The Unconditional Blog

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Archive for the ‘Media commmentary’ Category

10

Challenging times in Australia for online real estate search

Posted on: July 29th, 2009 | Filed in Media commmentary, Website searching

Google vs the Australian Property portalsThe launch 3 weeks ago of Google’s new mapping service for real estate search in retrospect slipped into life without great fanfare. It is only subsequently that the dust has been kicked up as the Australian media have started to report a growing stand off between the 2 major real estate portals – their media owned parents and Google.

At the heart of the issue is the question of whether Google’s move to provide map based search for property is anything more than an extension of the well established Google Search or whether this move takes Google into the operational domain of a real estate portal and as such states a desire by Google to compete directly with the established portals in Australia of Domain (Fairfax owned) and the market leading realestate.com.au (News Corporation owned).

At this time the two Australian real estate portals have stated that they will not supply a feed of listings on behalf of their customers – the real estate offices and agents to Google as in doing so they believe that Google is trying to compete directly for real estate buyers searching for property on behalf of agents. Google on the other hand sees its service as an extension of its well established natural keyword search – providing the public with a rich and engaging search experience, which then link to property portals and agents websites.

For clarification in simple terms (although not universally agreed) a real estate portal is a website that aggregates (for free or at a cost) a comprehensive selection of real estate listings and seeks to create tools to ease the property search process and provide the pubic with a great user experience around rich data. The end result may be in the form of a telephone call, an email or a referral web link to an agent or real estate office. The principle is based on the premise that buyers do not want to search multiple websites for property in a suburb when a portal can aggregate the results for very specific search – 3 bedroom house in this suburb at this price. Realestate.co.nz is a real estate portal.

This whole issue in my view revolves around this question: “Is what Google is doing with real estate map search any different from what they have always done in keyword search”.

Over the past decade as online real estate search has grown to become the first and last place people search for property, every real estate portal has spent directly and indirectly millions of dollars ensuring that their content is “found” and indexed by Google specifically so that the Google searches people do everyday for “homes for rent or homes for sale in xyz suburb” drives traffic to the portals. Most portals receive anywhere between 30% and 60% of their traffic from Google. To get this traffic they provide Google with no data, they simply let Google “read” and index their site.

Google therefore has always had an index of every listing of real estate in every country. The establishment of Google Maps real estate simply has added a single piece of data – the physical address. This is the piece of data that Google has found hard to access by indexing real estate websites, but is in the context of real estate so critical. With the address Google can places properties for sale or rent on a map.

So in Australia, these 2 major real estate portals and their parent companies have said they will not provide the complete data set for each listing with an address and further they have gone on to threaten the removal of advertising on Google search of their parent companies own media publications worth millions of dollars to Google.

What seems slightly ironic is the fact that the 2 major real estate portals in Australia have utilised the services of Google maps and been delighted to have had this excellent technology to feature on their own websites for years, allowing them to pinpoint the location of both individual properties and search results of multiple properties on Google developed maps; yet when Google takes that same data and presents it on a map on their own site the portals object.

Australian portals use of Google mapsA very clear principle of the web is open access to data – making content and data freely available – it is then the opportunities for business to find ways to monetise the aggregation of this data through advertising or premium services.

At this time only realestate.co.nz as the most comprehensive property website in NZ is feeding to Google maps on behalf of its customers – the real estate offices in NZ. Trade Me property as the other property portal has stated that they are not at this time feeding such data, although in this comment on the Fairfax owned Stuff website they state it is not a function of the decision taken by their parent company Fairfax in Australia.

5

Misrepresentation in newspaper reporting – another blow for the future of newspapers?

Posted on: May 3rd, 2009 | Filed in Media commmentary

Earlier this week I wrote a piece on the future of newspapers and their desperate need to embrace online and particularly social media as a critical means of engaging with audiences as the declining readerships, spiraling costs of manufacturing and shrinking ad revenues are very likely to see their timely demise.

Now to that list I would like to add the accuracy of reporting as a contributory catalyst.

When an article or analysis is published online in the every growing environment of social media as compared to hard print there is the instant ability for critique and contributory comment – this enhances the value of the original article and engages the audience. This is challenging to the newspaper industry as I judge it places more accountability to be 100% accurate rather then seeking to create articles to capture headlines and sell papers and with it advertising.

