The Unconditional Blog

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Archive for the ‘Real Estate Industry’ Category

4

Announcing the arrival of aspiring new real estate agents

Posted on: June 17th, 2010 | Filed in Agent Tips, Featured, Real Estate Industry

Speaker lndscape expandHave you ever wondered what would happen at a wedding if the celebrant / minister when uttering the words (Does anyone know any just cause..?) actually had someone leap up from the back row screaming “I DO“!!

There is that momentary hesitation which is then quickly exhausted as silence pervades the audience gathered together for the  happy day, and the service resumes as normal.

So what has this to do with real estate? – well let me explain.

Has anyone noticed that the newspapers have suddenly started carrying a large number of adverts in the Public Notices section from aspiring real estate professionals seeking to publicly proclaim their intention to take up a career in real estate. They are proclaiming in effect “Does anyone know just cause … as to why I should not be regarded as suitable to hold the position (license) of a real estate agent / salesperson”?

The key question I am keen to ask is – does anyone read these notices ? The fact is there is a legal requirement under the regulations set out in the Real Estate Agents Act 2008 for any person wishing to enter this profession to place an advert in one of an approved set of newspapers, in fact the requirement is to place 2 adverts.

What purpose does this process serve ? – certainly in today’s world of shrinking newspaper readership it is almost impossible for it to be seen as a viable means of allowing the general public to make a challenge to someones application to hold a license. There could be a better argument that the process would be better served by featuring a list of prospective applicants on the Real Estate Agents Authority (REAA) website or on the industry website. At least this approach would be in the knowledge that visitors would have context to the issue. In addition given this context a Google search for the term “Applicants for new real estate license in NZ” could then provide a link to such a list (a detail search on the current results show not one reference to any applicant or newspaper notice).

The sole beneficiary of this approach appears to be the newspapers who in the case of the major metropolitan dailies are charging around $500 for the privilege. This is the potential for a cool extra $1m for the newspapers given a typical flow of new entrants into this industry each year. This on top of the $555.75 levied by the REAA for a new application for a license and the fees for the education standards required to apply for a license (c. $1,000+) certainly has raised the financial barriers to entry into the industry.

0

Education is key to the future of the real estate profession

Posted on: April 19th, 2010 | Filed in Real Estate Industry

New Zealand_s defining university - Massey UniversityI was pleased to be given the opportunity last week to present the Top Academic achievement award for graduates of Massey University Graduate Diploma in Business Studies (Real Estate). Around 15 graduates each year complete the course which is a requirement for the attainment of an agent license and the conferment of the Associate membership of the Real Estate Institute.

Realestate.co.nz is the sponsor of this award for the top graduate each year and this year the winner Paul Spackman from Harcourts in Wellington received the award at a celebration dinner held after the graduation ceremonies.

The course which has been up until recently a 2 year part time course for those wishing to further their education in the real estate industry, will become a 3 year course from next year, a sign of the growing recognition of the critical importance of formal training within the real estate industry. Up until the new Act (Real Estate Agents Act 2008) the industry operated on a voluntary basis for education, requiring only new entrants to pass a certificate course for aspiring real estate salespeople. The course focused mainly on the legal obligations surrounding listing and the sale & purchase agreement. The new Act though has already set in place steps to see further education requirements right across the industry. This is good for the industry, good for the professional standing of those in the industry and great in the long term for the consumer.

The new Act calls for continuous professional development in the form of regular courses for which educations credits will be earned and required for the renewal of licenses by real estate salespeople and licensees. As yet these programmes, courses and credit structures have not been introduced.

The requirement to be kept up to date with developments and legislative issues is critical in so many industries; for real estate it is ever more so, as the service is provided to individual members of the public who rightly look to a real estate professional to be able with complete knowledge, experience and competency to navigate the process of legal representation in the marketing and satisfactory negotiation of a sale and purchase for a property.

In addition I have a keen interest to see that such courses in the future either as part of continuous professional development or formal diploma courses contain units with a focus to marketing and especially the application of technology within the industry. We face a challenge within the real estate industry in that the majority of the current professionals are from the baby boomer generation for whom the advent of computer technology and the web is still a steep learning curve and not a natural tool set. Whereas the growing majority of home buyers are emerging from younger generations who are to use the expression “digital natives” – those who have grown up in this always-on, always-connected world.

