The Unconditional Blog

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Archive for the ‘Media commmentary’ Category

31

A “frightening” rise in mortgagee sales?!

Posted on: February 15th, 2009 | Filed in Media commmentary

sunday-star-times-15-feb-09The Sunday Star Time headline today would have the reader believe that sales of mortgagee property (re-possessed by the bank) are rising at a “frightening” rate.

The article makes the following quote:

“TradeMe’s head of property Brendon Skipper and realestate.co.nz’s Alistair Helm say the speed of the increase is frightening”

I would like to set the record straight as I would not like to be misrepresented.

  1. I did not in the conversation with the journalist state that the rise in the number of listings of mortgagee properties on the market was “frightening” – I can accept that the quote could be misattributed as it seems to be a “joint quote” from both Brendon Skipper and myself. Clearly I cannot speak for any comment made by Trade Me.
  2. The level of listings on realestate.co.nz of properties that are described as mortgagee is not “frightening” – the fact is that today there are 298 listings – this represents just 0.37% of all residential property listings on the website. There are 81,252 residential listings of properties for sale from a total of over 117,000 listings on the website. A figure of 0.37% represents one listings in every 270.
  3. The current level is significantly higher than this time last year when the total was 122, however as shown in the graph displayed just last week on this blog the current level of 298 is not the highest level witnessed on this website – back in the final week of October last year the total stood at 311.
  4. The blog post last week “Mortgage listings on the rise” (which was the source content I directed the journalist to review) contained some valuable comments – one particularly from someone who has taken the time to review some of these “mortgagee” listings and had noted that they were not all true mortgagee properties for sale. Some had included the word “mortgagee” in phrases such as “Cheap Like a Mortgagee Sale!!” & “You Want Mortgagee Pricing??” . It is important to reinforce the fact that the real estate industry and our website does not have a specific category of listing which uniquely defines “mortgagee” – therefore any search for “mortgagee property”on the site is using a keyword search for the term in the listing description.
  5. Finally it is important to note that the newspaper headline states “mortgagee sales rise” – the only fact in the article is that the number of listings on 2 major websites which feature the word mortgagee is significantly up on a year ago. There are no facts availble in the real estate industry stating that the sale of mortgagee property is rising, or even how many mortgagee properties have been sold.
22

A higher degree of certainty appears to be creeping into the property market

Posted on: January 7th, 2009 | Filed in Media commmentary, Money Matters, Real Estate Industry

istock_000006631415xsmallMedia speculation of the prognosis for this year’s property market has in my view started with a very level headed perspective – and I thank Anne Gibson of the NZ Herald for that.

For whilst the headline may be designed to capture the attention “House prices – how low will they fall?” – the substance of the contributors comments show a higher degree of alignment and with that I would judge comes a degree of certainty and stability – something that was significantly lacking in 2008.

The key comment from Tony Alexander (BNZ) “Although sales remain very weak they may almost be at their cyclical low and some improvement is likely before the middle of 2009” reflects well the sales statistics which will see the final number for 2008 at around 56,000. This is an all-time low and likely-as-not will see an improvement in 2009 mainly as a function of the fact that there is always a segment of the market that has a need to move house, rather than a simple “want”.

On property prices whist there is no complete consensus, the trend expressed by all commentators is for a fall in prices in 2009 – that group includes the Real Estate Institute. Whilst extreme views will always exist the main body of opinion expects to see prices down in percentage terms by single figures rather than double digit falls.

It is interesting to apply the percentages to the median prices to see what might be the outcome in real terms. Remembering the current median price as reported in November was $337,500 and the peak of prices was at $352,000 which was in November 2007, so prices are down 4.1% from the peak.

  • The Reserve Bank estimates that by end of 2010 prices will fall in real terms by 16% from the peak – that would see the median price at $295,680
  • REINZ expresses a view of a fall of between 5% and 10% this year, that would see prices at this time next year of between $303,750 and $320,625
  • The BNZ is stating a further 5% fall in prices this year, that would see prices at this time next year of $320,625
  • UBS economist Robin Clements expects prices this time next year of $299,200
  • Brendan O’Donovan Westpac’s chief economist expects this year to see a 5% fall to $320,625

Whilst the world is still facing economic uncertainty and growth is at best slowing considerably and as stated earlier in terms of NZ property there is no complete consensus on price expectation, I think there is some valuable take-away from the fact that there is a sense of certainty of the direction and general scale of price falls for the year ahead. This could well assist the market as a large component of the stagnation of the market in 2008 was directly attributable to uncertainty in the minds of property owners.