Just today I find my own comments made to a journalist from the Herald on Sunday misreported and inaccurately attributed in an article regarding mortgagee sales titled “But wait, there’s a catch“.

I was called this week by Andrea Milner of the Herald on Sunday requesting information as to the details regarding the sale price of mortgagee properties. I stated that as a listings website we had no visibility of the sale transaction process or resultant price in comparison to the listing price or value.

I stated that we analysed and reported the number of listings of mortgagee properties and the searching for mortgagee properties on the website regularly in the commentary of this blog. I shared with her the fact that the blog regularly charted the listings and also analysed the sales of mortgagee property as reported by Terralink International.

In the conversation I pointed her to the article I had written on the marketing presentation of mortgagee listings and the comment posted by John Ross of Professionals Upper Hutt regarding his success of capturing mortgagee properties for auction and the success of those sales at auction.

When you compare that written comment by John Ross on this blog with her quote from me I think it is very clear that there was an inaccurate attribution of the quote. Both are presented here:

The quote from the Herald on Sunday

Alistair Helm, chief executive of realestate.co.nz, says real estate agents will advertise properties as mortgagee sales to “lure people in” on the premise of a great buying opportunity, then take them to auction and achieve a higher price than what was expected by the mortgagee.

John’s comment on the blog was:

We have promoted mortgagee sales using this B&W method with run away successes. As we say,”drop your lines, let em bite and then reel em in”. The thing is, last year it was more important than ever to to make your bait more attractive than all the other choices in what was a market flooded with listings.
The B&W ads stood out, they got a whole lot more enquiry than all the others, the buyers got hooked thinking they would get a bargain, we put them in our auction room and many times over we sold above expectation, even surprising ourselves

Clearly I would have no means of of having any insight into auction activity or performance. I have always been more than happy to share facts and information as well as analysis with the media as I do on this blog regularly. I am very conscious of not commenting on matters for which I have no detailed information as I stated in this case.

I am naturally pleased that I am able to communicate through the medium of social media so that I can respond in a timely and accurate manner and more importantly in a medium that allows others to comment.

3

Believing that journalism dies with the newspaper is not true – there is life after newsprint

Posted on: April 29th, 2009 | Filed in Media commmentary

istock_000005336240xsmallThe editorial in this week’s Listener titled “Feel free … don’t take media freedoms for granted”  lays down a challenge in the final paragraph:

“Freedom of expression is an individual right. But maintaining it is the responsibility of us all. Feel free, of course, to disagree.”

The article seeks to perpetuate a somewhat retrospective view that only mainstream media can uphold the principles of journalism and that the inevitable demise of newspapers is more than just a concern over financials and readers but actually brings into question the very principle of free speech and accountability for impartial reporting.

I would like to challenge the contention of such an article. As the writer of this blog I think I have both the justification and the experience to make a contribution to what I feel is a valid discussion – one that should be aired and debated. That actually in itself highlights a fundamental challenge I would make to the Listener. They are a pure print publication, whilst you can read this editorial online, I cannot comment directly on this article. If you want to comment on the editorial your only course of action is to write a letter in the limited hope that they will choose to publish the response. A blog like this though can engage and stimulate a valuable interchange of opinions which adds to the richness of the original editorial.

The editorial makes the assertion that blogs “serve a completely different purpose (than mainstream media)” – I would content that there are more than a few highly credible, widely read blogs that investigate and shine a light into the news – both political and business. To say that “no one except the media takes upon itself the daily role of observer and critic of institutions like the government, using the experienced staff and the recourse to lawyers they need to do the job impartially and properly” is an elitist statement that conveniently tries to marginalise and stereotype social media to be the embodiment of extreme political views written by those who border on libelousness without due care or consideration to legal obligations. Far from it I would content that many professional bloggers are enormously careful and respectful of legal and professional ethics – even more so as their readers are never more than a click away from an alternative source of opinion and insight – compare that to the switching alternatives of an annual subscription to a magazine or newspaper.

Accompanying the editorial is an article titled “Riders on the Storm” which examines the demise of newspapers. Sadly this article cannot be read fully online until the 16th May.