None of this though takes away from the achievement of Paul and his colleagues as graduates of this year’s course, my hope is that they will go on to lead successful careers in the real estate industry.

3

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

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

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

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

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

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

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

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

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

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

8

Analysis of the real estate business model

Posted on: January 29th, 2010 | Filed in Featured, Real Estate Industry

Analysing real estate business modelsThe real estate industry has staged a degree of a recovery during 2009 – ending the calendar year transacting just on $29 billion worth of sales from 69,629 property sales. This was up 25% in value from the 2008, but is still down 23% from the 2007 year when 92,101 properties were sold with a total transaction value of $37.87 billion.

The chart below ably demonstrates the rise and fall of transaction values over the past two decades with the red line representing the 12 month moving average volume of sales and the blue line indicating the total value of those transactions.

NZ real estate industry - volume sales and value 12 month moving average 2009From this market perspective it is interesting to look into the structure of typical real estate offices within the industry. I am grateful to the Real Estate Institute (REINZ) and the Australian real estate training and business support company Best Practice for an insight into a typical real estate office’s business structure, which I am sure will prove insightful for anyone looking to build a future in this industry. Best Practice undertook a survey of NZ real estate offices in June and July 2009 seeking to understand the make up of the business – level of income, expenses, personnel and profit performance. This data was published in the REINZ monthly magazine in December.

The survey reviewed the performance of real estate companies across three tiers – those companies with sales of less than $2m per annum; between $2m and $3m and those with sales over $3m. From their analysis each of these segments represented a third of all offices that completed the survey. To the Best Practice data I have added some data drawn from the database of real estate office held by Realestate.co.nz. The detail of the sample size of the survey was not published in the magazine so there is no way to validate the numbers as a representative samples of offices of a similar size.

Small offices

According to the survey the bottom third of all NZ real estate offices as measured in terms if sales value had sales of less than $2m. These offices averaged 8.6 sales people and had 1.5 principles. By contrast the database of Realestate.co.nz shows the bottom third of all offices (by number of salespeople) have less than 4 sales people.

From the survey the average total revenue of such an office is $1,083k per annum. This business generates an operating surplus of $207.6k, which is effectively the return to the principle (owner / branch manager) of the office after all expenses have been covered.

The pie chart below shows the representation of the total revenue made up of all expenses and the operating surplus.

Analysis of costs and profit for real estate offices with sales of less than $2m 2009 Realestate.co.nzThe largest cost is the sales commissions and employee salaries which make up half of the revenue generated by the office, marketing accounts for 15% and includes both marketing of the office as well as the expenditure on behalf of clients, some of which is recharged. Group fees refer to franchise fees and marketing group fees.

Medium Offices

According to the survey the middle third of all NZ real estate offices as measured in terms if sales value had sales of between $2m and $3m per annum. These offices averaged 17.2 sales people and had 1.8 principles. By contrast the database of Realestate.co.nz shows the middle third of all offices (by number of salespeople) have between 4 and 8 salespeople.

From the survey the average total revenue of such an office is $2,271k per annum. This business generates an operating surplus of $558.9k, which is effectively the return to the principles (owner / branch manager) of the office after all expenses have been covered.

The pie chart below shows the representation of the total revenue made up of all expenses and the operating surplus.

NZ real estate offices - medium size with revenue between $2m and $3m - share of revenue by expenditure

As compared to the small offices, these medium sized offices have the same primary costs of staff, but do deliver a better profit for the owners at 25%, the marketing expenditure is less with better amortization of overheads of General & Admin (G&A). Interestingly this survey group identified the lowest cost of referral / conjoint fees – that is fees paid to other real estate offices when those offices sell listings of this company – the level was just 0.1% or $3,045 per annum.

Large offices

According to the survey the top third of all NZ real estate offices as measured in terms if sales value had sales of more than $3m. These offices averaged 29.4 sales people and 2.75 principles. By contrast the database of Realestate.co.nz shows the top third of all offices (by number of salespeople) had more than 9 sales people. Interestingly there are only 12 offices in NZ with more than 29 salespeople.

