As the last few hours of 2008 approach I thought it would be valuable to share a review of 2008 from the perspective of the real estate industry in NZ. This blog provides a rich catalogue from which to review the past 12 months across the 157 posts written.
However rather than establish a Top 10 based on readership or comments, I thought I would pick out 8 key themes (in no particular order) that for me personally have made the most significant impact for the future.
Challenging the norm
Competition is good and healthy in this as in any industry – it ensures complacency cannot survive and ensures innovation can flourish. Real Estate is a competitive industry. There are a vast number of companies and individuals all vying to offer services to sell or lease your property in the most efficient manner for the maximum return. However one notable company departed this industry in the past year, for whilst their market share may have been less than a couple of percent their impact was significant and will continue to be felt into the future.
The Joneses ceased operations in February in a calm and organised manner – time will tell if theirs was a under capitalised business model destined to succeed which became a victim of the dramatically slowing market or whether there were serious flaws in the business model.
Further reading: The Joneses – a review of their impact on real estate in NZ
Changing the rule book
On Thursday 4th September the government passed the new Real Estate Agents Act. Replacing the 33 year old former act, this was a significant milestone for the industry. The new act which is implemented in stages which will be complete by the end of 2009 holds some key provisions for all involved with the industry. Most significant is the establishment of a government agency to oversee all complaints, allied with that is a significant increase in the fines handed down for breaches of the act.
Additionally the act removes the compulsory requirement of all Agents (that being licensees who legally can operate offices as opposed to salespeople who make up the majority of the industry) to be members of the Real Estate Institute. Whilst percieved in public comment as being a diminishing of the role of the Institute (REINZ), it actually holds the opportunity for the Institute to take on the role for which it can provide greatest benefit for professionals in the industry – that of taking a leadership role in advocacy, training, strategy and public profile. The reality was that the Institute was always compromised in its former role being saddled with being the legislative compliance “police” whilst trying to represent the industry.
This new year will herald the establishment of a new form and vision for this industry body – one the vast majority of professionals in the industry eagerly await.
Further reading on the act : Official government release on the new bill
The fuel for the market
The driver of the property market, be it residential or commercial is finance. Property is largely a leveraged asset and therefore the price of, and the accessibility to finance is critical to the health of the market. This past year has been, as once described by Queen Elizabeth a “annus horribilis” as the global credit crisis turned into the global economic crisis the property market appeared to shut-up shop. Sales dried up and ended the year down close to half of the prior year as buyers and sellers alike “sat on their hands” unprepared to enter a market which showed little certainty.
The price of property as measured by median or average price has fallen – not be the 30% level touted by some earlier in the year, but by an order of single digits. A factor in this outcome could well be the very low level of sales.
Distressed sales have occurred as those who found themselves unable to meet repayments or found that refinance was no longer available had to offload in mortgage sales – however despite the rich media coverage of this category of the market, the scale of mortgagee sales is still tiny in relative terms, with just over 400 properties from an available inventory in excess of 80,000.
Further reading: Residential Property Update – November / The credit crisis – New Zealanders’ interest in real estate takes a hit / Will we see property prices rise before 2018?
At the coal face
For the majority of this decade the real estate agent has been much maligned, envied and chastised in equal doses, for they were a critical part of the market as everyone wanted to buy or sell property and the agent held the pivotal role to facilitate these sales. Their percieved fees may have seemed high when properties seemed to sell as soon as they were listed, but truth be told the true income for agents was far from the perception with average income often little more than the average wage. This partly as a result of low barriers to entry which attracts hundreds if not thousands of agents when the market is hot, but often takes a while to shed numbers when the market cools.
The reality is that at its peak with 100,000+ property sales per year there were around 18,000 agents – just five and a half sales per agent per year. With an average net commission of say $5,000 to the agent that makes a gross income of just over $28,000.
Today the level of sales have fallen to around 55,000 – however the number of agents chasing those sales has not fallen by as much resulting in the likely average income falling to below $20,000 for the 14,000 or so agents still active in the industry.
