The Unconditional Blog

The impartial voice of the industry

 

Archive for the ‘Real Estate Industry’ Category

6

Trends for real estate in NZ – the top 5 for 2008

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

With the benefit of a half a day in the country and extensive research prior to his visit Stefan has put together his perspective of the top 5 trends for the real estate industry in NZ for the next year. He is presenting these in more detail at his 2 speaking engagements whilst he enjoys his brief time in NZ.

The tug of war has started… again!

The evolving and changing real estate business model

With an industry amounting to a transaction value of north of $35 billion, it is always going to see innovation and challenge.

The changing business model trend is particularly topical in NZ. The past year has played witness to a number of challenging developments, the majority of which have been focussed on the costs of service. We watched the very public rise and fall of The Joneses but away from the headlines business models charging 1% commission instead of the standard 3-4% have established a foothold in some areas. Other models will continue to appear and evolve.

Thought Reform

The DNA of a new breed of Real Estate Agents

This trend is so timely. Within the last year the market has changed so dramatically and sales are much harder to make so success will rely heavily on an agent’s skill set.

“Agents are no longer order takers and are looking to acquire skills to build their business” – Bill Shue, President, RealtyU a large US based agency.

What degree of additional education will be needed to better understand the needs of the consumers of the future? The new recommendations contained within the new tabled Real Estate Agents Bill includes a requirement for continued professional development so education providers and the Real Estate Institute (REINZ) will be already developing strategies for agents to regularly upskill.

Clash of the Titans

Power brokers flex their muscles

As to whether we will see more polarisation of the market to the major groups and franchises is not an easy question to answer.

Almost two-thirds of all NZ real estate offices are part of franchise or marketing groups compared to Australia where less than half of all offices are.

The flexing of muscle in the USA has shown that the big doesn’t always win. Power struggles have been won by smaller players showing innovation, internet strategies, growth, good profile and consumer awareness. As is often stated, real estate is a local business and innovative local firms can become the power brokers for areas or sectors of the market.

The new digital currency

Information

Information is key and online is the arena in which real estate now operates.

The past couple of years have seen enormous changes in the online real estate marketing – to quote the report “web traffic has replaced walk in traffic”.

Buyers are thirsty for information on all properties and are finding it all on specialist real estate websites with comprehensive portfolios of photographs, video and mapping.

The growth of the web has put the ‘print media spend’ by real estate companies under review and now the state of the market is forcing cost cutting so the newspaper marketing budget is likely to be the biggest victim.

The real estate industry and newspapers were in a co-dependent relationship for so many years that separation will be hard.

Sami Inkinen, the founder of USA online search engine www.trulia.com has described the reluctance of real estate to divorce newspaper in a much less favourable way.

“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.”

Two worlds; one industry

The evolution of online communities & networks

The web has started to transform the real estate industry but the most significant part of its evolution is yet to come.

The web was first used by buyers and sellers for browsing, then for searching.

The most important trend for New Zealand real estate over the next 12 months will be buyers, sellers and agents using the web for sharing.

Real estate is a universal topic of conversation at any time with anyone which makes it a perfect platform for online social interaction.

For the real estate industry the trend is towards agent blogs – they provide an open forum for agents to discuss the market, their community, raise topical issues for debate, demonstrate their expertise and create meaningful dialogue with potential clients.

Most importantly blogs and social networking sites such as Facebook and LinkedIn provide the professional capabilities and services of an agent to be represented in an open and honest manner.

This will become a credible and comprehensive way for buyers and sellers to get a sense of the agent’s ability, integrity and honesty – a better way to choose an agent than by throwing a dart at the newspaper!

The challenge within this trend is the fact that the majority of real estate agents are from the baby-boomer generation not the internet generation.

Technology is set to be a disruptive influence on this industry:

– will we see changes happen this year? – unlikely;

– will these changes be far reaching? – absolutely;

– will the changes benefit those that embrace this new open networking environment on the web? – absolutely;

– will the consumer be the beneficiary through greater service and value ? – without any doubt.

2

The definitive set of real estate facts and information

Posted on: July 10th, 2008 | Filed in Money Matters, Real Estate Industry

If ever you need to access to the definitive set of graphs on real estate and property statistics for NZ – then this is the place for you (and for me!). The team at interest.co.nz maintain this set of 21 graphs which pictorally provide a great snapshot of the drivers of property sales in NZ.

