2 years.

Examining the data highlights some facts. For whilst the global property market has arrested over the past 2 years as the global recession took hold, there were those markets that faired better than the worst performers.

In fact 7 of the 20 countries measured, have ended the past 2 years with price indices higher – 4 of them over 5% higher and in the case of Hong Kong over 15% higher. These 7 countries shown in the chart to the right were Hong Kong, China, Switzerland, Australia, South Africa, Italy and Sweden which appears to have made a last minute rally to return to positive growth.

The Economist - house price index falls Q1 2007 to Q1 2009 - The majority of the 20 countries though saw falls in house price index. Naturally as would be expected the USA shows the greatest decline hitting an index of 70 (30% down at the end of 2008) and showing some early Q1 recovery in 2008. Most of the other markets show between 5% and 15% decline.

The NZ data in the report and charts is surfaced from QV and shows a 9% decline at Q1 2009, although the latest QV data for August 2009 shows a 2.8% decline.

The Economist also highlighted in it’s article some markets where the graph would have almost been inadequate to reflect the scale of price fall – Latvia suffered a fall of 60% fall and United Arab Emirates a nearly 40% decline in house price index.

7

Australian housing market boosted by incentive scheme

Posted on: September 19th, 2009 | Filed in Buying / Selling a home, International

australian-homes-for-saleAustralian homebuyers – specifically first time home buyers have leapt on the incentive to get into their first home.

In the 10 months to the end of July more than 137,000 houses were purchased aided by the combintaion of both state and feral support with an incentive of between A$14,000 and A$21,000 – that would equate to a Federal funding of in excess of A$2.4bn.

There is no doubt that this incentive has underpinned the property market on the other side of the Tasman where sales were reported last week as being up 32% in a year. The June quarter saw 130,000 sales.

What is really interesting is the Australian perspective on this bouyant property market stimulated by this government stimulus package – this is the quote from the Housing Minister Tanya Plibersek:

“A strong housing market is critical for underpinning confidence and supporting jobs in the Australian economy as we battle the worst global recession in 75 years.”

A somewhat different perspective from that expressed by the Reserve Bank Governor here in NZ.

1

Most innovative US broker award – 2009

Posted on: August 9th, 2009 | Filed in International, Online marketing

inman-innovator-awardsAt the Inman Connect conference held this week in San Francisco a number of awards were handed out in what was a very short ceremony – the focus of the conference is on content, discussions, networking and innovation.

The award that interested me was the award for Most Innovative Broker or Franchise Award. The nominees for this award were diverse from the traditional major franchise of Coldwell Banker to the innovative new major franchise of Better Homes & Gardens; as well as leading regional players such as John L. Scott. Additionally the innovative online realtor Redfin was nominated as well as @properties a Chicago based realtor. However despite the competitive challenge of these major players the winner was a small brokerage from Charlottesville, Virginia – Nest Realty.

Reviewing their website tells me a lot about them and from within the industry more importantly tells me about their understanding of the property market and the role of a real estate agent / broker.

Nest Realty Group - winner of Inman Innovation award for realtor 2009Their website does what so many fail to do – engage with me as a prospective client in the context of the area.

For someone who has never been to Charlottesville and lives some 13,700 kms away, I can within a few minutes not only get a great sense of the city and the community, but also a clear sense of the local property market.

These are in my mind the key determinants of a great real estate company website. Too often real estate companies see their website purely as an advertising billboard for their clients properties, when the more likely scenario is that the reason comes to a company’s website is to discover more about who the company is, what they stand for, what knowledge and expertise they have and why I should select them to market my property.

This website certainly provides a property search facility, but importantly it does not compete with the primary role of providing information and insight in to the areas – why would you consider living there, and where to live. The conversation and dialogue is facilitated through a great integrated blog which is titled the Nest report and it is to here that interested clients would go to search out rich information on the market, the trends and key indicators.

So my congratulations to Jonathan Kauffman and the whole team on their success – well deserved and hopefully you can provide a benchmark for others to measure themselves against.

4

UK Property market sensing improvement

Posted on: August 6th, 2009 | Filed in International

I have just spent a few days in the UK on the way to attending the Inman Connect conference in San Francisco. This visit has afforded me the opportunity to see how the UK property market has been fairing.

The last 2 years has seen a battering of the UK market with price falls as reported by both of the leading market indexes (Halifax and Nationwide) exceeding 20% from peak, however the general sentiment exposed in the papers in the short time I have been here is certainly observing the green shoots of recovery.

The latest Nationwide house price report for July showed the average value of a UK home rose 1.3% to stand at £158,871. This was the third straight month of rises, and the forecast was that the year could end with a net positive increase. This outcome was reported by the mortgage lender’s chief economist Martin Gahbauer as “an unthinkable outcome .. only a few months ago”. Just 5 months ago in February the year-on-year decline reached its largest level with a 17.6% fall in prices.

The data of house price values presented by Nationwide is based on mortgage lending – in June the Bank of England reported 45,584 mortgage approvals which is down significantly and this is in itself causing concern that these lower numbers may be effecting the average house price statistic. It is interesting that the prime reported data on house prices comes from mortgage lenders rather than a real estate industry body as in NZ.

