At this time there seems to be a steady debate as to the health of the property market and the usual collection of critical questions:
Have we reached the bottom? / Are property prices going to dive? / is this a good time to buy? / should I sit tight and save for the future?
As I stated in the interview on TV One’s Breakfast the best advice I would offer is research, research, research. To assist in this process I have collected together what I think are the key statistics on the market today. These statistics provide an insight into the general level of interest in property, the degree of supply of properties onto the market, the level of enquiry of agents regarding properties and the current level of sales. These statistics are accurate objective numbers and are presented showing at least 2 years data. I have not included any data on price movements, these are well communicated in other articles, equally my belief is in the need to look for liquidity in the property market as a forward looking indicator – price is a market messaging device, but without sales there is no property market.
I should make one observation at this stage. All of this data is based on the whole country and therefore are an aggregation. Clearly within a suburb or region the scale and trend may be somewhat different. It is important to better understand your local market to really be well informed, however a combination of these statistics and the great information to be found on Zoodle will go a long way to assist property seekers to be better informed.
Interest in property searches
The web is now the most actively used medium for real estate search. Recent research from the US indicates that 82% of all real estate transactions involve the internet at some stage (NAR Survey of home buyers 2008). It is therefore safe to say that the level of web site traffic to real estate listings on a comparative basis can provide an indication as to the health of the market. The graph below shows the indexed level of traffic to all NZ websites featuring real estate listings based on Nielsen Online domestic traffic. (The index weekly tracking tries to eliminate the inherent growth of web traffic as a function of growing broadband penetration).
The blue line representing current levels of web traffic is showing a more sustained growth than the same time last year. Last year was characteristed by two very marked downturns in viewing activity – in late March at the time the awareness of the economic downturn started to be reported; and then again in the middle of September when the banking collapses dampened any spring burst of activity.
Inventory – the supply side of the market
Tracking the number of listings on the market and the number of new listings coming onto the market provides a view of the supply side of the market. The graph below shows that the NZ market continues to be burdened by a large number of listings. At this time there are just over 116,000 listings on realestate.co.nz. This is represented by the blue area of the chart, compared to 18 months ago the level has increased by over 30,000. However the majority of the increase occurred in the period Feb – May 2008.
Whilst listings did slip downwards in the early spring of 2008, they did rise again to the current level prior to Christmas. The red line (left hand axis) tracks the number of weekly listings added to the website. The most telling information from examining this line is the very high level of listings coming onto the market in the Jan / Feb period of 2008 (4,500 per week), 12 months later whilst showing a similar pick up after the Christmas holiday dip the level of new listings is down relatively to less than 4,000. This is very likely to be a function of better informed vendor recognising the quieter selling market.
As a point of note these stats cover all listing types and therefore cannot be used to compare directly with property sales – the data does provide a guide to property movements as residential property does constitute the largest portion of the listings (c. 70%).
Real estate enquiries
Whilst traffic to websites provide a guide to the level of interest – emails enquiries sent out from realestate.co.nz to real estate agents does more accurately reflect intention to act by prospective buyers. The graph below uses an index basis to track the past 2 years weekly enquiry levels.
The blue line for 2009 activity whilst not reaching the peak of activity witnessed in Jan / Feb 2008 is still showing an activity level ahead of 2007. The peak of enquiry appears to have occured in the last week of February at a point that cut throught the 2008 level. Whilst it is not clear where 2009 will proceed from here the historical trends of this graph have been effective in indicating consumer sentiment. The most conspicuous demonstration of this was the collapse of enquiry in Sep 2008 at the time of traditional spring resurgence and equally the rise in the pre-Christmas period which mirrored sales activity at those times.
Property Sales
The February statistics for sales as reported by the REINZ will be released within the next week. The graph below shows the actual sales of property for the past 8 years up to Jan 2009.
Clearly as seen from this there is no sign yet of a pick up in sales with the January figures hitting an all time low. As to the future predictions I would venture to suggest that 2009 will see a turning point in sales – the rationale for this is the subject of a blog post written on the Zoodle blog in January titled “Property sales likely to pick up in 2009” which I would encourage a review for insight into the relative state of sales.
Thanks for this Alistair – there is some great information here which will be worth directing buyers and sellers to.
What I find most interesting is the volume of listings at 115,000 – that is more than 2 years supply at a sale rate of 4,500 per month. If the past is anything to go on the months of March, April and May could see the volume of listings on the site climb through the 130,000 level.
I suspect that the pool of listings will not reduce unless there are significant changes in price expectations on the vast majority of listings throughout NZ.
It would be worth adding a days to sell graph to the above item going back say 5 years.
Also interesting that the sessions on the realestate.co.nz website show a big lift yet the volume of email enquiries has turned down. I have a theory on this – the majority of emails we were getting until recently were for homes without asking prices, ie By Negotiation, Auction or Tender and the emails were only seeking a price indication.
Now that most of our homes have an asking price we get very few emails. I suspect that this can be applied across the industry as there are now many more listings with actual asking prices on them and auction and tender listings are well down on this time last year as sellers realise that there is no point wasting money on an auction marketing campaign in this current environment.