Real estate statistics graphs - interest.co.nz

Not only just real estate statistics are provided on the website – here are the other categories comprehensively covered:

Confidence

Credit

Economy

Exchange rates

Government

Industry

Interest rates

Labour

Overseas trade

Population

Prices

Social indicators

16

Auckland property market potentially showing signs of stability

Posted on: July 4th, 2008 | Filed in Buying / Selling a home, Real Estate Industry, Regional News

The sales figures for Auckland properties as reflected by the monthly figures released today by Barfoot & Thompson certainly show the continuing sluggish property market with just 556 properties sales in June. This brings the total for the first 6 months of 2008 to 3,363 – a decline of 48% from the same period last year which saw over 6,500 sales.

The figures though on further examination do show some interesting early trends which could reflect a more stable market – one where a smaller set of buyers and sellers are meeting the market at a realistic level.

This pair of graphs track the moving annual total of sales volume and sales value as reported by Barfoot & Thompson over the past 12 months. The blue horizontal bars representing the sharp decline equally reflecting the contraction in real estate business, in the case of sales value from a high of an annualised $6.3 billion to the current level of $4.2 billion.

However when examining the monthly variance to prior year as shown by the yellow line the analysis indicates that the rate of decline in the case of volume sales in June was less severe than for the prior 2 months. Certainly the reporting period is beginning to track against the first months of decline this time last year, however it does at least show some signs of a base level potentially.

The average sales price monthly variance does show a continuation of the range between 0 and a negative 7 percent, with June down 2.3% as compared to June 2007. Certainly not the heady growth seen over the past 3 years, but equally not the crash as yet predicted.

The coming months will be particularly telling with as ever a deficit of buyers eager to negotiate with a continuing surplus of sellers.

3

NZ Property market statistics – May 2008

Posted on: June 11th, 2008 | Filed in Real Estate Industry

The monthly statistics published by the Real Estate Institute for May show a continuing low level of sales across the country with 4,373 in the month a 53% decline from May of last year. The year-to-date stands at 25,565 itself 44% down on the same period last year. This means that close to 20,000 less properties have been sold to date in 2008 as compared to 2007.

REINZ NZ Property sales data - % changeAnalysing the percentage change year on year of property sales shows that the variance is bouncing around a low point first hit in March. Heading into winter and set against the first signs of a slowing market in June of last year may see this begin to creep back in the coming months.

REINZ median price change May 2008In terms of pricing the median price at $345,000 remained as last month and for the second month showed a 1% decline compared to the same month last year as shown by the graph.

An additional perspective to the state of the market is provided by the graph below which presents the effect of the slower sales and static pricing is having on the stock of property for sale on the market as measured by the listings on realestate.co.nz.

Inventory of property on the market in NZ - realestate.co.nz

Tracked over the past 3 years and based on a 3 month moving average it clearly shows the steep rise in stock levels as represented by months of inventory from May of 2007, when prior to this over the previous 2 years the level of stock of properties for sale had been fairly static at around 5 months, subsequently for the last 12 months this level of stock has grown month after month to now stand at close to 14 months stock.

As highlighted by the red line this 12 month period of growing inventory matches the period when the median price has been fairly static around $350,000, and has shown some early signs of a price correction over the first quarter.

0

Open Home Signs – visual pollution?

Posted on: June 3rd, 2008 | Filed in Agent Tips, Real Estate Industry

I commend Ross Brader for tackling this subject on his blog today – his question “Real estate signs & direction arrows – Visual pollution or necessity?”

Here is a real estate agent open minded enough to challenge with good facts and information one of the bastions of this industry.

My view as I have commented on his blog is clear, they provide no value and merely clutter up neighbourhoods. That’s just my view though!

4

Rural real estate continues to grow

Posted on: May 28th, 2008 | Filed in Real Estate Industry

The farming sector of the economy and specifically the dairy industry will later this week find out the scale of the Fonterra payout which is now expected to top $7.60/kg. This compares with the 2006/7 payout of $4.46/kg.

This scale of rural economic success has a natural and consequential flow onto the rural real estate market – especially the market for farms which is worth well in excess of $5bn per annum and seeing unprecedented growth in sales volumes and median prices as shown in the graph. The graph tracks sales of farms over the past 5 years measured as a moving annual total based on REINZ data shown in the blue line. The red line represents the median prices of all farms as measured over a moving 3 month period.

REINZ Farm sales and prices - May 2008

A key driver of the median price as reported in the REINZ Rural Monthly Update is the dairy sector – in the 3 months to April 2008 dairy farm sales totalled 163 with a median price of $3.9m. Clearly in the farming sector median prices and total sales are not as easily comparable as they are in the residential market. A key factor is the consolidation of farming units which had a consequential impact on medians.

Serving this active market are the specialist real estate companies who are actively talking up a very successful year just closed. Harcourts rural division recently reported their year to end of March with over $900m in sales a 20% increase. PGG Wrightson the specialist rural supplies company with a 64 strong chain of real estate offices reported total rural sales of $2.3bn – a 65% increase over the year which included the sale of 19 rural properties over $10m.