The similar data from the other major lender Halifax showed July house prices also rising in July by 1.2% to £159,623 and as can be seen from the chart below the long fall in prices since the peak nearly 2 years ago is showing a small but significant turn around. The chart also tracks the NZ property price index. Both indicies track the price index from the point starting 6 years prior to the peak in the case of NZ this was in November 2007.

NZ & UK house price index pre and post bubble to Jul 2009

This lower activity in the UK market is also a function much like NZ of lower number of properties being put on the market. One of the leading real estate companies Savills reported that lower interest rates have enabled people to stay in their homes where they might otherwise have been forced to sell up in a higher interest rate environment. This shortage of listings is being judged to be reason why in London property prices are up for the 4th month in a row – in July by 1.5%.

Supporting this objective data is a survey undertaken by the property website propertyfinder.com which found that over half of respondents believe that house prices will rise by July 2010.

Countering this wave of optimism was a Sunday Telegraph opinion piece by David Blanchflower an economics professor at Dartmouth College in the USA and a visiting professor at Stirling University in the UK, as well as a member of the Bank of England’s Monetary Policy Committee.

His assertion is that house prices have further to fall as a function of affordability; an assertion similarly discussed in NZ. The affordability measure being based on the ratio between average earnings and average house prices. His view is that prices will need to fall back to the long-run average of 3.62 from the peak of the market when it hit 5.84. It has over the past 2 years fallen back to 4.33. This statistical analysis has certainly been debated well here in NZ especially through the forum of interest.co.nz where the view of a 30% fall along a similar extrapolation from Mr Blanchflower has been recently revised to a 15% fall – as ever time will tell as to the final picture which will unfold in the next couple of years.

6

Aussies eye NZ property websites as much as job sites

Posted on: July 17th, 2009 | Filed in International, Website searching

The statistics released today by Nielsen Online showing the level of interest in NZ job websites is also naturally reflected in the level of interest shown by Australians looking at property websites.

As the NZ Herald reports in June 51,097 unique browsers from Australia viewed NZ job sites – an increase of 30% on September last year . At the same time 82,684 unique browsers from Australia viewed NZ property websites – a smaller 2% increase on September last year, fairly closely matchingt he growth in NZ traffic.

Clearly job searching is a precursor to any move and therefore property search may well lag behidn the forward trend. However the scale of traffic is certain an indicator to the overall level of interest by Australians in our country.

In analysing the data I was drawn to the relative strength of the realestate.co.nz website to Australians searching for NZ properties. Based on traffic (unique browsers) the website was ranked 11th placed of all NZ websites. However when judged on the metric of engagement which is the total time spent on the site it was ranked the 5th most actively used NZ website ! An amazing 15,500 hours in the month of June.

Top 5 most actively used NZ websites by aussies

0

Rise in net immigration reflected in property web site stats

Posted on: June 22nd, 2009 | Filed in International, Website searching

The latest data released by Statistics New Zealand show that long term migration to NZ continues to grow. The month of May saw a 727 net gain.

The reporting of the stats by Bernard Hickey Alex Tarrant on interest.co.nz judges that the gains are being driven by a decline in outbound loss to Australia and a net gain from countries like India and the Philippines – the latter furnishing the dairy industry with workers, the former adding students.

These statements backed up by the analysis of the raw data from Stats NZ interested me to look at our own analysis of monthly trend of overseas viewers of real estate listings. The latest charts of the top 20 countries viewing rental property and property for sale are shown below:

International visitors to rental properties May 2009 realestate.co.nz

International viewers to property for sale - May 2009 realestate.co.nz

The key growth (year on year) in property listing views continues to be from countries like China, India and United Arab Emirates (Dubai). Comparing the Stats NZ data with our own data and then reflecting on Bernard’s Alex’s comments certainly shows some very strong correlation.

  • China shows a 21% year on year growth (full 12 months) with 5,459 new long term arrivals – our data shows that year on year viewings of property to buy is up 116% from China, rental viewing is equally up 63%
  • India shows a 36%  year on year growth (full 12 months) with 6,827 new long term arrivals – our data shows that year on year viewings of property to buy is up 72% from India, rental viewing is equally up 97% – clearly showing student interest in renting
  • Philippines only shows a 6%  year on year growth (full 12 months) with 3,715 new long term arrivals – our data of viewings of property to buy does not hit the top 20 countries from Philippines, rental viewing is up but only a more modest 13%
  • France shows a 26%  year on year growth (full 12 months) with 1,173 new long term arrivals – our data shows that year on year viewings of property to buy is up 38% from France, rental viewing is equally up 43%
  • United Arab Emirates (Dubai) shows a 27%  year on year growth (full 12 months) with 379 new long term arrivals – our data shows that year on year viewings of property to buy is up 77% from UAE, rental viewing is equally up 53%
  • And finally a decline has been seen consistently from South Africa over the past few monthss in regard to viewing properties on this website. In terms of Stats data it shows an 8%  year on year growth (full 12 months) with 2,860 new long term arrivals – our data shows that year on year viewings of property to buy is down a massive 47% from South Africa, rental viewing is equally down a massive 58%

Looking to draw some comment here it is important to realise that whilst these 2 sets of data relate to the same month (May 2009) clearly there is likely to be lag effect from viewing property online and making a move to a new country. This may explain the data on South Africa which could be fore-telling the data from 6 to 9 months from now as a decline in new immigration from this country could eventuate.

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