3

Property prices – median vs. average? – how confusion can arise

Posted on: December 22nd, 2008 | Filed in Media commmentary, Regional News

The headline of the morning paper makes for dramatic effect – “NZ’s first $2 million dollar suburb!”

All over the country people stumbled over their breakfast to find out if they live or know someone who lives in the named suburb………. Herne Bay in Auckland! The article claims Herne Bay over Remuera as the first suburb where the average price has broken the $2m barrier.

Naturally working in the industry I was somewhat surprised, as I would have thought that the prize would have more likely to have gone to Queenstown. Equally I was surprised as I know there are many properties in Herne Bay that are well below $1m. As of today there are 66 Herne Bay listings on  our website with the highest at $4.95m and the lowest just $390,000 – it is actually a pity that of the 66 listings only 15 have a displayed price – the rest are by “Negotiation” – but that is another story.

What lies behind the headline is as ever as important as the headline itself. For the sales data for these 2 Auckland suburbs provides a very useful example of how insufficient data can  result in misleading statistics. More particularly how average price can be influenced far greater than median price when data numbers are low. Take a moment to see the detailed data for the 2 comparable suburbs of Herne Bay and Remuera.

Herne Bay

In the 12 months from December 2007 to November 2008 there were 44 reported sales by real estate agents in the suburb – total sales value – just under $83 million, resulting in an average price of $1.885 million. The graph below shows the distribution of sales from highest to lowest.

Herne Bay property sales (REINZ) - Dec 2008

Whilst the newspaper article sighted an average price for Herne Bay at $2.19m, this analysis does not show it that high (the data analysed here is from reported sales provided by the Real Estate Institute – REINZ, the data source is not quoted in the newspaper article). The point to note is that close on three quarters of all sales of property in Herne Bay in the last 12 months were actually below $2m.

When it comes to the Median price as opposed to the Average price the difference is very striking – the median price over the past 12 months is $1.315 million – a difference from the average of $570,000. The reason to find such a big difference is the extreme price of just 2 properties, both fetching over $8m. These 2 properties significantly skew the figures. If these 2 individual properties were removed from the data set – the result of the remaining 42 properties sales would show the median price of $1.310 million (down $5,000) however the average would fall to $1.553 million (down over $330,000). Clearly demonstrating the vulnerability of average price to extreme data points from within a small data set.

Remuera

By contrast the data for Remuera shows a vastly different perspective. In the 12 months from December 2007 to November 2008 there were 315 reported sales by real estate agents in the suburb – total sales value – just on $376 million, resulting in an average price of $1.194 million. The graph below shows the distribution of sales from highest to lowest.

Remuera property sales to Nov 08

The median price for Remuera over this period was $919,000, a difference of $274,000 as compared to the average price. Just as with Herne Bay there were a handful of very expensive property sales, four of which were over $5m with two of them over $6m.

Whilst as the graph shows these were exceptional they had a lesser impact on the average price. By removing just the 4 which sold above $5m the average price comes down to $1.128 (down just $65,000) whilst the median moves to $915,000 (down just $4,000).

What this analysis seeks to demonstrates is the complexities of reported pricing for property given the diversity of properties that makes up a suburb. Additionally it clearly shows how smaller data sets with an extreme range of data points can significantly skew statistics, especially when it comes to averages and this can therefore lead to some claims and headlines which end up not being totally reflective of the genuine state of the market.

26

In defence of real estate agents

Posted on: October 13th, 2008 | Filed in Media commmentary

Let me start by stating that this blog post is not expressing an opinion of the Real Estate Institute (REINZ) – nor is it endorsed by the Institute. It is an opinion by a person who works in the real estate industry, running a website for the industry as a commercial business. It is for this reason alone that I am moved to bring to task the writer of the front page article of this week’s Listener magazine – Gareth Morgan.