What I found interesting in this article is the view that newspapers whilst recognising that their readership is declining; and having attempted to create a business model online, report an adjudged failure of online versions which they typically suggest generate marginal revenue (typically 9% to 12% of the print versions). This would seem to indicate that online has been a failure, however this analysis is flawed. To compare the revenue online to the revenue of print completely ignores the massive legacy of cost inherent in newspapers.

The fact is that the advertising lead revenue of newspapers is not a function of market demand lead pricing, but is more a function of a carefully managed scarcity of advertising inventory which has been in the past leveraged to create an income stream to support an archaic manufacturing and distribution machine. Think of it this way; the costs of the major newspapers amount to many hundreds of millions of dollars per annum as they have to pay for the print and distribution of billions of pages of newsprint using massive and costly printing machines and fleets of distribution trucks – all those costs has to be paid for somehow – the cost of the paper to you or I goes nowhere close to recovering those costs and that is why they generate hundreds of millions of dollars from advertisers. Now consider for a moment a new model of a newspaper – no paper, no printing presses, no fleet of trucks – smaller simpler, still employing journalist and reporters but publishing online, suddenly that revenue stream from advertising from the websites today looks less like 10% of total revenue and looks more like a healthy return over vastly reduced costs of operation.

It would have been valuable for the Listener reporters to have read an excellent book I am currently reading by Jeff Jarvis challengingly titled “What Would Google Do?” – in it he dissects may industries and examines the impact Google is making on our commercial and social lives. Naturally he looks at the newspaper industry and makes the assertion based on rich analysis and investigative journalism (he is and has always been a journalist) that newspaper must and can survive the “paper” era. He quotes the London based Guardian paper as saying back in 2005 having spent US$150m installing new printing presses – that these would be the “last presses” they ever bought. He contends that the newspaper industry needs to ask the hard question – what business are we in? – the manufacturing and distribution business? – no longer; the information business? -not a sustainable place as it becomes commoditised (thanks to Google); the community business? – not yet. No the key recommendation is that the newspaper’s future lies in becoming a platform for larger networks of news – be part of the flow of news and share and link with bloggers and engage in the conversations of readers as part of the news.

So where you may ask is the contextual relevance to real estate? – well the real estate industry is one of the largest purchasers of print advertising and interestingly in the Listener article they quote a local newspaper executive as saying that “The main difference between advertising figures this year and last year is the drop-off in recruitment advertising”. This comment blew me away – has he not noticed the massive slump in the property market – the real estate industry transacted $42 billion in sales at its peak – 16 months later that has fallen to almost half – that directly effects the newspaper spend by vendors advertising homes for sale. I think the issue for newspapers is as home sales climb slowly this year and next, how much of that money will never return to print – rather it is finding a more cost effective and accountable home in the likes of featured property adverts on our site and other sites where agents and vendors can measure real performance metrics of adverts to monitor traffic.

The fact is newspapers don’t need to die and nor with it does the freedom of expression, newspapers will only die (and with it the freedom of expression) if the owners of those newspapers fail to see the importance of uncoupling the paper from the newspaper.

6

Auckland rises up the ranks as top place to live

Posted on: April 28th, 2009 | Filed in Media commmentary, Regional News

Auckland - 4th placed world city for liveability - Mercer Survey 2009The Mercer 2009 Worldwide Quality of Living Survey has just been released and NZ’ers and Aucklanders alike have cause for celebration. From their 5th place ranking of 2008 Auckland has now nudged up one more place to 4th (well 4th equal with Vancouver). Auckland now enjoys the illustrious company of sharing the top 5 with Vienna, Zurich and Geneva to round out the top 5 and also importantly be the top city in the region.

This vindication of the quality of life that one third of NZ’ers enjoy living in Auckland seems though to have slipped the attention of the “Auckland” newspaper the NZ Herald. I came across the story whilst reading the Melbourne Age whilst over in Australia today. Whilst Melbourne is ranked 18th that city felt it worthy of running a key story of the day and appears on their home page. The NZ Herald despite my review of the online digital print version and the online website shows absolutely no signs of the story! Rather and in a somewhat telling judgment of what some may say is typical of newspapers to sell bad news is the story that some parts of the new proposed “Super City” will pay higher water rates. Clearly I recognise that the issue of a global flu epidemic is a key news story but one would think that a balance of stories would provide a rich news experience for a newspaper and its readers.