Currently the website features 9 dairy farms alone priced in excess of $10m, these amongst a total of 210 dairy farms. A total of 6,581 farms, agricultural units, rural properties as well as bare land are featured on the site with the most expensive being a 2 farm unit comprising 489.5ha near Gore on the market for $27m.

Clearly whilst the real estate industry is generally tightening its belt to manage a significantly slower 2008 in residential sales those offices with the benefit of an exposure to the rural economy are able to secure a steady and significant business as farmers seek to consolidate and drive the economic wealth of the country from the farm gate.

3

REINZ statistics for April show significant market correction

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

The language accompanying the release by REINZ of the April sales and pricing statistics was as telling as the data in the release.

The comment “(the) market suffered a further slump in sales in April” clearly acknowledges that what we are seeing in the data has been presented in the past few months but has not been so overtly conveyed. Equally the comment “the loss of confidence in the housing market is deeper than we had anticipated” speaks to the analysis presented in the earlier blog post “Media seriously impacts the psyche of NZ’ers when it comes to property” highlighting the emerging softening in demand as measured in web viewings of property.

There is no doubt that consumer sentiment has switched out of real estate as the dual whammy of rising mortgage costs (whilst rates may be on the way down the refinancing of fixed term mortgages will still be at higher rates than those established 2 to 3 years ago) and the general household costs impact discretionary spend.

Looking in more detail at the latest stats from REINZ data for median prices and sales we see the most extreme downward trend of the past 2 decades. These graphs present the year on year percentage change in median price and property sales tracked from 1993 to date.

REINZ Monthly sales yr on yr % change 93 to 08

Clearly seen here in the median price graph are the key cyclical peaks of pricing (1994 to 1997 / 2004 to 2006) and the lows of 1998 to 2002, plus our new downturn.

REINZ Monthly median price yr on yr % change 93 to 08

The steepness of the decline and the new lows are of an unprecedented level. A very important bell weather to understanding the stage we are at in this cycle will actually come in the May figures. It was May 2007 when we first started to see the signs of the heat coming out of the market in regard to sales volumes. Therefore a continued fall in volume as compare to May’07 would show sales down on a falling base of a year ago certainly highlighting that we are not close to the bottom of the cycle.

As for the trend of median price; naturally this is harder to anticipate as the scale of the falling-off in price growth has not been seen to this extent in the past 2 decades. Simply at this point all that can be stated are the figures.

16

Barfoot & Thompson sales figures for April reinforce the trend

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

The figures published today from Barfoot & Thompson speak to a very slow market in Auckland. The month of April saw sales of just 453 as compared to 983 in April last year a 52% decline.

The fact is these figures are not surprising – I think the general public are well acquainted with the fact that the property market in NZ is in a slump. A correction was always going to happen as the level of sales experienced in the first 6 months of last year were unsustainable.

The first 4 months of 2008 has consistently seen volumes down around 50% – this will continues until July when we pass the peak of 2007 sales – the graph below shows this with clarity with the estimated extrapolation of the REINZ data on the red line.

The key question a lot of people are asking and in some ways you almost get a sense that soon we will be seeing the TAB taking bets on, is the latest REINZ sales figures. These figures will probably out next Monday the 12 May together with the latest pricing stats from QV. For the benefit of adding my own perspective I believe the extrapolation of the REINZ sales stats based on the trend of Barfoot & Thompson sales will see a total NZ figure of around 4,700.

That figure for April would result in a total monthly sales the likes of which has not been seen for 8 years; but then again people know that property markets cycle up and down in periods of 5 to 7 years, this has been a longer peak as a function of the easy credit of the early part of the decade.

For the year a total annual sales across the whole country of 78,000 based on the current annualised figures will come as a shock to many in this industry who have only ever experience a buoyant market with annual sales of over 100,000. The likely outcome by the end of the year will be a leaner and more focussed real estate profession, better able to serve the consumer.

30

NZ Property slump is mirrored around the world

Posted on: May 4th, 2008 | Filed in Buying / Selling a home, Real Estate Industry

If it is any consolation we are not alone. Just as the developed economy of the western world (and some emerging countries) partied on the flow of easy credit in the early part of this decade – so one by one they are all facing the grim view of the property market that is looking pretty sick at this time. Take a look at some of our fellow sufferers:

Needless to say the state of the US housing market is well recognised as the home of the sub-prime mortgage debacle. Here in pockets of the US properties are being given away for the price of unpaid taxes at the extreme example and overall prices have come back over 10% at the median level, but for a country with over 100 million properties what a median prices means is a little uncertain.