From the survey the average total revenue of such an office is $5,178k per annum. This business generates an operating surplus of $1,114.8k, which is effectively the return to the principles (owner / branch manager) of the office after all expenses have been covered.

The pie chart below shows the representation of the total revenue made up of all expenses and the operating surplus.

Analysis of top real estate offices in NZ - revenue over $3m - breakdown p&l 2009As compared to the other two thirds of real estate offices these large offices pay out the lowest percentage of staff costs – 42% compared to 50%. They deliver a healthy 225 operating profit to be shared by the owners. The cost of premises is slightly higher than the other groups whilst G&A is average. What is considerably different is the share of referral income and conjoint which at 7% is far higher than the other groups. Could this indicate a more co-operative style of business assisting the success of these businesses perhaps?

The last part of the analysis is comparing the revenue generate per salesperson. Based on the salesperson numbers in the survey the largest offices have the most effective sales people generating $176,324 per sales person. The medium office generated $132,089, whilst the smaller offices generated $126,273.

5

A significant decade for real estate closes – the future will be challenging

Posted on: January 20th, 2010 | Filed in Online marketing, Other interesting reads:, Real Estate Industry

The last 10 years witnessed some incredible highs and lows in NZ real estate – at its peak in the month of March 2005 houses were being sold at the rate of 368 a day – that is close to 33 an hour. At the other extreme in January 2009 sales stalled to a low of just 3,706 – a daily rate of just 120.

In pricing terms the decade started with an average NZ home costing $174,850 – in today’s money that would equate to $222,411. By the end of the decade that average NZ home cost $369,825 a rise of 66% over the decade. If you had decided to sell in that house in November 2007 when the market peaked then that house would have seen an inflation adjusted rise of 77% from the start of the decade.

At the start of 2000 the process of searching for a home likely involved a meeting with an agent early in the process as access to information as to what was on the market very much resided in their offices. The internet was used for property search but not as the primary means. Back in January 2000 there was only one website aggregating listings from various sources RealENZ (the predecessor of Realestate.co.nz) – the monthly traffic to the site was around 60,000 visitors as probably less than 20% of buyers used the web.

REALENZ - NEW ZEALAND LARGEST REAL ESTATE DATABASE ON NEW ZEALAND INTERNET-1In January 2010 78% of buyers turn to the web first when searching for real estate and the monthly audience for all monitored websites is over 1,300,000 unique visitors. This has largely placed the task of searching firmly in the hands of buyers with a vast amount of additional information accessible to educate and inform buyers mostly thanks to Google and their ability to organise the world’s collective knowledge and make it universally accessible.

So as we start this new decade and consider how the industry will change in the next 10 years I was prompted to share the following summary from Brad Inman written as the introduction to last week’s Real Estate Connect Conference held in New York attended by over 1,800 delegates from around the world. Brad is highly respected in the industry as the publisher of Inman News and a knowledgeable and insightful observer of the industry.

“The first decade of the new century ended last month. What began in a boom and ended in a bust, the real estate market, is slowly coming alive. Along the road to recovery is a raft of innovation that has enabled the smart and technology savvy real estate agent/broker to survive. Combine the technology transformation with a revived market and change will accelerate dramatically in the coming 24 months.

Think of these changes in phases. Phase one included a greater number of steps in the home buying and selling process being digitized and automated, allowing consumers to more intelligently navigate real estate deals. In addition, the Internet has enabled home buyers through maps, search, AVM’s and MLS data (US centralised Multiple Listing Service) to structure their own home hunt, in one way relieving the agent/broker but reshaping their world along the way.

Because of technology, consumer needs are changing, and smart agents are transforming their business practices to focus on these new expectations. Technology – communication and information delivery – has become a central part of the services that home buyers and sellers expect and that savvy agents are providing.

Instant online real estate intelligence will be the next big change as consumers rely more on rich live data feeds, social media and local metrics to make house buying and selling decisions.