Auckland is a wonderful place to live and work, sure it has its problems – most major developed and growing cities have their problems – those problems are the consequences of the growth of this city which now can challenge to be a credible place to live and work within the Asia Pacific region, a region which no doubt is going to be the powerhouse of the global economy for the next two decades. So with this as a backdrop of economic focus what better opportunity is there for our major city to face outward to Asia and being the number 1 ranked city in the region to attract business and talent to come and live and grow to the benefit of all New Zealanders.

The only caveat is the need for Auckland to plan, act and execute as a cohesive and progressive outwardly focused city – the plan for the new central single governing body is the solution to the factional infighting, narrow parochial patch protection and myriad of duplicated of bureaucracies that has plagued Auckland for decades. The vision for Auckland was crafted back in 2001 when a smart group of passionate Aucklander’s decided that these impediments to growth needed some greater public exposure and international benchmarking. So with private funding and broad based representation a new organisation was born “Competitive Auckland” – its vision was to assist and challenge the governance and leadership of local and national government to ensure that Auckland could attain its rightful place as a leading global city of the Asia Pacific region.

That organisation is still active today – it has morphed into the Committee for Auckland and has played a significant role in spearheading the initiative for a single governance body for Auckland. The organisation does not seek to capture the headlines as a self serving promotional vehicle, rather it likes to use its influence and capabilities to effect change and bring together the people who can makes the difference and who have the mandate and resources to effect such change. Auckland and NZ has much to thank this organisation for, as it has in its own way contributed significantly to the current ranking of Auckland and will continue to contribute this great city’s future.

Disclosure of interest, I was the Executive Director of Competitive Auckland and The Committee for Auckland from 2002 to 2004.

UPDATE – in the time it has taken me to write this blog post I see that the NZ Herald online has posted the story – pity it missed the printed version earlier – but then again why would you read the print version when the web version is always the most comprehensive and up-to-date!

1

Mortgagee properties lose some of their lustre

Posted on: April 22nd, 2009 | Filed in Media commmentary, Website searching

There was a time just a few weeks ago when the media wires were abuzz over the shear scale of mortgagee property sales. It reached a crescendo in mid February with the somewhat exceptional Sunday Star Times headline of Mortgagee sales rise ‘frightening’

Well it appears that our national fascination for such properties has waned significantly both in terms of the interest in searching for such property and also for the availability for such properties on the market. The chart below shows the level of inventory of mortgagee listings (blue area of the graph) tracked against the level of searching for the keyword of ‘mortgagee’ on the site (red line) as represented by the % of all keyword searches each week.

Mortgagee listings and search data NZ - Realestate.co.nz April 2009The word ‘mortgagee’ is still the #1 search phrase on the site with over 1,000 searches in the past week, however this was dwarfed by levels of 3,500 per week in mid February – such is the power some might say of the media to drive interest in this property market.

In addition to a cooling of searching interest the number of mortgagee property listings on the website has been steadily declining with the level of new listings not keeping pace with those on the market finding buyers. From a peak of 412 listings in the second week of February the number has declined to the latest level of just 335. Out of interest this total is an audited number that excludes listings (18) which seek to leverage the keyword of mortgagee to attract viewer attention.

On a regional basis the majority of mortgagee properties definitely lies within the main metropolitan centers with Auckland accounting for 45% of all the listings closely followed by 17% in Canterbury, then followed by the Bay of Plenty and the Waikato with 7% a piece and Wellington a distant player with just 3% of all listing. The graph below shows the average number of listings over the past 6 weeks as compared to a year ago.

Mortgagee listings by region of NZ - realestate.co.nz April 2009The trend of mortgagee listings had shown a steady rise through all of 2008 to reach a peak of 423 in the middle of November whilst declining at Christmas time before rising again through January. The one irrefutable fact of mortgagee properties is that they cannot sit on the market for an indefinite period unlike normal property listings – there is urgency on the part of the lender to liquidate to clear the outstanding debt.

