The Unconditional Blog

The impartial voice of the industry

 

Archive for the ‘Real Estate Industry’ Category

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Barfoot & Thompson sales continue to record a subdued property market

Posted on: December 5th, 2008 | Filed in Real Estate Industry

Barfoot & Thompson continue to provide a valuable early snapshot of the health of the property market with their sales figures are reported through the Rates blog at interest.co.nz.

The month of November saw 546 sales, up slightly (8.5%) on the prior month – this is not unusual as the past 2 years have seen a similar (11%) lift for November vs. October.

Overall though as the graph above shows year-on-year sales show a decline of 38% for November 2008 – that follows a decline of 19% on a prior basis recorded last November, this means that November 2008 is exactly half the sales of November 2006.

In terms of average price the November average price of just over $500,000 represents a 4% decline from October and an 8% year-on-year decline. The graph below tracks the monthly average price over the past 2 years recording a price movement in the range of $495,000 to $560,000 over the past 12 months. The red line tracks the month vs. prior year sales price change which is tracking at around a 5% to 8% decline.

Barfoot &Thompson currently have 8,338 listings of residential properties and sections on realestate.co.nz with 65 offices around Auckland and Northland. Barfoot & Thompson is a shareholder in Realestate.co.nz Ltd
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Rural real estate market shows signs of inventory growth

Posted on: November 17th, 2008 | Filed in Real Estate Industry

Recent media has covered the slow down in sales of rural properties, farms and lifestyle sections, the Real Estate Institute in its recent report for October detailed the number of farms sold in the three months to October 2008 down to 390 as compared with 582 in the same period in 2007 and 470 in 2006.

Set against this was the forecast expressed by Errol Saunders, managing director of Ford Baker Valuation, who quoted in the National Business Review as sighting that prices had stabilised and sales volumes had slowed dramatically over the past year, pointing to the likelihood of a downward correction over the next 12 months.

With this backdrop it is worth reviewing the key statistics of inventory to sales analysis from data from the realestate.co.nz website. The site has a total of just over 4,000 listings of Farms and Agricultural land, excluding lifestyle properties – this as part of the current 113,000 listings on the site. The graph below tracks the past 23 months of total farm sales and inventory – clearly showing the drop off in sales and the rise in inventory most noticeable in the January to May period of this year as shown by the blue area under the graph.

The most critical sector of agriculture to the NZ economy is undoubtedly the dairy industry and this sector has enjoyed buoyant activity over the past 18 months with dairy conversions and appreciating payout prospects, however just as all sectors of business has succumbed to the relentless impact of the credit crisis there are signs of a rise in inventory of diary farm listings on the website over the past 3 months as represented in the graph below with the area under the graph representing this inventory.

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Residential property update – November

Posted on: November 13th, 2008 | Filed in Buying / Selling a home, Real Estate Industry

The latest sales figures released by The Real Estate Institute show a very subdued level of activity – just 4,469 properties were sold across the country in October – traditionally a strong month for sales as seasonal spring activity initiated in August and September culminates in strong sales in October and November before the onset of the Christmas period.

The year to date sales total 47,547 some 40% down on the same period to October 2007 – taken on a rolling 12 month basis as shown in the graph below (volume of sales – red line, value of sales – blue line) the 12 months to October totaled 60,981, which is the lowest level of sales recorded stretching back to 1993.

With this traditional spring resurgence in sales activity usually comes a fresh clutch of listings onto the market and a pick up in buyer interest. The commentary reported last week showed the impact on buyer confidence of the credit crisis which began in September and at this time shows little sign of abating, although from this updated graph of tracked visitors to real estate websites the relief of the elections has generated a tentative upturn in viewings.

Looking at the state of the market in terms of inventory of properties being marketed by real estate agents the website of realestate.co.nz currently features over 62,000 listings of properties for sale (excluding sections) from amongst the 113,000 listings in total – a record level for the website.

The extent of the inventory of listings is clearly highlighted in the graph below which shows the quantity of new listings (red line) being added to the site over the past 2 years as well as the sales by month and the consequential inventory build.

The inventory is represented in terms of weeks of inventory based on the rate of sale of property in the month. Clearly evident from the graph is the inventory levels rising from mid 2007 at around 25 weeks through to a peak of 55 weeks in April of 2008. Subsequently with a decline in new listings that inventory has come back to a level of 48 weeks especially as sales have been so flat. The latest statistics for October show a new clutch of listings coming onto the market; over 14,000 in the month which has seen a slight increase in inventory – less than expected possibly as some of these listings may be re-presentation of property previously marketed earlier in the year.