Unfortunately the Listener does not provide a website that publishes the full content of the article, for that you will have to wait until the 8th November, or resort to rushing round to the local dairy. I therefore will judiciously quote from the article so as not to infringe the copyright, however I believe in doing so I will not stray from the context of the article.

Let me say that 90% of the article “Avoiding Armageddon” is well researched, well written and what I would judge to be a fair assessment of what will likely pan out from the current crisis in the next few years. Further I take no exception to Gareth Morgan’s assertion as to the likely trend and scale of property price falls. He is a respected and intelligent economist. No; my challenge to him is over the 3 paragraphs written as one of 2 possible scenarios in which “the real estate market might adjust if this global slump just keeps rolling”.

The paragraphs in question are these:

This is a buyers’ market now and so seller and real estate agents are on the back foot. Agents are commission salespeople, so naturally they want the highest price possible for the property, as that maximises their profit. Sellers also want the highest price, whereas this is absolutely in conflict with the buyers objective. This is why in this very inefficient sector – where to transact a house the fee typically is 3% compared to under 1% for shares or bonds – real estate salespeople have been able to exercise undue market influence.

For instance, in a bull market, common unethical practices of real estate agents include having their mates make false bids in auctions, buying properties and then on-selling them to unsuspecting clients, and running closed tenders to deliberately suppress transparency and capitalise on buyer disadvantage. In New Zealand, their industry body has been outstanding in its defence of these tactics to exploit buyers and manipulate market forces.

But in a falling market, property sellers and their agents will find the shoe on the other foot, and buyers will find opportunities to at last turn the tables. Agents will have to work a little harder to procure sales for their clients and will not worry at all about stitching buyers into contracts for overpriced properties. That is very easy to achieve in a collapsing market and they’d be quite happy to see a buyer catch the falling knife of a weakening price, such is their vested interest.

These comments are in my view disrespectful, ill informed and gross generalisations of the people who work in the real estate industry. Let me explain why.

  1. Real estate agents are commission sales people – self employed and looking to earn a fair dollar – not unique as there are many other commission based sales people – selling carpets, air conditioners, life insurance etc. All have one motivation – to close the sale. So to say that real estate agents want the highest price for a property is too simplistic – yes, a higher price earns more commission, but a sale is what they want, and more than that they want a satisfied buyer and seller, after all their livelihood is based on reputation and referral. Look at the reality of a real estate agent – they list and want to sell a $400,000 house – do they work with the buyer and seller in challenging circumstances today to try and facilitate a sale today at say $360,000 or do they in Mr Morgan’s view hold out for a $400,000 sale? The reality is that in terms of cash-in-hand the difference to an average salesperson of these two amounts is (after tax) just $320. So in their shoes do they work to facilitate the sale at $360,000 and earn $2,895 today or do they sit around waiting for months in the hope of earning $3,215?
  2. To say that the real estate market is inefficient and in the same breath compare the typical 3% commission with 1% for shares and bonds is again over simplistic. The real estate market is very open, transparent and highly competitive – every year competitive models appear – last year The Joneses tried valiantly to reinvent real estate, there are operators in this country charging 1% – in the US it is 5.5% on average. To transact shares and bonds is no more than digits on a screen, to transact real estate takes a lot of speculative unpaid time on the part of agents in the hope of firstly winning the account and then closing the sale. The fact of this industry is that in the past 12 months the total value of all sales by agents is $26.5 billion representing a commission of say at 3% of $794 million. Now given the average proportion taken by a single agent of the gross commission is around 50% that means that with around 15,000 agents the average gross earnings for each agent in the past 12 months was $26,500 – that amounts to just $13 per hour!
  3. The phrase “common unethical practices” is used in the article – the definition of common practice is “something that is usually or regularly done” – I therefore feel that this is a case of a gross generalisation. There are around 15,000 agents operating in NZ (many are leaving this industry every day as the property market continues to collapse), but to say that these people “commonly practice “unethical practices” is clearly not the case. There have been a few cases where this has happened but take any industry that employs 15,000 people and transacts business worth $26 billion dealing with 100,000+ customers and sadly you will find unethical practices – not all of the time, but all do – you only need to look at the heart of the credit crisis and the greed of financiers to find examples.
  4. Lastly to say that “Agents will not worry about stitching buyers into contracts for over priced properties” is again ill informed. Agents do not go knocking door-to-door trying to stitch up buyers – buyers come to them. In today’s web-empowered world the power is firmly with the buyers and seller – not the agent. The agent acts for the seller – their role is facilitation and negotiation, they do not force anyone to buy anything – leave this practice with the door-to-door salesperson.