1

More information is valuable in assessing the right time to buy property

Posted on: April 12th, 2009 | Filed in Buying / Selling a home, Media commmentary

sunday-star-times-12-april-09The Sunday papers are unanimous in their predictions that now may be a good time to buy property – so goes the headline in the Sunday Start Times quoting Tony Alexander BNZ’s Chief Economist. His proposition is based on the three fundamentals of the housing market – immigration, construction and interest rates.

Matched to that Bernard Hickey at interest.co.nz has shared his insight into the view that now it is almost cheaper to buy than to rent. His analysis reported in the Herald on Sunday states that with interest rate declines matched to property price falls it is now cheaper for a young couple seeking a first home to buy rather than to rent. The margin is slim with the calculations that it now takes 23.7% of after-tax pay to afford the rent on a three bedroom house, while it takes 22.3% to afford the mortgage. The house in question is not of a median price but is judged to be at a price point midway between the lowest price and the median – the 1st quartile price.

To find such forecasts certainly flows naturally from the strong sales growth figures released last week by the Real Estate Institute (REINZ) showing a 29% increase in sales for March 09 as compared to March 08. As can be seen from the graph below after such a fallow period for so much of 2008 the monthly sales figures have shown some favourable levels of activity, certainly not of the hyper activity of 2007 but a measurable improvement.

NZ property sales - REINZ statistics April 2009Another article featured in the Sunday Star Times was a commentary on the comparison between NZ / UK and US house prices in terms of % falls in prices from the peak month of pricing.

The analysis comparing the 3 markets and using the most respected measure in each market shows the fact that in the US the price of residential property is now down 29% from the peak (July 2007), the UK is down 21.8% from the peak (Aug 2007) and NZ is down 4.8% from the peak (Nov 2007) – this 4.8% figure reflects the latest March statistics from the Real Estate Institute which showed median prices had increased slightly in March. The figure quoted in the article of a 6% fall from peak was based on February data.

These numbers are detailed in the graph below showing the 6 year growth of property prices on an index basis in NZ and UK and then the subsequent fall over the following 19 months in the UK and 16 months in the case of NZ.

UK and NZ property bubbles Apr 2009As stated in the article the circumstances for the market collapse in the UK and the US are very different to the NZ property market – primarily in the US based around unsustainable speculation in new home construction fueled by sub prime mortgages and in the UK rampant “buy-to-let” speculation equally fueled by margin loan criteria. Certainly the global factors of credit tightening, economic slow down and rising unemployment play negatively on the property market but sharing comparable market statistics provides what I hope is valuable insight.

7

Auckland’s property market – just recovering or on the move?

Posted on: April 4th, 2009 | Filed in Buying / Selling a home, Media commmentary, Real Estate Industry

NZ Herald headline - property market on the move in Auckland Apr 09Clearly the headline makes the claim that the Auckland property market is “on the move” supported by the 46.2% growth in year on year sales as reported by Barfoot & Thompson yesterday for the month of March. At the level of 924 sales for the month this does represent a very strong level of activity in the market, but as the article goes on to detail with a balance of commentators these numbers are unlikely to be the start of a significant resurgence.

The figures from Barfoot & Thompson when seen in context in the 2 graphs below show a picture of a market finding some life – not as yet surging on the move. The 3 month moving average of sales volumes certainly show how consistently low activity has been in the market over the past 12 months with hardly any signs of seasonal fluctuations – let alone any signs of growth, set against this the March data has pulled the 3 months to March up considerably.

Auckland property sales - B&T sales volumes to March 2009

The pricing in the market though retains a downward track with a clear level being found at around the $500,000 whereas during 2007 the $550,000 level was proving to be the consistent level of price. The year-on-year slight pick up seen in February sales price has returned to a negative trend with a year-on-year fall of around 5%.

Auckland property prices - B&T sales prices at April 2009

As the commentators rightly say the sales volumes are likely as a sign of latent suppressed activity on the part of the buyers and sellers being triggered by lower interest rates and the media not being so doom laden.

