The Unconditional Blog

The impartial voice of the industry

 

Archive for the ‘International’ Category

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Inventory of commercial listings reaches new peak as confidence plunges

Posted on: March 25th, 2009 | Filed in Commercial, International

The recently released Colliers Property Confidence report brings into stark focus the knock-on effects of the global recession. Sentiment among respondents shows a significantly pessimistic outlook especially amongst Aucklanders and especially so in the retail premises sector.

This downturn in sentiment and lack of activity generally in the market is directly resulting in an upsurge in listings on the website. In March the total of commercial property for lease and purchase grew to yet another new high of over 22,000. Just 12 months ago the site hosted just 12,800 listings. The graph below shows in dramatic style the steady rise of inventory of commercial property since early 2007.

Commercial property listing realestate.co.nz

The graph also shows the level of activity of searching on the site by visitors both here in NZ and overseas for commercial property. This level of activity amounting to 8,000 to 9,000 visitors per month has been pretty consistent over the past 12 months. What is interesting is the make up of those visitors and especially the component of international visitors viewing commercial listings.

In first 3 months of 2009 traffic from overseas is up 18%. A year ago 1 in 5 of all visitors viewing commercial property was from outside NZ, 12 months later this has grown to 1 in 4. Large increases have been seen from Australian visitors (+ 76%), Canada (+67%) and Japan (+107%) – meanwhile traffic from the US is up only 8%, meanwhile South Africa is down 31% and Hong Kong shows a 22% decline.

Returning to the level of inventory it is interesting to see the geographical distribution of listings. The two pie charts below display the make up by region of the country of the 14,200 leasehold properties and the 8,000 properties for sale.

Commercial real estate listings NZ by region March 2009

What is clearly most striking is the fact that over 80% of all leasehold property is located in the main 3 centers with 58% in Auckland alone. By comparison with commercial property for sale the 3 main centers account for only half of all listings.

10

Putting house price movements into perspective – global / national / local

Posted on: February 21st, 2009 | Filed in International, Real Estate Industry

There is a well know phrase in real estate – “it is all about the local market”. This alludes to the fact that unlike a globally traded commodity such as crude oil, skimmed milk powder or computer chips, property is not mobile, it is not homogeneous and is certainly not a consumable item.

These fact needs to be borne in mind when reading the headline numbers of price movements, for what may be true for national median or average price across NZ may not be true for the region you live in, the city your live in or the street you live in. Within this aggregation of statistics is likely to be large variations of price movements generally above and below the average.

This was brought home to me this week by the map below which comes from Zillow – a specialist real estate website in the US which as well as featuring properties for sale also tracks house values. Very effectively the map visually represents the picture of property price movements across the USA. The headline figure for property price falls in the US is eye-popping, the latest Zillow home value index shows in the last quarter of 2008 year on year values fell 11.6% which means that a collective US$1.4 trillion of value in houses was lost in the last quarter of 2008 alone; and a total of US$3.3 trillion was lost over the whole year.

zillow-us-value-dec-08

However the map very clearly shows that you cannot see the US as one market – it is a country of 303 million people creating averages over such a massive and diverse data set is bound to lead to generalisations that luckily this map destroys.

Clearly the US real estate market has problems, but they are mainly regional problems – most conspicously Florida, California, Nevada and Arizona – these are big populations areas. California alone has a population of 34 million. These areas are where hyper-speculative new builds took place and subprime loans funded the expansion and this is where the pain of 20%+ property price falls are occuring. Other areas of the US are not seeing double digit falls, some are even seeing steady prices. The point being that real estate stats need to be seen in perspective to the market – local markets.

16

Should government incentives support the property market?

Posted on: February 12th, 2009 | Filed in International, Money Matters

istock_000005541249xsmallThe US senate has just passed a component of the staggering US$900,000,000,000 economic stimulus package providing support for property purchase in the states.

The proposal is to offer a 10% tax credit of up to US$15,000 to property buyers. The estimated cost of the package is set at $18.5 billion. Now in theory (based on annual sales of around 4 million properties in the US) this would mean that over 30% of all property purchased would benefit from this credit. This seems an odd calculation when you sense that anyone who was buying would naturally take advantage of it, unless it is going to be used to aid the purchase of a lot of properties below US$150,000 (of which there a few due to plummeting prices!).