We seem to get a lot more questions vie text message over the last few months – we can reply to these far quicker when we are out of the office and it is something we have been encouraging. We even have ability to text us directly from one of our websites and this would be a featuyre worth adding to our realestate.co.nz listings. All our Pt Chevalier listings at http://www.lochores.co.nz have the text capability.
Also with access to sites like http://www.zoodle.co.nz and http://www.aucklandcity.govt.nz buyers can locate any information from listings that may be missing like rates, land area and CV.
In our office when we email listings to our buyer database we list the CV, Land Area, Floor area if available, Auckland City Council and Auckland Regional Council rates. This has cut down the number of emails we get from our registered buyers as all the info required is available up front.
We also used to get a large number of emails asking when is the open home time so by setting our open home times earlier in the week and making these available on the various websites we use that type of enquiry has dropped back.
This leaves us with more time to concentrate on actually showing and selling homes rather than spending a couple of hours each day replying to emails.
As ever Ross some valuable insight.
As I mentioned a cautionary note the listings total of 116,000 contains non residential listings – actual residential listings total around 79,000 of which around 7,000 are duplicates as a function of multiple listings, so a monthly sales of c. 4,000 would be judged against an inventory of 72,000 – so 18 months!
Giving buyers the ability to direct text salespeople from listings on realestate.co.nz would be a fantastic development – I am sure many salespeople would be happy to pay the cost of the texts. It saves so much time and allows a much more rapid response as against clearing emails once or twice a day.
Sorry – missed that note re 70% of the 116,000 being residential – is the balance commercial and sections?
“Clearly as seen from this there is no sign yet of a pick up in sales with the January figures hitting an all time low. As to the future predictions I would venture to suggest that 2009 will see a turning point in sales”
You better be right Alistair or with this current trend it’ll hit zero !!!!
Alistair,
Your “research, research, research” quote resonates with me. As it applies to the average property buyer though, I very much doubt it will be put into practice. There was very little research put it when the market was rampaging up, so the chances are that there will be very little when the market heads south. Buying property in the last 10 years has been dominated by “groupthink”, not shrewd research.
Your key stats are valuable, but the prudent buyer should also factor the wider economic environment into their equation. It is factor beyond our control, but one that could be the most potentially damaging.
Ross, it sounds like emerging technologies and access to property information for potential buyers runs the risk of making agents in the future an un-needed or cheaper attachment to the property buying process.
Andrew – I would say in fact it is quite the opposite.
Interesting to note that Auckland’ largest real estate company has in fact just put it’s fees up! They will still no doubt maintain a very high market share despite this.
When I started selling homes back in 1983 at a very young age there was no internet, no fax machines and no mobile phones, for sale signs were seldom used and we were not permitted to work on Sundays. Open homes had not been invented at that point.
The pareto principle says that 80% of the business will be done by 20% of the people. The internet and other technology has moved this more towards 90% of the business being done by 10% of the people.
Owners of homes cannot be home all day to make appointments with buyers, most sellers are committed to weekend family activities and prefer to have another party look after the selling for them. They would certainly not have appreciated the call I received at 5am this morning from an overseas buyer who had not made correct allowance for the timezone difference, whereas I was happy to take the call on the sellers behalf.
If it was that easy selling your house then why do most private sellers end up listing with an agent?
On the other hand buyers appreciate being contacted as soon as a new listing that suits them might become available and they value the services of a competent professional salesperson who will keep in touch with them and advise them immediately of new listings.
In my case having been in the industry for such a long time over 80% of my business comes from repeat sales and referalls from past clients. This would not happen if their was not a value attributed to my service.
When I started in real estate I could never have imagined the technology that would be available today. Despite this I have always been an early adopter of all the technology as soon as it is available. I was one of the first salespeople in NZ to have a personal website and email buyer database. Soon we will have full motion video open homes online which will make life a lot easier for buyers and sellers alike.
What all this digital technology means is that I can cover more ground. My diary is in my phone, I have a buyer database with over 600 people in it and a very high profile internet presence. We list all our homes on 11 websites and use search engine technology to make sure our homes are seen by as many possible buyers as possible.
Many of my sales come totally from lateral thinking and would not take place without this. Often I sell homes that are not actually on the market but match buyer and seller together and make things happen.
Next week I have been asked to make a presentation at Professionals annual Principals and Managers meeting all about how to embrace technology, the internet and make it work to your advantage.
So Andrew in the current economic real estate environment I would say that it is more crucial than ever that when selling your home your employ a totally competent professional salesperson who has the knowledge, experience, track record and negotiating skills to get your home SOLD!
I actually enjoy the current market as it is a time when every ounce of experience you have is fully utilised and as a result I have managed to sell almost $6,500,000 worth of homes in the last 6 weeks.
Wow Andrew you got Ross wound up!! Good stuff. My 2 cents worth is this: If a home-seller is a better negotiator than the agent they appoint they shouldn’t appoint them. They should sell privately or find a better agent.
I suppose if everyone was as smart as us regular bloggers, everyone would just find the most professional and trusted person available.