These innovations will change the role of the agent and the broker again. At one time, the listing data was perceived as the central value proposition of the industry, but that has changed with ubiquitous listing data. Then the agent became more of a counselor, teacher and advisor, which will evolve as Internet real estate intel becomes more sophisticated and matures.

In the future the role of the agent will be to focus on the gnarly often confusing transaction and direct and move it along. Smart agents are using technology to make that process easier and less confusing for their customers. The agents with the best technology will find and close more deals online and dwarf their slower-to-adopt competitors. Thanks to technology adoption, their business will scale and they will capture greater market share by closing more deal efficiently”.

5

Vendor paid marketing – the impact of the new Real Estate Agents Act 2008

Posted on: September 26th, 2009 | Filed in Online marketing, Real Estate Industry

istock_000004577428xsmallThe NZ Herald today provides an insight into the new Act that will apply to all in the real estate industry from 17th November. All that is except Property Managers who were excluded from the Act – a matter that will be debated extensively in the coming months as may facets of their role in providing services to landlords and tenants are very much akin to that of a selling agent.

The new Act is extensive and much needed – nobody in the industry would disagree with that statement as the previous Act of 1976 which this Act replaces was instigated in a very different world and without amendments it had failed to keep up to date with the changing nature of business and appropriate controls.

The area that I am interest to highlight as the NZ Herald has done is the rules as they apply to the disclosure of discounts and rebates on the expenses incurred by agents in the process of selling a property.

The exact wording from the Act is as follows:

Section 128 : Agency agreement must disclose rebates, discounts, and commissions

(1) An agent is not entitled to any expenses from a client for or in connection with any real estate agency work carried out by the agent for the client in connection with a transaction unless the agency agreement under which the agent performs that work contains a statement that-

(a) identifies the source of all rebates, discounts, or commissions that the agent will or is eligible to receive in respect of those expenses; and

(b) specifies the estimated amount of those rebates, discounts, or commissions (to the extent that the amount can reasonably be estimated).

(2) This section does not limit the liability of any person under the Secret Commissions Act 1910.

The Herald article quoted some real estate companies view of the interpretation of the Act – I am not a lawyer and would not wish to make interpretation as to this section of the Act. However it is clear what the intent of the law in the drafting of this section.

The view was that in principle the role of real estate agents was not as transparent as some would judge it needed to be – whether that was a small minority that created that perception or whether it was a wider held view is again not something I would wish to speculate on.

The key issue I feel is the appropriateness and application of the disclosure of rebates and discounts on advertising in the media which is clearly what this section covers.

Let’s look at real situations as they occur in this industry – A real estate agent when putting forward a marketing proposal will quote the cost of a premium featured listing on a website or an advert in the newspaper. From my experience the majority of real estate agents charge clients the cost that the publication or website charges them (ie. charged at cost with no margin added).

In the case of our website a featured listings is currently $250 (inc GST) – in the case of the NZ Herald the cost of an advert is clear in the rate card.

The real question is how much information does the public want or need to know in regard to the costs of advertising; as long as the cost is the competitively challenged market rate.

For example if the newspaper or website is aggressively fighting with a competitor and decides to reward loyalty or incentivise a real estate company through some form of annual rebate – should that be disclosed? – could that be disclosed?

If for example it was an annual volume based rebate. If that rebate was disclosed to the property owner and the owner felt that the rebate should be deducted from the marketing costs. If subsequently the real estate company fell short of the annual volume target set by the media company and therefore failed to receive the rebate – what happens then? Does the property owner have to refund the rebate?

The fact is most businesses – whether they be restaurants, bars, supermarkets, plumbers, painters, carpet layers etc etc operate on the basis that the costs of the raw materials supplied by them to a client may not be what they paid – there may be a volume rebate. What is so different about real estate?

Real estate is a competitive business. If a property owner does not like the service or fees from one company they can cross the road to another company.

1

Latest mortgagee sales data shows only half the story

Posted on: May 25th, 2009 | Filed in Buying / Selling a home, Real Estate Industry

In reading the latest media reports of mortgagee sales for March you could be forgiven for thinking that we are heading into some stratospheric rise of mortgagee sales – much akin to the US market.