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The new theme of change – it feels like real estate is ripe for change

Posted on: November 10th, 2008 | Filed in Real Estate Industry

The pervading word of this week has been change with both the US and NZ elections focused on a time for change. In both countries a new leadership will take office challenged by significant issues brought about by the economic crisis. Common to both is a new more youthful freshness. In NZ we will see a younger look to the new government with potentially the baby-boomers in the minority.

Reflecting on this and turning to the real estate industry in this country, it is clear that we could well be experiencing an equally significant change. A change that could see a re-inventing of real estate starting in 2009. Here are some thoughts as to the change and the catalyst for that change:

  1. The state of the market – the slump in the property market shows graphically in this presentation of the first 9 months of this year as compared to the prior 5 years.


    With just 43,078 sales so far this year and a 12 month rolling sales of just 63,366 properties – down 36% on a year ago. The immediate effects of this are already being seen in a mass exodus of real estate salespeople and office closures. Whilst no official figures are published the scale could be of the order of 3,500 salespeople and 130 offices over the past year.
    This contraction presents a great opportunity for ambitious real estate agents – property sales have not stopped – currently around 140 homes are bought and sold everyday – and people need the assistance of an agent to facilitate that process. With less agents, the smart ones that remain have a a golden opportunity to better demonstrate their skills.

  2. The regulatory framework – 2009 will see the full effects of the Real Estate Agents Act 2008 come into play. This act has significant ramifications for all in the industry and for property owners in NZ. Whilst a comprehensive document the most critical and public elements will revolve around the new regulatory authority as a government agency able to levy significantly higher fines for breaches of the act on agents and companies ($30,000 and $100,000 respectively) coupled with a commitment by this new authority to “hear” every consumer complaint in a timely fashion.The ramification from this for those in the industry will be the costs of compliance and cost of personal indemnity insurance – significant fixed costs on an industry operated through independent contractors.

    Another facet of the new act revolves around the structure and operation of real estate offices, the prior act required for a tight geographical network of offices to ensure adequate management and control of sales people, the new act recognises the greater adoption of home offices and modern technology. This change could well see fewer, but larger real estate offices around the country and with it a potential reshaping of the high street presence of real estate.

  3. The greater adoption of technology – There is a great quote I have used extensively this year in presentations to the industry:“Traditional agents will not be replaced by technology.. they will be replaced by agents with technology“. The principle of the quote is that whilst the web has and will continue to transform the industry, it will not replace the key roles of agents in totality, it will redefine their role – focused around negotiation, facilitation and professional advice and guidance. Critical to the success of this new breed of agent will be the comprehension and ease with which they adopt technology.

    The fact is that whilst the web has become an ever more pervasive element of all business and personal life over the past 5 years and in that time the front-facing public experience of real estate online through websites like realestate.co.nz have demonstrated the adoption of the latest contemporary web technology; the true face of real estate – the office and agents have not being moving as fast behind the scenes of this front end presentation.

    This behaviour shows itself in web listing presentation that still often resembles a newspaper advert with a proliferation of acronyms, few or no photos and a desire to believe that “less is more” factual information on a listing will encourage more phone calls. An emerging section of this industry – a more youthful faced section embracing this technology in all its facets is emerging  and will rise and become respected by consumers and will succeed challenging more entrenched operators for whom the web is still seen as just-another-advert.

As to the future face of real estate, the industry will look very different by the time of the next election, it will be a learner operation, with potentially around 10,000 agents and 1,000 offices. There will be more integration of support services within companies, rather than every agent trying to do everything themselves and in so doing constantly reinventing the wheel. Agents will leverage technology to not merely list property for sale, but will come to rely on the web to better support the marketing strategies they propose in winning contracts to market property for owners. Sellers will equally be more likely to select agents based on performance metrics more openly sourced online, evaluating the prospective agent through social media channels to critique their expertise in the local market and with the target audience.

The real estate bubble of the past 6 years has well and truly burst, however the market will recover – it will however be facilitated by a new breed of agents, somewhat more cautious, certainly more professional and competent and absolutely more focussed to customer service. This is great for all property owners – however it is unlikely that all these services and ensuing costs will see any change in fees for transacting property, it is likely that the true costs of real estate transaction services will likely be shown more transparently by those future agents who will more than justify their fees – providing a breakdown of the work undertaken. They will be more confident to highlight the workload required to complete the transaction leading potentially to a fee for service as opposed to the current wholly commission fee structure.

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Real Estate Agents Bill passes into law

Posted on: September 4th, 2008 | Filed in Real Estate Industry

A significant milestone was reached tonight as the government delivered on its promise to protect New Zealander’s who are buying and selling their property.

