The Unconditional Blog

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Archive for the ‘International’ Category


Iceland – victim of the credit crisis, so what is property like there?

Posted on: October 18th, 2008 | Filed in International

The global credit crisis has taken its first casualty – not just at the level of a bank, but a country. Iceland is the first sovereign state to succumb to this crisis, having to seek urgent support from fellow Nordic neigbours and also Russia as it nationalised its 3 major banks. The question posed on in an interesting opinion piece by Neville Bennett is “Will we (NZ) go down  the Iceland route“.

As the bog post highlights there are similarities especially in terms of being a small independent state vulnerable to this credit crisis with such a high net foreign liabilities amounting to 160% of GDP in the case of Iceland, that compares to NZ at 89% and Australia at 61%.

I though it would be interesting to complement the financial analysis with some perspective of the property market in Iceland. Now whilst the comparison is made that Iceland is similar to NZ in size, that is only true when you measure both countries against say India or China, in reality the population of Iceland at 303,000 is only the size of Canterbury. It is a harsh landscape with the only habitable areas around its coast line with the centre of the country a barren harsh environment of geysers and volcanic wasteland. The land mass is roughly half the size of NZ at around 130,000 sq kms.

Some smart Google searching eventually brought me to the only significant real estate website in Iceland, not as you may have thought or or even hú (naturally that is house for sale in Icelandic). No in the case of Iceland the media companies seem to dominate with the website of the daily paper Morgunbladid providing a comprehensive portfolio of property.

The current exchange rate of Icelandic Kronor to NZ$ is around 67, so this means that property is not that cheap – take this 2 bedroom city unit on the market for around NZ$195,000, nice and modern layout, but given the scale of the economy and population it is no bargain. Clearly as the opinion piece by Neville Bennett states, the Icelanders enjoyed similar to NZ’ers property price inflation fueled by easy access to foreign debt attracted by relatively high interest rates brought about by a reserve bank using the weapon of interest rates to manage inflation – sounds familiar.

One interesting thing I did find in investigating Icelandic property was a government funded Housing Financing Fund (Íbúðalánasjóður) which provides long term low interest loans of up to Kr 20 million (NZ$300,000) for up to 80% of the purchase price of primary residences. The current fixed rate for periods of 20, 30 or 40 years are 5.4%!

A little outside the funding of this government scheme is this property at the upper end of the Icelandic property market, it is a 410 sqm house of 9 main rooms on the market for Kr 100 million (NZ$1.5m).

What is interesting and maybe is a result of a similar slow property market is a few properties listed which have defiantely been on the market a while evidenced by the snow – which given it is mid October now means that these were listed last northern winter – a tell tale sign not so conspicuous with NZ property.


10% off for 10 days – the US property market starts a sale!

Posted on: October 7th, 2008 | Filed in Buying / Selling a home, International

With the continuing problems in the US property market one of the largest and most respected real estate companies Coldwell Banker has decided that it is time to have a sale!

From the 10th to the 19th October the company is encouraging sellers to join up and offer their property at a discount of up to 10% of the current listing price (most US properties are advertised with a list price). This bold and highly innovative initiative is designed to try and kick start the lackluster property market into life.

Whilst clearly a smart bit of marketing, with extensive coverage across all the media – Yahoo, Wall Street Journal Market Watch – it seems a surprise that they forgot to add the details to their website for eager buyers looking to see what’s on offer!

Backing up this marketing programme is some very interesting statistics which are worth sharing. The company carried out a recent survey of 3,379 of their real estate professionals in markets across the United States, 56 percent said that listing prices in their market remain above where they need to be to attract qualified buyers. Additional findings from the survey include:

  • 77 percent agreed that the majority of sellers in their market still have unrealistic expectations regarding the initial listing price for their homes
  • 79 percent agreed that homes in their market that are priced appropriately are attracting more buyers and moving more quickly
  • 76 percent feel that a 10 percent or less reduction in listing prices in their area is all it will take to help push these homes over the “tipping point” to a sale

Our brokers and sales associates agreed that, even in the current climate, it will not take much movement to attract those buyers who have been watching and waiting” noted Jim Gillespie, president and chief executive officer, Coldwell Banker Real Estate LLC. “Depending on the market, a price reduction of just 10 percent or less just may make the difference in both satisfying sellers and bringing buyers to the table

It will be interesting to see the results and also to see if this tactic is deployed here in NZ.