I often use the heart surgery analogy in real estate but most people just don’t seem to get it. If I had a heart problem and had a choice between employing the world’s best heart surgeon and someone ranked the world’s 20th best heart surgeon, I know which way I would go. I think along these lines when I look at investing my money, I seek out the best people in that field, not the average ones.
Real estate is about making informed decisions (research, research). Especially when selling (as opposed to buying) it’s very much about taking responsibility for your decisions.
Cheaper agents are cheap for a reason Andrew. Do you get that?
Ross, good to see some emotion in this forum for a change. You certainly have an impressive track record and are no doubt an agent that achieves results. I also suspect that you are at the top of your game with many years experience in the biggest market in NZ.
The fact that 10% of the agents are getting 90% of the business suggests to me that new technology is already making many agents redundant. The possibility for tech savvy agents to gain more market share is assisted with new technologies. The information asymmetry that used to exist has been addressed via sites such as zoodle, qv. interest.co and realestate.co enabling people to conduct research themselves, both the agent profile, track record and the particulars about the property itself.
Many agents that I have had dealings with over the past 8 years have (in my opinion) not been a credit to the industry and a consequence of the limited training and education necessary to qualify. The sooner technological advancements and the business cycle assist educated and competent agents to weed out the rest the better. Failing that, attach real-estate to a marketing / commerce degree and clean out the industry. Only then will the majority feel they are really getting value for money when they employ a real-estate professional. Instead of feeling like the house sold itself, in spite of the agent and not because of them.
Steve, agents that are cheap for a reason shouldn’t be selling such valuable assets and discredit the industry. Thankfully, the property slow down is performing natural selection.
Andrew,
Being tech savvy and tertiary educated does not necessarily make you a good property agent, lawyer, researcher, turck driver, lover, etc. Ross is a success because of his service and professionalism, and his education and tech expertise are merely tools to support that.
Andrew – you are right onto it. The economic climate has prety much cleaned out the industry already. Those waiting for a summer recovery will have been very disappointed.
With an average of around 4,500 sales per month in NZ there was no way that over 17,000 salespeople could survive in the business. Homes almost sold themselves in the boom times, which is why private sale companies did well back then, but this current slump is far more challenging than anything I have experienced in the last 25 years.
In my area the median price so far this year is down exactly $100,000 since the 2007 peak and asking prices have to reflect this or there will be no sales.
If you are selling your home anywhere in NZ in this environment you need to seek out the top salespeople in your area and use one of them to sell it. Those that only have a few years experience during the boom will not know how to handle things in the slump.
I was just listening to Kathryn Ryan on Nine to Noon on Radio New Zealand National.
About 4/5 through.
She started a question with something like “Modest signs of recovery in that market….”
Alan Bollard replied with:
http://www.radionz.co.nz/national/programmes/ninetonoon
You can listen to the interview here:
http://podcast.radionz.co.nz/ntn/ntn-20090313-0910-RBNZ_on_Official_cash_reserve_announcement-048.mp3
I think that generally everyone is confusing the volume and price issues in this market.
Nobody is calling a strengthening of property prices. The view from Dr Bollard is probably close to the truth.
However when it comes to activity in the form of transactions we are seeing more activity. Nobody is calling it buoyant, but to see sales of 5,000+ places a pleasant change from the “flat lining” of 4,300 which typified the 9 preceding months up until Feb 2009.
A total of say 64,000 sales in 2009 is quite likely up from 56,000 in 2008 – this can be called an increase, certainly not even close to the 100,000+ years that typified 2006 & 2007.
Once again, it’s the Reserve Bank’s outlook…. for 2009. Looking out and beyond, the property landscape might look as bleak as Mondor, while many still dream of Xanadu.
Mark Weldon Compares CNBC Hyping with the NZ Real Estate Industry
From 10:48:000
Initially talking about CNBC etc hyping investments. Then asked whether there is a parallel in NZ he replied:
Mark Weldon:
From:
http://www.radiolive.co.nz/AudioArchive/AudioOnDemand/tabid/344/language/en-NZ/Default.aspx
and selecting Sunday Mar 15th 12:30
Alistair, have you seen this ?
from: http://www.squirrel.co.nz/?p=318
Steve
I had not – thanks for highlighting it. I must admit this is entirely logical as there is nothing on the horizon which will establish confidence in the credit markets in the short and medium term to drive them to ease this approach. Therefore the market will have to adapt.
Having said that does this mean that the market will not re-establish some degree of liquidity and by that I mean not leap up to sales levels of 8,000 a month, no more like a more cautious rise to upwards of 6,000 a month.
The market can operate with 20% equity quite easily. For first time buyers then a more pragmatic approach to that first home will see purchases in the sub $300k range – a small apartment perhaps.
As to a large segment of the market buying and selling between $400k and $600k. If this segment is made up of 2nd or 3rd time buyers then likely as not due to mortgage principle repayment and capital appreciation they may well have $100k to $150k in equity in their current house which is more than enough for a 20% deposit for up to a $750k property at the top end. Not everybody is “upside down” in their mortgage.