This initiative is being looked at and examined by other governments around the world – most recently last year Australia introduced a 2 tier grant for first time home buyers of between A$14k and A$21k.

The US stimulus was likened to a similar incentive implemented back in the midst of the 1974 crisis when a US$2,000 tax credit was offered to home buyers which was cited as a factor to helping restore some confidence to the then very unstable property market.

These incentives would certainly have supporters and detractors especially as a question will naturally be asked as to the possibility of a similar incentive being offered by the NZ government as part of their economic stimulus package.

In support of such a scheme is the principle that it would generate interest and demand into the property market which has clearly shown a very low confidence and activity for now approaching 10 months whereby the sales have flatlined at c.4,000 per month irrespective of seasonality. If targeted to the first time home buyers it would encourage the adoption of the habit of home buying – a long held objective of most governments.

Whilst its impact on sales would naturally be seen as positive, the impact on prices may not be so certain for whilst it may mop up current high levels of inventory (116,000 current listings) – it may have a short term cessation on price falls which only prolongs the long term natural market trend.

The detractors would argue that it merely supports those who would have bought anyway and could cause more uncertainty with a short term “sugar fix” which eventually would have to be withdrawn with all the consequential impacts on market confidence. The detractors would also argue that property should be a function of the economic activity of the country not a driver of the economy and as such focus of economic stimulus should be on jobs, investment, technology and business development to grow real sustainable economic wealth.

So far the new government has not entertained any such plan for stimulating the property market – it will be interesting to see the view in the coming weeks and months as well as to observe the impact of these US and Australian initiatives.

2

The first of the major franchises forgoes the allure of TV for the power of online

Posted on: January 14th, 2009 | Filed in International, Online marketing

Century 21 TV CommercialCentury 21 – one of the largest global real estate franchises has announced in the US that they will redirect investment in TV advertising to online marketing.

Century 21 has a franchise network in NZ of 60 offices, but has not undertaken any TV advertising for the brand here in the last couple of years.

This decision, one of the first by a major group is likely to be a common theme of the future marketing plans for real estate companies as faced with the contraction of the market and a growing appreciation of the role of online for real estate search, they will be keen to ensure more accountability for all marketing investment. Here as in the US the web is now by-far-and-away the most utilised and most intuitive way for property buyers to search for available homes to buy.

The trend away from newspaper advertising as evidenced in 2008 and reported in the US figures; was matched here in NZ with the local launch and closure of the aspiring NZ real estate publication “Property Book“. These facts further demonstrates how sensitive the print media market is to influence of advertising spend of the real estate industry. This must be of concern for all of the major publishing firms who have become so reliant on real estate adverts as a core staple of the advertising income of most papers and have yet to secure an online income of similar scale.

In the US last year further key events underlined this trend – most noticable being the closure by the LA Times of its real estate supplement and on a broader level the filing for Chapter 11 bankruptcy by The Tribune Group of papers of which the most famous would be the Chicago Tribune and the LA Times.

5

Would you want to live in the President’s house?

Posted on: January 9th, 2009 | Filed in International, The lighter side

the-white-houseIt is called the White House and it certainly looks like the White House, however this 1,650 sq metre home is a replica and is for sale!

As reported in the New York Times the Iranian-American owner of the house has decided it is time to sell up and is looking for a reported US$9.88 million (that’s around $17m).

It is staggering to see the extent of the work undertaken to create a property that so closely mirrors the original, I cannot quite conceive of anyone in NZ seeking to build a model of the “Beehive” – not an official residence of course, but our own iconic vision of prime ministerial location.

Whilst I could not find the listing on any agent website (maybe they are keen not to have too many gaukers!) – it took me no more than 2 minutes with the power of Google maps to locate the property (can’t miss it really!). A valuable lesson in the empowering of consumers as property buyers through advancements in the web. The property address for interested prospective buyers is:

3680 Briarcliff Rd NE, Atlanta, DeKalb, Georgia 30345, United States.

View Larger Map

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So how about a real estate walking tour?

Posted on: December 3rd, 2008 | Filed in International, The lighter side

It is a constant challenge for a real estate agent to find an engaging way to entice would-be buyers to check out the stock of available properties, there are always too many constraints on people’s time and the web does provide a great means of showcasing property.

So how about making open homes into an event. This real estate company in Charleston, South Carolina does that by grouping together a number of open homes in a neigbourhood and establishing a weekly walking tour for prospective buyers.