The previous Act dates back to 1976 and there has long been calls from within the industry and outside to repeal the Act and establish a new Act reflective of the times

Full details have been posted on the Government website.

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What are the facts in real estate?

Posted on: September 3rd, 2008 | Filed in Real Estate Industry

Given my role in this industry, I naturally often get asked questions about the state of the market and the activity on the website, this tends to provides a great opportunity to share the kind of information and statistics I detail on this blog with friends and colleagues.

But the other day a friend accosted me by saying “so .. what are the facts in real estate?” – I realised after a momentary hesitation that he was not looking for me to provide the “concise statistics to NZ real estate version 48”, but rather he was enquiring into the latest marketing campaign currently being undertaken here in Auckland by Barfoot & Thompson – they call it “facts in real estate” complete with its own micro-site.

The question got me thinking as to the level of awareness of “key facts” regarding real estate in NZ; so I thought I would share some of these here in a brief format to assist those who may be interested in the industry as a career or just out of curiosity.

The Market

2008 will be a very slow year for real estate – an estimated 60,000 residential properties will be sold by real estate agents with a combined sales value of around $20 billion. This compares to 2007 with 92,000 and a sales value of $37 billion. The current median price of property in NZ is $340,000, this is up from $282,000 3 years ago and $185,000 6 years ago.

The Companies

There are somewhere around 1,300 licensed real estate offices in NZ at this time. The number is declining as a function of reduced sales = reduced income = cut costs. A year ago there were probably around 1,450. The numbers are not published on a regular basis, but we naturally track our subscriber base which generally represents around 90% of all offices in NZ who use our site to feature their listings.

There are 10 what would be called major groups (all of which have over 50 offices) – they are a mix of public companies (PGG Wrightson), private companies (Barfoot & Thompson), marketing groups (Professionals, First National) and franchises (Harcourts, Ray White, Century 21, LJ Hooker, Harveys and Bayleys). Bayleys is a type of hybrid having both franchisees and company owned offices. These 10 groups account for around 60% of all the offices in the country.

The Salespeople

The average office in NZ has 10 salespeople, the largest has just under 100 and at last count there were just under 250 offices with less than 5 salespeople.

Based on the current market there are around 13,000 sales people, although this number is declining. With around 110,000 real estate listings at this time this means that an average salesperson handles around 8 listings at any one time. With just 60,000 sales this year, this means that the average salesperson is making only 1 sale every 11 weeks. Back at the market sales peak in 2003 there were 120,000 sales in total and the average salesperson was making a sale every 7 weeks.

Undoubtedly there are some sales people who are more successful than others, with the most successful individuals managing many sales per week. Whilst there are not many in this league, they do demonstrate the fundamental aspect of this business which is all about personal motivation. All the salespeople in this industry are effectively self employed and only earn income when they sell a property, the more you sell, as a function of your skill in providing top quality service, the more you will earn.

The Selling Process

The majority of property sold in NZ is sold through a real estate agent with private sales accounting for around 10% of all sales.

The costs of service provided by licensed real estate agents are predominantly based on a commission on the selling price. The individual commission is set by each office or group and does vary. This commission is for a full service which may not include advertising the property which is a cost incurred irrespective of successful sale or not, and that is why it is often a cost for the property owner when it involves main media.

There are marketing companies who offer services to assist you in marketing your property as you may try and sell your property yourself. These companies operate outside of the law regarding the legal requirements of real estate agents and cannot act in the transaction, facilitation or negotiation of a sale without becoming a licensed agent. They tend to package up a marketing services under a single fee which is charged regardless of successful sale of the property.

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Enough evidence to predict property market is warming up

Posted on: August 21st, 2008 | Filed in Real Estate Industry

Calling a turning point in a market is a risky thing to try and do, but when it comes to property sales there is now compelling evidence that the market is warming up again following some of the slowest sales months of the last decade.

Leveraging multiple sources of data provides robustness to this prognosis:

1. Website visitor activity in line with 2007 despite earlier fall off

The level of visitor sessions from domestic browsers to a basket of real estate websites has shown a tenacious attraction – defying the doomsayers of the media. Averaging around 325,000 sessions per week, this is pretty much line-ball with this time last year when the pace of the market was considerably more active. The graph below tracks this basket of 6 websites through 2006/ 2007 / 2008. The post earlier in the year sited the striking coincidence between the timing of extensive media coverage by prophesiers of a property crash and the fall off in traffic to these websites back in late February early March, a position from which a more stable level of engagement has followed.