Another contributory observation I would make is the fact as highlighted in a blog post on Zoodle written in January titled “Property sales likely to pick up in 2009” . The total sales for residential property in 2008 at around 56,000 was at an all time low in both real and normal terms. The 2008 sales when viewed as a % of all dwellings represented just 3.7% whereas the average sales level as % of all dwellings over the past 20 years is 6.2%. This clearly showed that 2008 activity was frustrated by sellers and buyers who needed to move but were unable for a myriad of circumstances and what was needed was a catalyst which is what has fueled this recent activity – not the start of a new market resurgence. The fact is as we have seen in the first quarter of 2009 the level of sales volumes lifting off the bottom, and we are quite likely to see sales growth of potentially upwards of 20% this year as we might well head towards 70,000 sales across the country – that would still be well below the average sales % of all dwellings which currently equates to around 90,000 properties.

The fact is the that the uncertainties of employment, credit availability and economic wealth weigh heavy on the market and the consumer and in these circumstances the property market is more likley to be frequented by well informed, financially aware and stable buyers ready to meet what they judge is the market price.

42

Discussion: The housing crisis lies in lack of supply, not falling prices

Posted on: March 16th, 2009 | Filed in Media commmentary, Real Estate Industry

An article published today in the NZ Herald titled Housing crisis lies in lack of supply, not falling prices is sure to provoke some healthy debate. The article by Charles Lowndes a professional real estate agent with over 30 years experience both here and abroad, provides a perspective of the outlook for the real estate market in the coming years. The limitation of the article in both print and online is the inability for comments to be made as to the support or rejection of the hypothesis, that is why this blog can provide such an environment for discussion.

The article is written by a real estate agent and this is bound to bring the predictable call of “self interested promotion of the market” – however I find this attitude surprising when one would usually tend to respect the views of a person who has dedicated their 30 year career to understanding their industry. Further commentators in the financial services industry never seem to be tarred with the same brush when they dissect their market – after all financial service companies earn commissions trading financial products

The article makes the proposition that the combination of strong immigration as a function of the global recession matched to the stalled market for the building of new homes will put pressure on the supply side of the market in NZ. Now there may not be a crisis of supply, but the reality of the market needs to be recognised.

The content of the article draws parallels with recent posts on this blog – earlier this month in the post “Emerging concern over supply of new homes as consents plummet” it was highlighted to the extent to which consents had fallen below the supply level required to meet market demand. NZ unlike the US market does not have a surplus of new homes which are unoccupied. The 80,000 homes for sale as listings on realestate.co.nz are in the majority occupied and are being sold so home owners can move on.

The post just last week “Examining facts on the state of the real estate market” spoke to the growing interest in the property market. Subsequent to this article and others written last week there has been those who have claimed that the market is not awakening, citing the year on year performance of February 2009 with 2008 (down 18%) and 2007 (down 44%). These figures are true however a perspective overlooked in all these analysis is the relative growth at this time of year. There is no doubt that due to concerns about unemployment and tighter credit from lenders the market in terms of property sales is at an all time low, but as the chart shows below the relative growth between January and February this year is far in excess of the seasonal trend.

NZ property sales - Jan and Feb in prior years

7

The right time to buy a house ? – that is an individual decision, but people are looking

Posted on: February 26th, 2009 | Filed in Media commmentary, Website searching

nz-herald-front-page-26-febThe headlines of the papers are again flashing lights on the housing market – only a week ago we had “frightening rise in mortgagee sales” and today “ Expert’s tip – Now’s the time to buy a house“.

This latter quote not from a real estate professional but from the chief economist of the BNZ Tony Alexander. His view is that if you feel that you have security of employment then now represents a good time to buy a house – especially if you can secure that mortgage at a rate below 6%, ideally around 5.5% fixed for 5 years which based on historical trends would be an excellent rate.

The article naturally provides insight from sections of the industry and regular commentators, all of whom provide insight but not a lot of facts. With the exception of Barfoot & Thompson who report a record week of sales for last week at 241 – the highest level since November 2007, which coincidentally was the market peak of prices when median price hit $352,000.

It will take another couple of weeks until the REINZ monthly sales stats show the state of the market and whether the sales will reach anything close to the Feb 08 figure of 6,356, certainly a long way from the January 2009 sales of 3,706.

In the meantime a key lead indicator of the market can be seen by the scale of online searching for property. This research is now fairly stable as online searching is now the first point of entry into the market for most property hunters. Tracked on a weekly basis over the past 3 years the statistics from Nielsen Online show a very active start to the New Year.