The facts are clear. This is a very depressed property market – a year ago the total annual sales in the preceeding 12 months was 98,905, a year later it is 63,366 a fall of 36% – thousands of agents have left this industry, many more will follow. Real estate offices are closing. The agents that remain are staying because they know they can provide a great service, many have been in the industry a long time and have built up a strong reputation. This industry may not have a high regard in general terms, but ask 100 people in the street today if they were going to sell their property – would they use a real estate agent? and how do they view their last transaction ? – I know the answer to the first question is 74% and the second answer would probably be pretty satisfied. So why should a good economist choose to knock these people who are just carrying out their chosen career and in so doing providing a good service?

Alistair Helm

CEO – Realestate.co.nz Ltd

9

Are you in the market to buy or sell a property?

Posted on: September 9th, 2008 | Filed in Media commmentary

I came across this post on the TVNZ website today – they are keen to hear from anyone who would like to participate in a special report on the property market.

I certainly feel that this report would be more valuable and representative if it can benefit from a wide audience base. So in the spirit of public cooperation I would encourage you to participate if you are who they are looking for.

Check out their online article or email news@tvnz.co.nz

5

A foriegn invasion of property buyers! – that is what some reports would have you believe

Posted on: August 30th, 2008 | Filed in Media commmentary

This week has seen some interesting “piggybacking” of property related stories which have captured the interest of political parties and journalists alike. I think there is value in outlining some facts regarding these articles.

The first article to appear was in The Herald on Sunday entitled “Overseas buyers home in” – I was asked to comment for this article which had its origins in some investigative journalism into recent sales of property to overseas buyers in some parts of Auckland. The article drew heavily on the input of real estate agents (take note of that – it becomes relevant later!). I provided some statistics to this article on the relative growth in visitors to the website from overseas – specifically the UK, Australia and the USA. All three of which have been a key part of our traffic for many years.

The scale of the growth was reflected in the fact that in the space of 12 months our international traffic had risen from 22% to 27% of our total. Remember these statistics are just for website visitors. We have no way of knowing the identity, intent or circumstances of any of these visitors! – for all we know they could be overseas school students doing a project or elderly grandparents viewing prospective new homes for their overseas grand children. There would need to be fair number of these as our weekly overseas visitors often exceed 30,000.

Following that article the Green Party put out a press release entitled “Speculators could shut out first time buyers” – the premise being that NZ was being invaded by thousands of speculative property investors who were having a catastrophic effect on our housing market; and the government should act now to restrict purchasing of property by non – New Zealander’s.

The question is – where are all these sales to overseas buyers? – the current level of sales is at the lowest for well over a decade and a half and prices are at best stagnant and worst on the way down.

Anyway the story has continued with today an article from the Waikato Times entitled “Foreign invasion – just a myth say real estate agents” – if the tuth be told, there was no invasion in the first place! and the original article came from real estate agents!

The key fact though to bear in mind from this piggybacking is just how local real estate is – whereas Hamilton may not have seen any overseas buyers, some parts and sectors of the Auckland market may well have. To make generalised statements that the market is doing this or doing that is always going to be open to interpretation simply because every real estate market is a unique set of individual properties driven by unique circumstances and distinct groups of people.

An alterntaive view could be that we are in a lull in news that preceeds an election and as ever stories of property and speculation as to the state of the market capture readers attention.

22

Newspapers and real estate – a match made in heaven; now beginning to show signs of disaffection

Posted on: July 7th, 2008 | Filed in Media commmentary, Online marketing

Newspapers vs online in the real estate raceThe reliance on newspapers by the real estate industry has been an enduring relationship – one that has seen many a boom and bust in the latter’s industry cycles, and yet through all of that, the two have been inseparable – a perfect symbiotic relationship.