However without complete and comprehensive information sometimes misleading impressions can be formed – this reminds me of a TV commercial from the 1980’s in the UK for the respected newspaper “The Guardian” – Seeing the whole picture!

Anyway back to mortgagee sales. The sales in March were 201 – clearly a massive jump as compared to 42 sales in March 2008. This is also the highest ever level of sales in a month ever recorded.

One of benefits of the web though is the visibility of what is on-the-market to complement the data of what has been sold. There are two unique aspects of mortgagee properties that provide these statistics with greater weight as a “lead indicator” – all mortgagee properties are sold by real estate agents and mortgagee properties need to be sold, they do not generally sit on the market for long.

Taking these facts, it is therefore possible to correlate the listings on the market to the sales off-the-market – the graph below shows this correlation. The adjustment that has been made to the statistics is that the listings data is shown with a one month delay – that is to say for the month of March 2009 on the graph shows the reported sales of 201 and is matched to the listings in February with 444.

NZ Mortgagee sales and stock March 2009

You would judge that there is a clear correlation of these data sets on this adjusted basis over the past 2 years. Looking forward the forthcoming months has already shown a decline with currently just 379 mortgagee property listings on the website.

It is naturally risky to make predictions, but the graph below may assist in assessing longer term trends – this shows the very latest weekly data of listings of mortgagee properties presented as a 12 week moving average – this measure effectively removes any seasonality factor and is more likely to provide a more robust indicator of trends.

NZ mortgagee listings - may 2009 realestate.co.nz

Have we seen the peak of mortgagee properties? – as far as inventory goes, we are not seeing the massive rise seen during 2008, as yet it seems to be plateauing, if the level of interest in searching for mortgagee properties as shown in the graph below is any guide then mortgagee properties is no longer quite the hot topic!

NZ mortgagee properties - seacrhes to April 2009

16

When the going gets tough…the best invest!

Posted on: May 20th, 2009 | Filed in Real Estate Industry

harcourts-conference-09Yesterday I attended the opening of this year’s Harcourts conference. This is the time of year which sees most of the major groups undertake their annual conferences, an opportunity to gather together their sales teams who are of course independent contractors.

This past year has been one of the toughest faced by this industry for as long as any of the long term players in this industry can ever remember. Volume sales of property have fallen over 25% in the past year and that on a base of a year ago which itself was down 27% – this means that the value of sales written in the past year by this industry was just $23 billion compared to $40 billion just 2 years ago.

With this backdrop many companies might have taken the decision to make cuts and adopt a resilient tone of pragmatism – not Harcourts!

As the leading real estate company in NZ with 180 offices the company demonstrated at their conference an overt sense of confidence and passion to succeed in today’s challenging market. The theme of the conference is “One team, Our time” – a reflection of the great adage “when the going gets tough .. the tough get going” – this is clearly a case of a company looking to invest and grow its market share in today’s market.

harcourts-conference-logo

The fact is the performance of Harcourts is impressive. A New Zealand company tracing its roots back to 1888 when John Bateman Harcourt established a real estate and auctioneering company in Christchurch. Whilst the first century for the company was steady and cautious, the second has been anything but; especially in the past decade.

The company now boast 609 offices across 8 countries on 3 continents with South Africa and China recent developments. The company has an enviable record of sales performance with last year being the only year in recent history in which year-on-year sales slipped just 6% to $18.3 billion – not a bad performance when viewed against the state of most real estate markets around the world.

As now a truly international real estate company the profile and dynamic growth has elevated the company to be cited as one of the leading global companies in the industry by Stefan Swanepoel in his 2009 Real Estate Trends.

The success cited by Stefan was down to a combination of training and technology coupled with a focus on customer service to which at yesterday’s opening session should be added the challenge set by Mike Green the CEO for Harcourts International to be seen as a truthful and trustworthy company, a bold ambition within an industry renowned for issues of consumer confidence around a lack of transparency and reputation. But this company has a track record of driving innovation and cultural change.