The graph below tracks all property listing websites, this includes the major property portals of realestate.co.nz and trade me property as well as the leading 6 real estate company websites as well as open2view. The data is presented on an index basis to provide a realistic year on year comparison.

NZ online traffic to real estate websites Jan Feb 2009The blue line shows for the first 8 weeks of this year that having awakened from a traditionally quiet period around Christmas. Activity of searching for property climbed well past the early peak of last year and is now at an index of 120 as yet not showing the traditional plateauing of activity witnessed in 2007 and 2008. In fact the week just ended (16 – 22 Feb) saw an all time high of activity – 1,096,703 individual sessions viewing property online in the week.

The comparison on a week by week basis for the past 8 weeks is shown in absolute terms in the bar graph below – this clearly shows the activity level in February has been spurred on – likely as not by the interest rate reductions.

NZ online real estate traffic Jan Feb 2009These graphs and statistics are no guarantee of future sales, but demand has to start somewhere and potentially these stats could be a lead indicator. Certainly the circumstances a year ago when negative consumer sentiment impacted online searching in late February certainly impacted sales later in the year – as ever time will tell.

14

Headlines can be misleading – especially when it comes to economic forecasts

Posted on: February 23rd, 2009 | Filed in Media commmentary

istock_000003907033xsmallThe newspapers and TV were again full of the headlines this morning of the forecast rise in unemployment to 11.2% coupled with house price falls of 35% – how bad could it get??

The repercussions of these headlines spread far and wide through the economy and the ripples have sometimes unexpected consequences – let me explain.

The fact is that in this case the headlines are attention grabbing and don’t truly represent the report from which they are quoted. It is good that the web provides a balanced reporting environment with the benefit of greater independence in reporting provided by the likes of Bernard Hickey on Interest.co.nz amongst others to provide context to this report by the New Zealand Institute.

If you read the report you find that these forecasts are not the opinion of the NZ Institute at all they are part of a US research into the trends from an aggregation of a number of recessions over the past century and to quote the very short piece from the research:

The eminent American economist Kenneth Rogoff and co-author Carmen Reinhart released research showing that recessions originating in financial crises such as the current global recession are generally protracted affairs associated with profound declines in output and employment. On average, real house prices decline 35 percent stretched out over six years, while the downturn in equity markets lasts for at least three and a half years. Unemployment rises, on average, by seven percentage points.

The Institute then go on to say :

Applied to the New Zealand context, for example, this points to a worrying possibility that unemployment could rise from a historical low of 4.2% to a rate of 11.2% over the next two years – a rate exceeding the most pessimistic forecasts at the present time. This simple extrapolation may be misleading, however.

It is an 11 page report and this is the only reference to this figure. Overall the report which the mainstream media have latched onto was not (despite how they may have constructed it) a report on the likely future rate of unemployment, it was a detailed analysis of the credit issues for funding NZ in the future and provides some detailed proposals.

There are a ready army of doomsday merchants out there who love to have us believe the end of the word is nigh! – the fact is economic forecasting in today’s uncertain times is very difficult, however the important thing to bear in mind is that the developed world still wants to retain living standards and the developing world wants to aspire to attain such living standards – that should be (and hopefully will be) sufficient for the global powerhouse economies to fix the issues and restore some confidence and stability in the banking system.

The problem is that the average person in the street does not have the time or inclination to read such reports, preferring to graze on a diet of TV news and newspaper headlines – no problem with that except when the headlines impact the decisions they make and the lives of other people they impact.

Likely as a result of these headlines another property sale has fallen over. Speaking to a real estate agent today he recounted this story:

On the ZB news at 7am this morning the first few items that Kiwis hear while they are driving to work – unemployment may exceed 11% and house prices are more likely to drop 35%.

Got an offer late yesterday, been working it with small gap to close, then this morning buyer calls to say no we will leave it and wait a bit longer. I say what if they will take your last offer – he says nah – withdraw it! – makes you wonder if he had his radio on!

So another sale falls through, another vendor has to go through the whole sale process again and an agent has to start the whole marketing process again – for him no likely earnings for this next few weeks. The ripples from the headlines spread far and wide.

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