Newspapers have delivered the captive audience and offered the visual medium so critical in portraying property for sale at what has been a cost effective rate. The real estate industry has found the layout opportunity of the newspapers very much to their liking with clear sections focussed to bundle key company brands rather than location based presentation. Allied to this the individual agents have grabbed the opportunity to profile themselves as part of the newspaper advert for a client’s property again bundling their portfolio as a subset of the company pages. All very efficiently handled and mutually supportive.

But as with every other industry and in fact every advertising medium the steady march of the internet has begun to expose some deep cracks in these relationships.

The newspaper industry when it comes to real estate search is struggling to maintain a relevant and credible offering – the market research from Nielsen Online as of July last year showed that in the 12 months running up to the report the rating of newspapers as the most actively used medium for searching for properties in the past week had remained static at just under 50% of all buyers, whilst by comparison the web has rocketed from 70% to 80%. (The latest update to the research will be available shortly and based on overseas trends is rising at a stellar rate towards 95%).

The impact from the latest data from the US is also showing the effect on the bottom line of the newspaper industry. The statistics from the Newspaper Association of America just released for the 1st quarter of 2008 show just how much the real estate industry is fleeing this once critical medium – a 35% decline in spending in the 1st quarter of this year as compared to 2007 – just US$619m was spent – representing a net loss to the newspaper industry of US$334m!

Real estate newspaper advertising in the US It is interesting that these figures were reported in the NZ Herald the other week, but were not featured among the headlines of the day. The adjacent graph shows the extent of the decline in real estate advertising on newspapers in the US over the past 3 years – a period that has seen over a billion dollars removed from newspapers’ coffers and reinvested in other media or simply not spent.

The comparable data for NZ is not published – investigation of the website for newspaper advertising does not offer such comprehensive information to provide an insight into the performance of the two major media empires of the NZ market.

Whilst the decline is inevitable the extent of the reliance on this medium is still surprising. One explanation for the continuation of the support for the medium was effectively shown in a recent research study of the marketing activities of a sample of 1,300 US agents carried out by VHT – a real estate marketing services company.

When asked what their most common media for advertising a listing 83.3 percent said they used newspapers. While respondents indicated a significant portion of their listing budget was spent on newspapers, only 20.4 percent said they think this medium is “effective.” 49 percent felt that online ads were “very effective.”

As to this illogical imbalance between investment and return – the telling statistic was the in the response that when asked what their sellers felt was important (in advertising a property) 92.4 percent said that their sellers mentioned newspaper ads.

Clearly the real estate industry continues to educate the public in the perpetuation of the belief that newspapers are valuable in marketing property, thereby gaining valuable marketing dollars to continue the perpetuation of company and individual agent self promotion in the property supplements to the newspapers. The purpose of this blog is to bring some impartial perspective to the real estate industry and I believe this is one of the key elements of this industry that needs greater understanding and transparency.

Disclosure of interest – it should be noted that the successful transfer of marketing dollars to online website such as realestate.co.nz is in the best interests of the consumer (property buyers and sellers), the real estate industry and this website – a rough estimate of the collective media spend by the real estate industry online in the whole of 2007 in NZ was less than $15m – that is less than 10% of the total spend by the real estate industry across all media, yet at that level of spend online is delivering the best return in lead generation.

4

Mortgagee mansions! – the truth is somewhat different

Posted on: June 8th, 2008 | Filed in Media commmentary, Money Matters, Regional News

The front page article of the Herald on Sunday proclaims – “Mortgagee Mansions – rich pickings as the wealthy are forced to sell”- well it certainly grabbed my attention this morning as I am sure it did for countless other folk as they sat down to learn yet more about the fall out of the global credit crunch.

The article upon closer reading seems to be full of “shock and awe” but equally a lot of people saying “we don’t have that statistic or this statistic” – yet despite that the article claims that the fall out in the housing market is being felt more noticeably than many thought at the top end of the market.