Aggregated real estate website traffic

2. Inventory is reducing whilst sales volumes are plateauing

The inventory of residential properties on the realestate.co.nz website is falling – July saw inventory of homes for sale fall from an April peak of 65,716 to just 60,150. This is the 3rd straight month of inventory falls. The sales volumes for the same period have been pretty stagnant at around 4,350. There tends to be a lag effect between listings inventory movements and sales of between 1 and 2 months in most cases. The July sales figures from the REINZ showed an unseasonal increase from June (July is normally the lowest sales month of the year). The graph below tracks the inventory and sales per month from October 2006; it is very clear the turning point of July 2007 when sales started stalling and inventory started rising.

Inventory and sales analysis realestate.co.nz

3. Enquiry for properties is increasing

The number of email enquiries forwarded to real estate agents from realestate.co.nz on behalf of interested buyers has grown markedly as can be seen from the graph below. The graph tracks comparable enquiries on a seasonally adjusted basis over the past 18 months with the period since May showing a marked upturn.

Now the key point in this collective analysis is market liquidity, there is no inference for property prices. The current analysis provided by the Real Estate Institute’s sales and median price data up to July show the median price stagnant in the range $340,000 to $350,000 a position it has held now for over 16 months with the exception of just 3 of those months. Does this tell us that property prices are definitely holding their own or has the sales decline so significantly altered the mix that the median can remain static whilst underlying prices change? – I don’t propose to attempt to predict prices.

Finally I would add one more validation to this premise that the market is active, far more active than the most recent 4 month period. That validation comes from an economist – Tony Alexander who in his BNZ weekly overview of the 14th August commented:

“The REINZ reported this week that there were 4,489 dwellings sold around New Zealand in July. This was a decrease of 33% from a year earlier which sounds fairly shocking. But it’s actually the weakest annual rate of decline since February and in seasonally adjusted terms sales in the month improved by roughly 5% after rising 9% in June.

Sales activity appears to have been at its most depressed levels over the months of March, April, and May but since then there has been some greater matching up of the dreams of buyers and the hopes of sellers and hence an improvement in turnover.”

Further he commented in regard to pricing

“..it’s interesting to see that still there is no evidence prices are pulling back to any significant degree. The median dwelling sale price for the entire country in July was $340,000. This was exactly the same as the median price in June and down by only 1.4% from a year earlier

For the moment we think the results for June and July indicate a pulling back from the scenarios some people are peddling involving prices falling 30%. Heck, even in the United States prices have “only” declined 19% over a two-year period and they experienced massive bad bank lending to people who should never have been given a sniff of mortgage money in the first place at low teaser interest rates of 2%. Nothing remotely approaching that has happened in New Zealand and we know many people got a very unpleasant surprise over the past three years when they went to their bank expecting to get 100% financing and found their income was not high enough to qualify.”

As a final cautionary note he states:

” ..it would be equally wrong to believe there is anything remotely smelling like an upturn just around the corner.”

” So the interpretation we invite people to take from these latest numbers is merely a pulling back from an ugly brink but not the end of the downward slope or even visual confirmation of the bottom in the near distance”.

My take on this as a summary would be that I think we can expect the traditional lift in sales and interest in the market that spring usually brings but not necessarily at the kind of levels we’ve seen in recent years, hence why I say an upturn in the market is imminent. Just to ensure that I temper any implied over enthusiasm, the analogy I would use to describe this warming of the market is the kind of slow and steady warmth you apply to frostbitten body-parts to avoid amputation!

15

Auckland property prices – falling or rising??

Posted on: August 6th, 2008 | Filed in Buying / Selling a home, Real Estate Industry

The monthly sales figures and average price reported by Barfoot & Thompson within the first few days of the month have become a key lead indicator to the national figures released by REINZ around the middle of the month. The question is always how to interpret the data. As ever today’s figures present the same challenge.

Firstly the sales volume of 629 is a marked improvement over June at 556. July is normally always a slower month than June as we head into deep winter and July this year has been a depressing month, I think we would agree with bad news and bad weather – neither conducive to good property buying. So you could say things on the property front are actually looking brighter. One important point though that Peter Thompson made in his release was the that the figures did include the sale of 87 apartments – clearly a distressed sale to be so highlighted. If these are removed the “revised” figure of 542 looks about right on a season basis for July – not any more of a slow down than would have been expected.

As to pricing – the average price is reported as $497,479, this represents a 5.3% decline from June and 9% down on July 2007 – clearly this would signal that prices are falling.