This idea would naturally suit today’s market – there are plenty of homes on the market (now topping 80,000 homes on this site from over 114,000 listings) – it is summer and people like to get out and about – it is innovative and might capture a bit of interest.

It might even be possible for agents to pool reources (there are less of them in the industry these days!) and agree to showcase each others properties in the tour. Add in a coffee stop and a bit of local knowledge and gossip and before long we might have an initiative worthy of the Peid Piper!

2

Australians demonstrate property market confidence in face of economic storm

Posted on: December 1st, 2008 | Filed in Buying / Selling a home, International

The “lucky country” once again appears to be able to show a steely determination to see opportunities in the face of adversity. A online survey undertaken by realestate.com.au (part of the REA Group) showed that around 46 per cent of Australians indicate they still intend to secure their dream home, despite the global credit crunch.

A further 53 per cent of respondents were not concerned about their job security. In response to the survey the CEO of realestate.com.au highlighted the Federal Government’s First Home Owner Grants as the likely impetus behind the confidence. These grants of A$14,000 for all first homebuyers and A$21,000 for first time homebuyers buying a new home were introduced in October as part of an economic stimulus package.

These grants are actually in addition to all ready established state incentives such as Victoria’s additional grant of between A$3,000 or A$5,000 (subject to meeting certain requirements), which is known as the First Home Bonus. For contracts entered into on or after 6 May 2008, an additional bonus of A$3,000 is also available in addition to the $5,000 bonus for the purchase or construction of a new home in a regional municipality in Victoria. That means that being a first time homebuyer buying a new home in Victoria could net you A$29,000!

Of course what the government giveth in the one hand they taketh in the other – stamp duty for example on a $250,000 house in Victoria would swallow up around A$11,000 on this scale of property.

The impact of this impetus announced in October was seen almost immediately in Australia as demonstrated by an upsurge of viewing on the realestate.com.au website which holds a portfolio of listings for new built homes.

The website of realestate.co.nz features a mixed portfolio of both exsisting and new homes – searching under the phrase “brand new” which is one of the top 50 searches on the website highlights 2,784 listings across NZ, the majority or which are new homes. Among them is this very rural retreat in Morrinsville for $378,000.

2

Innovation abounds as property sales in the UK slump

Posted on: November 23rd, 2008 | Filed in Buying / Selling a home, International

Whilst the NZ property market continues to bump along at historic lows (just 4,469 in October), the UK market is looking considerably worse  as it approaches 50 year lows with just 59,000 properties sold in September which was 53% down on a year ago, and a staggering 62% down on the peak of December 2006.

In such circumstances the challenge facing homeowners is the classic – do I move or do I ride out the storm?  – however for builders and property developers the issue is not so clear-cut or so easy. Their property project is not something they can sit on until the market hopefully one day recovers – they need to liquidate their asset.

There have been innovative attempts to sell property as reported in the UK earlier this year with homeowners turning to “raffles” and other competitions to find ways of “selling their home” as a prize draw. The concept is simple – find 10,000 people who buy a £25 ticket each – answer a simple question and you collect £250,000. However as this article from the The Telegraph shows it is no easy task – not least of which is the legal hurdles that a seller needs to go through. (Any attempt to undertake such a process in NZ would need to be assessed as to the issue of complying with all relevant local laws).

So one property developer sitting on an £8 million serviced apartment project has applied the same appeal of the “lucky ticket”, but wrapped it into a highly structured business service complete with charity fund raising and service company sponsorship, as profiled in this Telegraph article.

Win a London Pad offers the lucky winner an investment property likely to return £500,000 per annum – all the lucky person needs to do is receive one of 200,000 entry tickets by buying an MP4 player (£60) or subscribe to to a broadband provider, open a bank account or participate with one of the 12 corporate sponsors.

The mechanics are fairly simple – for the introduction of a customer to one of the partners the developers gets a referral fee, added to that is clearly a margin on the MP4 player (with a portion going to the charity) – at the end of the day with enough marketing (this blog I guess being a part of viral marketing – no connection or pecuniary interest, I can assure you) the developer should end up with his £7 million, the charity (Great Ormond Street Hospital) should net somewhere close to £600,000 – the business partners should gain new subscribers and one lucky individual should end up with a investment property.