So with the benefit of the fact that this website is the most comprehensive real estate listings website in NZ (currently with over 108,000 listings of which 79,000 are homes for sale – a clear 35% more listings than any other website) I thought it would be of benefit to look into the current 250 mortgagee listings on the site to see how close to the truth the article in the paper is. Of the 250 listings – 206 are homes, 13 are lifestyle properties and 31 are sections.

Firstly Bernard Hickey’s comment in the article that the most pain is being felt in Auckland is absolutely right, with more than 50% of all mortgagee properties being found in Auckland. Although to put it in perspective there are 106 which as a segment of the current 16,181 homes for sale in the region is actually only 0.7% or 1 home in every 153 homes.

Excluding Auckland the remaining 100 homes are spilt across the rest of the country in a fairly even distribution – the South Island has 36 or 0.3% of all homes for sale; and the balance of the North Island excluding Auckland has 64 at the same 0.3% of all homes for sale.

The only areas of the country to come close to the Auckland level are Bay of Plenty, Canterbury, Central North Island and Manawatu / Whanganui – all showing around 0.4%.

In terms of pricing the facts paint a vastly different picture to that of the newspaper article. There are just 10 mortgagee properties being marketed with an indicative price over $1m. As a proportion of the 4,538 properties currently for sale across the country with this level of asking price they represent just 0.2%. On the other hand the average price of all mortgagee properties on the site is $378,000 – well below the average price as reported by REINZ for April which was $427,000 (note this is the average price, not the median price).

Clearly the bulk of the properties subject to mortgagee sale today are in the sub $400,000 price bracket – 158 of them representing 0.9% of all properties in this price bracket.

So with the benefit of a little more research the newspapers could have provided a little more depth of information to assist their readers be better informed about the property market – but then as they say – why let the truth get in the way of a good story – especially when it can grab headlines to sell newspapers!

6

Property book – real estate publication online

Posted on: May 31st, 2008 | Filed in Media commmentary, Online marketing, Website searching

The launch date has arrived and we are now able to evaluate the deliverable of a new entrant to the property advertising market in NZ, both on and offline – so what do you think?

Having seen the website I personally can now see the logic behind some of the press release comments – the claim of “buyers will be able to register to receive weekly email updates hot off the press” makes sense when the website is actually a weekly ebook of the print publication – so clearly they can inform interested buyers each week that there is a new ebook.

The first week’s publication is for Auckland city and next week we are told that a North Shore edition will be released. The content of this week’s edition stretches to 24 pages and 31 properties – by comparison this seems a bit light with 4,789 Auckland City properties for sale on realestate.co.nz today.

The single lasting impression of flicking through the ebook online as a surrogate for the pleasure of a nice cafe and a chance to flick through the real thing, is the fact that if you ripped off the front page you could not possibly tell the difference between Property Book and Property Press – now, is this a case of imitation being the sincerest form of flattery? or is this a clear case of passing off and the matter may now end up in the high court. Either way let’s leave web searching for property online to the trusted and frequented web portal supported by the vast majority of real estate professionals, after all where would the web be without comprehensive content.

1

Traditional media begins to recognise the influence of blogs

Posted on: May 24th, 2008 | Filed in Media commmentary

It is interesting and quite telling (given the media’s reaction to my prior post on the correlation between web traffic and media coverage of real estate) that the NZ Herald have chosen to paraphrase my recent blog post regarding the government’s initiative to assist first time buyers with a shared equity scheme, in an article in today’s paper, entitled “Property investors could target shared equity scheme“!

Is it now the case that the NZ Herald seeks to leverage the resources of citizen journalists to fill its paper rather than undertake their own investigative journalism?

I suppose I should be flattered that the NZ Herald should choose to observe and comment so publicly on the content of this blog – clearly my message regarding the value in a wider coverage of real estate issues through social media channels of blogs and forums is beginning to resonate with traditional media – this is therefore likely to be a good outcome for the consumer.

As a point of clarification from the NZ Herald article – I have certainly never set myself up as, nor have made any such claim to be a “real estate expert” as the article claims. My expertise is in website operation and management, my comments and posts on this blog are observations and analysis of topical issues pertaining to the real estate industry.

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