But wait a minute what of these 87 apartments? – the implications is that they were sold as a distressed lot – the question is what impact this would have on average prices. Lets look at a couple of scenarios:

  1. If the apartments were say sold at $300,000 each then the average price for the month excluding these would have been $529,178, a slight increase on the June figure of $525,316.
  2. If the apartments were say sold at $150,000 each then the average price for the month excluding these would have been $553,255, a significant increase on the June figure of $525,316.
  3. But what if these apartments were say sold at a real distressed price of $99,000 each then the average price for the month excluding these would have been $561,441, a very significant increase on the June figure of $525,316.

The key thing here is how the impact of this situation can effect average pricing – equally this scale of bulk sale in a slow market would effect the median price.

The 2 charts below tracks the sales volume of Barfoot & Thompson over the past 2 years and details their average price, it also compared this to the average price reported by REINZ (the figures released by REINZ are median price, so this allows a more relevant like-for-like comparison). The first graph shows the actual reported statistics, the second graph shows the figures if these apartments were excluded (based on the second scenario of $150,000 each) how the picture would look.

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Belief in private sales falls as property market falls

Posted on: August 5th, 2008 | Filed in Online marketing, Real Estate Industry, Website searching
FSBO - appeal falls as market falls

Step back a year or so ago when all seemed right with the property market. Prices were steadily advancing and buyers were plentiful, this was a time when the pervading view was selling a property was as easy as selling a second hand car. All you needed was the web and a sign board, this was the time when people were questioning the very existence of real estate agents.

Well come back to today and the reality of the market which has shown all the symptoms of a significant slump with the total sales for the first half of 2008 falling just short of 30,000 representing a 43% decline. Now it appears from research released today that sellers are turning back to the real estate agents to help sell their house.

The annual Nielsen Online study into the behaviour of buyers and sellers of property provides a rich insight into the market through the eyes of a sample of consumers actively using real estate websites. The survey examines many aspects of real estate marketing online as well as the buying and selling process.

One of the key finding of the report is that in the past year there has been a significant increase in homeowners planning to get a professional real estate agent to sell their property instead of planning to undertake a private sale.

41% of vendors say they will DEFINITELY list with a real estate agent compared to 35% last year.

In total last year the survey said half of all sellers would at least try to sell without using an agent, that number this year is 46%, with just 14% this year said they would definitely sell privately.

It is clear from these figures that as a consequence of the change in market conditions, sellers better recognise the value of a real estate agent to be better able to secure buyers and close a deal on their property.

This renewed confidence in the role of the agent to support the seller has not in any way diminished the critical importance of the web as the primary search and marketing tool for all parties in the real estate industry. In total across all websites monitored by Nielsen Online the total daily average number of browsers now exceeds 100,000 and in total these visitors consume over 1 million hours researching real estate website information per month, both of these traffic statistics represent growth over last year 22% in the case of daily browsers and 30% in terms of duration.

Examining the attitudes of prospective sellers to the real estate agent in general shows some interesting pointers. The factor potentially effecting the selection of an agent the most is reputation, for whilst “previous experience” of real estate company came out top with 39%, the fastest and most consistent growth over the past 2 years is reputation of the agent – from 34% 2 years ago to 37% now.

It is clear from reading this blog in the past you will be aware of the growth in individual agents writing their own blog – this is judged to be the most effective tool for an agent to demonstrate through open and honest communication a passion and competence and through blog comments attract genuine feedback. The Voices platform of blogs for agents has been a catalyst for this change with now over 50 agents actively blogging – all from a base of virtually nothing 6 months ago.

Survey background
Nielsen Online surveyed nearly 1,200 online users between April and June 2008.  The research was undertaken on four selected real estate websites and compared the data to the two previous Nielsen Online surveys in 2006 and 2007.  The report was commissioned by a number of companies operating specialist real estate websites and services within the industry and sponsored by www.realestate.co.nz .  The survey has a margin of error of 2.9%.
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The web complements, but should never replace the human component of real estate

Posted on: July 30th, 2008 | Filed in Buying / Selling a home, Real Estate Industry

The content and tone of many of my blog posts are positively in favour of using the web to seek out the answers to real estate questions – whether they be for buying or selling a property.

It was therefore somewhat of a salutary reminder of the heart of this real estate business that I read this blog post by Bradley Inman – he of Inman News. In reading it I think I was overwhelmed by a sense of empathy. Here was a person who for getting on for almost two decades has advocated the opportunities presented by the web and social media to bring transparency and empower agents, and yet when it comes to seeking a realtor to sell his parents home – the tried and trusted elements of human connection proved the most valuable.

The post is all the more heart warming as if you ever meet the guy he wears his heart on his sleeve and is passionate about his family, his company, his industry – in that order.

Have a read of “Bradley find that realtor” !

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