Now that is the theory – as to the reality and facts behind how this works and the likelihood of success; I am not going to go ino this. All I want to highlight is that in situations as both the UK, NZ and many many property markets around the world find themselves at the moment, a little bit of innovation is needed to ease the property market – one sale at a time!

3

UK house guru offers advice in the midst of their housing crisis

Posted on: October 31st, 2008 | Filed in Buying / Selling a home, International, The lighter side

Kirstie Allsopp along with her colleague Phil Spencer have become household names in the UK as they have hosted the house hunting TV programme Location, Location, Location – not to be confused withe TVNZ programme of the same name.  The programme has been shown on both Sky and TVNZ and has captured a strong prime time position sharing with kiwis the property market back in the UK.

Some have said that the programme even contributed to the UK housing bubble highlighting as it did the appeal of property ownership and the potential gains to be made. Well now in the midst of the UK crisis the team are making a special edition to provide support and guidance for homeowners stuck in the midst of the crisis as well as people attempting to buy at this time.

Kirstie in an interview with the Sun newspaper offered some great quotes:

When asked if falling prices were the only problem?

The fact that people move house is a core part of our economy. While some people might benefit from falling house prices, nobody benefits from falling transactions.

Everyone from builders to bed-makers go out of business if people stop moving house.

When asked “Who’s to blame for the current problem?

Lots of people have asked me: “Do you think this is your fault?”

Well, yes – I have advocated home ownership, but I don’t feel guilty about that.

Blaming me for the credit crunch is like blaming Jamie Oliver for obesity. Yes, he has probably encouraged people to eat more but he has also encouraged them to shop and eat wisely.

Whilst there are those detractors of the simplistic manner in which the programme profiles the purchasing process there is no doubt that the broad appeal provides some useful tips and guidance to all who watch; and many would argue that it is a lot more real then many reality TV shows.

There is no doubt as you watch the show and read the commentary in the UK papers that clearly Brits are as besotted by property as we kiwis are – we are not alone!

2

US real estate industry body calls for government support for home buyers

Posted on: October 20th, 2008 | Filed in International

The US real estate industry body the National Association of Realtors (NAR) announced on Friday (17th October) what they see as a critical 4 step process to bring confidence back to the US housing market.

The package calls for the following key components:

  1. Removal of the requirement in the current law that first-time homebuyers repay the $7,500 tax credit, and expand the tax credit to apply not only to first-time buyers but also to all buyers of a primary residence.
  2. Revise the FHA, Fannie Mae and Freddie Mac 2008 stimulus loan limit increases to make them permanent. (This was a significant increase in the threshold of mortgages which are defined as “conforming loans” over which the 2 now state-owned mortgage lenders provided underwriting and thereby more competitive interest rates). The Economic Stabilization Act, enacted in February, made these loan limit increases temporary, and subsequent legislation reduced the loan limits and made them permanent. This has broad implication for homebuyers in high cost areas.
  3. Urge the government to use a portion of the allotted $700 billion that was provided to purchase mortgage-backed securities from banks to provide price stabilization for housing. The NAR argues that the Treasury department should be required to use the newly enacted Troubled Assets Relief Program to push banks to:
    • Extend credit down to Main Street, making credit more available to consumers and small
      businesses;
    • Expedite the process for short sales;
    • Expedite the resolution of banks’ real estate owned (REOs) properties. (These are mortgagee sale repossessions).
  4. Make permanent the prohibition against banks entering real estate brokerage and management, further protecting consumers and the economy.

The package is designed to restore confidence to the housing market which they see as a fundamental platform to restoring consumer confidence in general as a component of establishing economic growth.

Now time will tell if the package proposed finds any support in Congress in what the NAR are picking will be what they describe as a “lame duck” period immediately following the Presidential Elections and before the new administration is installed in the White House. The NAR hope the that Congress will return to seek to provide support in the form of this stimulus package.

What is interesting is the influence this body holds in Congress. The NAR is the worlds’ largest trade body representing 1,257,500 members – a sizeable force which has in the past carried significant weight in lobbying on Capitol Hill. What I think is interesting is the extent to which organisations in the US openly and publicly involve themselves in the processes of government.

My comments are not a refelection on any such activities in general in NZ, I just wanted to share this perspective of what is happening in the USA, as it pertains to the health of the real estate market over there which was the lead indicator to the credit crisis we are all witnessing at this time.

It is interesting to read the comments of the US real estate industry as evidenced on the Inman News blog on this topic.

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