Further reading: A tough year ahead for real estate agents
Head in the sand
This would have to be the favourite image of the year on this blog. It neatly highlights a fixed mindset within certain sectors of the real estate industry which I must say has changed markedly over the last year. I am referring to the love affair between print media and real estate when it comes to advertising. As the excellent quote states “I can’t find a single large real estate brokerage firm in 2007 that says print advertising really works….but I can easily name dozens who still spend the majority of their ad budgets on newspapers. It’s like a chain smoker battling lung cancer, while still smoking two packs a day.”
Changes are occurring as pressure on costs has driven many offices to seriously review the extent of press advertising, and equally has enabled them to recognise the measurable and valuable marketing contribution of specialist real estate websites.
Set against this backdrop and with the benefit of hindsight, it seems odd to look back on the launch and subsequent closure of a new real estate publication – Property Book. It sprung to life in May, just as the market was showing clear signs of stagnation and whilst securing some early supporters in the Auckland region by the end of the year it was gone, all that remains are some large billboards around Auckland themselves a result of the downturn in advertising spend in general across the economy.
Further reading: Newspapers vs. websites – the battle ground for selling your home / Property book – real estate publication online / Newspapers and real estate – a match made in heaven; now beginning to show signs of disaffection
This year has seen a growing sense of the industry “opening up” and showing a more transparent and a more open / transparent face. Information and statistics have been more freely communicated and this has assisted buyers and sellers be better informed.
A key component of this has been the use of social media online. The real estate industry is a natural fit to this capability providing individual agents with the opportunity to profile themselves through local blogs. With the launch of the Realestate.co.nz Voices platform we have enabled over 80 agents to present themselves and their ideas, thoughts and skills to the audience they have reached out to. The result is that many of these individuals have seen direct benefit with unsolicited calls seeking a skilled agent to sell property or business, all as a result of the credibility built around their blog.
Not solely restricted to individual agents some of the management and executive of major real estate firms have launched blogs as a means of establishing an impartial and open face to their company – most active of whom is Bryan Thomson, the CEO of Harcourts who started his blog a couple of months ago and provides a valuable insight on the market and the industry from one of the key individuals within it.
Further reading: Check out the variety of agents blogging on Voices / Bryan Thomson’s blog
First round elimination
The real estate market is now more than ever recognising that online is the marketing medium of choice – a necessity for effective marketing of client listings. The past 3 years have been intensely competitive with 3 key sites slugging it out for eyeballs and more importantly the subscriber $ of real estate offices. As is natural in such aggressive markets before long their is elimination as the costs of sustaining the battle becomes unsustainable.
This happened on both sides of the Tasman this year. First to close was MyHome in Australia, started with the massive resources of PBL media and Microsoft. Then in November the #3 player in the NZ market Allrealestate decided to close operations and focus its attention on its Australian site and the other international real estate sites.
Further reading: MyHome (www.myhome.com.au) – an epitaph to aspiring media owned real estate websites / Realestate.co.nz and allrealestate.co.nz form an alliance
The world at your finger tips
The saying goes that the world is getting smaller and the web is clearly a key driver of this accessibility to more information at your fingertips, added to that is the fact that without Google “where would we be!”
Whilst Google may concern many for its enormous repository of knowledge which could be construed as influence and anti-competitive monopolistic power over advertising, the beneficial resources it makes available for free is simply staggering. The launch of Street View in December cannot be underestimated for it opens up for real estate a valuable resource for the effective review of property for all prospective buyers. The sheer cost of this investment to photograph, catalogue and provide a view of literally every property n the country is a testament to the principle of Google’s endeavour to make accessible the world’s information for the benefit of all. Millions were spent by Google and many more will be spent in the future – this is a real example of a paradigm shift that is long remembered after the memories of 2008 fade.
Further reading: Google Street View launch enhances property searching on realestate.co.nz
Happy New Year!