3

Innovation in real estate cannot be hampered by access to print media

Posted on: April 30th, 2009 | Filed in Online marketing, Real Estate Industry

Home AutomatiomA new entrant to the real estate industry seems to have accidentally fallen foul of the terms of business of the leading property magazine ‘Property Press’ as reported by the National Business Review.

Property Wizards has decided that the fixed fee model initiated with early success and much fanfair by ‘The Joneses‘ is worthy of revisiting with their $7,000 fixed fee plus marketing. There is no doubt that any industry which even in the current economic climate transacts business to the value of $20+ billion per anum will attract innovation and challenges to existing business models. It is certainly healthy and a reflection of a continual focus towards the consumer that innovative business models should appear and test the established model.

The part of the article that I found most interesting in the story as reported by both the NBR and Landlords was the fact that whilst on the face of it Property Wizards are frustrated that a slight oversight has seen them excluded from future advertising in Property Press – they are however not overly dimayed as they clearly recognise that the best value in marketing is delivered by the web.

This is very quickly confirmed by a review of their website which highlights that in the ranking of services offers to vendors – they place website marketing as the #1. This exactly correlates with the finding of the Nielsen Online survey of 2008 in NZ which when a sample of 1,100 property seekers were asked as to the top sources of information when searching for property cited specialist real estate websites as the #1 source – spending an average of over two and a half hours per week searching. By comparison all of the print media options fell below eighty minutes and saw a year on year fall whilst specialist websites grew from 161 to 167 minutes per week on average.

Nielsen online surveyu of real estate sources of information NZ 2008

0

Property price data can be confusing – median price / average price / property values

Posted on: April 9th, 2009 | Filed in Buying / Selling a home, Real Estate Industry

In the rush to beat the Easter shortened week we have seen statistics released today by both QV and the Real Estate Institute (REINZ) for the month of March 2009. The headlines appear enormously contradictory and therefore some explanation I think is necessary.

Firstly QV

The headline of the release from QV : QV’s March statistics for the residential property market report a 9.3% decline in national property values over the past year (calculated using the QV index over the three months ending March 2009 in comparison to the same period last year), down further from the 8.9% decline reported last month.

Now the key point here is the words “national property values” – QV have a valuation model which they have used for many year to establish valuations for all properties in NZ. The explanation for their method is provided here for clarity:

Property Value Growth provides an estimate of annual property value movement for areas throughout New Zealand. The Property Value Growth uses QV’s House Price Index methodology, which generates a residential index for each area by recognising the sales price of each property sold compared to its capital value. This ensures the index provides a measure of change in property values, without fluctuations caused by higher sales volumes in one or more property sectors (e.g. high volumes of apartment sales or investment properties). Residential sales compiled for the previous 3 months are compared to the same period of the previous year to identify the annual percentage change in property value.

So QV are saying that the movement in their index between March 2009 and March 2008 is a 9.3% decline – this is not saying that the price (average or median) of property sold in March was 9.3% lower than those sold in March 2009.

Secondly REINZ

The headline from the Real Estate Institute: “The median price for homes across New Zealand at $335,000 for March 2009 is slightly up on February’s $330,000 and on a par with the March figure from 2007 of $343,500 but down on the comparable period in March 2008, $349,000, equivalent to 4.01 per cent”

Now the fact is that the median price ($335,000) reported by REINZ is the midpoint of the range of sales prices for the total of the 6, 694 homes sold during March 2009 by real estate agents. For information the average price of those 6,694 homes sold was $404,567 quite a bit higher than the median price. The view of statisticians and the Real Estate Institute is that given volatility of numbers (sales) and the diversity of the housing stock in NZ the use of the median price is a more robust measure less likely to show wild variances.

There is another important distinction here – QV (Quotable Value) a state owned enterprise has as its main business the valuation and reporting of property in NZ. The Real Estate Institute is a member organisation representing all licensed real estate agents in NZ.

So there is a degree of divergence in the figures for March – QV is saying by their measure of valuations of property that the valuation of March 2009 is down by 9.3% on a year earlier whereas the REINZ is saying that the median ( and average for that matter) are down just 4.0% on a year earlier. Either way it is clear that there is softness in property prices, a not unsurprising fact given the current economic climate and the tightness of credit.

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