Australian real estate now complete with Google Street View

Posted on: August 28th, 2008 | Filed in International, Technology, Website searching

Domain – the Fairfax owned real estate portal in Australia is the first of the Australian real estate websites to launch the Google Street View application within their site. The plans are in place for the NZ launch later this year, we are assured by Google. In the meantime have a wander down some suburbs from across the Tasman and literally peer over the fence!

The degree of coverage is pretty extensive as can be seen from this map of Northern Sydney where the key blue line on streets indicates the coverage for Street View. Equally outside of the major cities Google has driven down most of the streets. I found this place called Richmond on the Flinders Highway some 300 kms inland from Townsville in Northern Queensland – admittedly no houses for sale but you can still see all the homes in the place of less than 150 homes.

So be ready for the exposure of all of NZ’s streets soon – naturally we will be ready to offer it as part of the presentation on


A clearer view of mortgage broking in the US may help kiwis better understand the subprime meltdown

Posted on: June 29th, 2008 | Filed in International, Money Matters

It has long perplexed me to fully understand how a sophisticated monetary and financial system, so tightly regulated could come so unstuck as to facilitate the near collapse of the financial markets not just in the US but also globally through in part the subprime meltdown.

House and moneySure the US had been benefiting from an unbridled run of economic growth and perpetuating the model of the classic “land of opportunity” – but to see how loans could be written to people who had no requirement to prove the status of their income or assets (more likely liabilities) always staggered most people (at least in hindsight) and then to see that these new borrowers could be offered “low start mortgages” with rates half of what the flexible lending rate was at the time only could have resulted in one possible outcome – something the world has come to better understand over the past 12 months.

Well an enlightening piece of the puzzle is very neatly exposed in this excellent blog post from Jack M. Guttentag professor of finance emeritus at the Wharton School of the University of Pennsylvania. The post on Inman News entitled “Transparency is king in U.K. mortgage system” sets out to explain for a US audience the key differences of the UK system of mortgage broking from the US approach – for NZ the model of the UK is almost exactly the same as here in process at least.

The most enlightening perspective for me is the fact that whereas here brokers earn commission by managing the process of “selling” mortgages offered by a large number of banks and financial institutions where the lender is transparent in the offer of a mortgage rate which the broker resells.

In the US by contrast the brokers effectively package up mortgages sold to them at a wholesale rate adding their margin to then offer this to buyers. This process means that truly 2 brokers could offer the same mortgage to the same borrower sourced from the same financial institution but packaged up at different rates especially as these rates may vary for each of the years of a loan. Some may well say this is facilitating a true open market, whilst other may see unscrupulous ambition driving inappropriate behaviour.

The rates offered by lending institutions to brokers are not disclosed to the public, but are the closely guarded jewel of the mortgage broking fraternity. Based on this understanding it becomes clearer as to how the gulf between those that borrowed and those that lent became a chiasm through which so much risky debt was written and then resold with those who financing the debt not having any clear idea of the circumstances of the borrowers.

Not wishing to draw simplistic generalisations, this explanation provided by Jack M. Guttentag does at least demonstrate that the risks that created the heart of the subprime debacle in the US could not have been executed in the same manner in NZ due to the fact that the fundamental process of mortgage broking is so significantly different.


MyHome ( – an epitaph to aspiring media owned real estate websites

Posted on: May 20th, 2008 | Filed in International, Online marketing

Here is a sobering reality check for the challenges of the online market in the more sophisticated online world. Take an powerful regional media company (PBL), add the “software company of the century” (Microsoft), add A$20 million and develop a website, add liberal injections of national TV programmes and wait 16 months to build an online empire for real estate online.

MyHome Australia real estate website -closing its doors after 16 monthsThe result is the closure of a well funded and well supported real estate website in Australia! – just 16 months after launching to compete with the 6,000 kg gorilla of and its adversary MyHome is to close up shop and withdraw from the market. The reason for the decision is not clear although visitor traffic seems at the heart of the issue with latest stats of less than 500,000 monthly unique browsers, far short of the projected 1,000,000 projected at the launch.

Time will provide the full reasons behind the demise – but simplistically one could easily say that classically content is king!

Without a comprehensive portfolio of property to view, the consumer was less than motivated to visit a site that offered no significant benefit to other sites which people had become well accustomed to using. This despite extensive, expensive and comprehensive marketing campaigns. What is staggering is that this message was I thought learnt the hard way back in the internet bubble days across the world 8 years ago when billions of dollars was wasted building and advertising websites without content or value for the consumer.

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