UK – property sales down by around a half, the UK National Association of Estate Agents reporting their firms selling an average of just 7 homes in March (the latest NZ REINZ data shows a sale of just under 4 per office). Additionally where once a flood of mortgage approvals peaked at 3,000 per day in 2002 a mere trickle of 1,100 per day make it past the post.

Ireland – often so clearly compared to NZ is equally suffering with a 7% drop in prices last year after what had been an incredible run of property development and price appreciation

Spain went through the most amazing property bubble in the past decade with more than 4 million new homes built, more than the combined build of UK, Germany and France. But now no one seems to want to move to the sun, with thousands of properties standing empty and prices now looking anywhere up to 15% over priced ( as assessed by the latest IMF report) after an overall tripling in price in the past decade.

Denmark is a country of very similar size to NZ and a similar economy, although with the benefit greater critical scale markets much closer geographically they enjoy a much higher standard of living. Its property market has been on fire for the best part of 15 years, but the bubble has well and truly burst with prices on the slide.

Australia has long experienced the same explosive growth in property prices as on this side of the Tasman, however despite the demand of all those NZ’ers flooding across the ditch the likelihood from the recent IMF report is that Australia is vulnerable to a market correction. The report sights the Australian property market as the fourth most vulnerable in the world to a painful price correction.

South Africa is experiencing the impact of the global credit squeeze, there a series of interest rate hikes (with more expected) now see their commercial bank’s prime lending rate at 15%. A rampant property market lasting many years has now come to a grinding halt with prices falling.

Such is the overall scale of the issue that there is a growing number of forums dedicated to this subject – the most active one from within NZ (although it is a UK based one) is Global House Price Crash. It is well worth a read as an open forum of opinion and views.

9

Latest REINZ sales statistics show no clear direction on price

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

The press release from the Real Estate Institute (REINZ) detailing the sales statistics for March came as no surprise in terms of the number of properties sold in the month.

The figure of 5,186 was pretty clearly flagged in the Barfoot & Thompson sales report released on the 4th April which showed a sales total of 632 a 56% decline from March last year. With a market share of between 11% and 12% the B&T data is clearly a lead indicator for the total market.

NZ house sales dataTracking the sales in unit volume (red line) and value (blue line) clearly shows how steep the fall off in sales has been. The number of house sales has been falling since their peak (measured on an annualised basis) of 121,777 in April 2004. The latest fall began almost a year ago when annual sales were steady at around 103,000. That number has now fallen to 81,000 and the likelyhood is that by year end we could well see an annualised sales volume of close to the troughs of the late 90’s with around 65,000.

While the sales volumes were in some way predictable the median price was less so. The explanation from REINZ was “an especially noticable drop in under $400,000 properties” – now this would lead to a higher median. However examining the detailed stats in my mind does not wholly support this assertion.

Making a year on year comparison for sales of sub-$400k properties showed just 3,125 in March 2008 vs. 6,832 a year earlier – a 54% decline. However total sales were down 53% – not that significant a difference. In terms of proportion of total sales sub-$400k properties fell to 60.9% in March from 64% in Feb, but tracking back a year or 2 shows the same somewhat seasonal fall off. Extending the tracking period to a 3 month moving average does not show any great difference.

What is far more interesting is the $600k to $1million segment of the market. This price bracket represented in March 12% of all sales with 614 properties, it was down 49% – slightly less than the total market. This segment is noticable for the fact that it has grown from 6% of sales 3 years ago and continues to track ahead of the market.

You will recall that the median price from the B&T report showed a similar rise in their average price from $495k in Feb to $522k in March.

Now median prices can be misleading as we continue to be told especially when volumes fall – however a sample of 5,000 is pretty significant statistically – 10,000 is better. As ever the true indicator of property prices will be shown when individual reports emerge of properties sold below the price purchased a couple of years ago. Until then I think we will have to patiently wait and see, as are most of the property owners who seem resigned to “tough out this market” and hold off moving.

………………………….

Update 14 April

The latest QV report for March seems to echo this sentiment that there is as yet no clear indication on the direction of pricing.

Their view supporting the fact that the average New Zealand sale price decreased to $388,894 this month (from $393,240 last month) was a function of “The drop in average sale price this month is a reflection of more activity at the bottom end of the market, and less at the top end, rather than any significant drop in value. Many investors may be seeking to reduce their exposure to increasing mortgage costs, and having made good capital gains over the last few years are now looking to sell”

It is likely that if we do witness such sell off then pricing will be depressed but with such a significant drop off in sales so quickly we could be experiencing a “hunker down” mentality which could ride us through the next 12 – 24 months.

Page 5 of 7« First...34567