The Unconditional Blog

The impartial voice of the industry

 
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Comprehensive price data on each area of NZ

Posted on: December 8th, 2009 | Filed in Buying / Selling a home, Regional News

Every month we seem to be presented with more and more information on the property market. This is excellent for all involved in the real estate market as it will ensure better informed decisions.

In what seems like a very quiet move QV has produced an excellent analysis of property price movements for almost all territorial local authorities across the country.

However this is not just the normal data of the average price in this region this month vs last month – this analysis is far more detailed.

They have segmented the price bands of property in each area and detailed the movement of price in each area within each price band comparing the first quarter of 2009 with the third quarter (July – Sep 2009). The examples below highlight the regions with the highest and lowest price appreciation – North Shore and Queenstown.

qv-tla-data

The charts for 37 territorial local authorities of the country are provided in this download pdf summary. There are some areas excluded as QV highlight due to insufficient data to make meaningful comparisons.

Click here to download PDF of the QV area analysis of property price movements Q3 vs Q1 2009

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The next major technology challenge for real estate – 3D!

Posted on: December 7th, 2009 | Filed in Online marketing, Technology

istock_000008454256xsmallHeading as we are to the end of the decade prompts me to wonder – what will be the “next big thing” for 2010 and beyond?

So I will stick my neck out and say that the next decade will bring a radical change to the real estate industry processes borne of the transformative technology of the visual images we will see on every device in the future. That transformation will come from the switch from 2D to 3D.

To be clear I am not envisaging the adoption of the current version of 3D complete with coloured lens glasses – no! the technology I foresee will be a totally immersive and life-like experience.

I cannot claim to have come up with this prediction – for that I have to thank Phil McKinney the global CTO (Chief Technology Officer) of HP who in a recent interview with the Tech Weekly team at the Guardian podcast in the UK laid out his vision of the future focused around 3D.

So how would 3D imaging radically change real estate?

Well think for a moment around this analogy – the current 2D imaging we see every minute of every day is akin to the very first moving pictures – they were a marvel and without sound relied on captions to provide dialogue. Then came the talkies and some wondered why people would want to have sound – that view lasted all of 5 minutes before sound and image became the norm. So it will be with 3D – there are those that say “why do we need it” – until we experience it.

So imagine this world of 3D – the ability in the case of real estate to genuinely and authentically undertake Open Homes – true, lifelike experiences at the click of a mouse.

With this type of experience for all properties there will be no need for 150 words of description for a property, as the images will be streamed in real time to your viewing device; which will not be  a 17″ laptop or desktop PC, but a 50″ TV monitor.

Browsing through photos will still be the first step of search, but each property will be able to be experienced in a comprehensive fashion; investigating every room of a property from every angle in a truly immersive manner. Added to which you will be able to add your own furniture and colour scheme to ensure you can fit, and that the house fits you!

So how will this impact the real estate profession? – it is likely that we will see changes around the marketing of properties. It is quite possible that the marketing of properties will become an outsourced service. Specialised companies will be contracted by real estate agents to document digitally every property to enable a comprehensive selection of still and moving 3D images to be created.

Removing this task of content creation is great news for the real estate profession, freeing them up to focus their skills directly to the task of facilitating the sale. Bringing together the buyers and seller and providing guidance, advice, local knowledge and statistical insight to ensure that the purchase is executed with clarity and efficiency which satisfies both parties to the sale.

The technology for 3D is not quite there as yet, but something like this certainly has the ability to come upon us speedily. Rest assured when it does realestate.co.nz will be embracing it to add richness to the experience of property searching – we plan to be here providing services to property searchers and the real estate industry way into the next decade and beyond!

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Auckland property – facts on the state of the market

istock_000006996157xsmallRecent data published in the media seems to be pointing to a impending bubble in the Auckland market – described in the NZ Herald as “a bubble that will burst and cause a painful property recession”.

I confess that our own NZ Property report for November contained a component of this speculation stating as it did that

The price rise in Auckland (asking price expectation) of 4.1% (Nov ’09 vs. 3 month average) is a direct result of the tightness of the market with inventory levels remaining tight as the flow of new listings seems to be being met by a steady demand

As ever any analysis of a market in order to be able to establish trends requires access to the most comprehensive data. It is appropriate to gather this data and undertake some detailed analysis.

The chosen data I have analysed for the Auckland region is the REINZ sales figures and the new REINZ / Reserve Bank Stratified House price index. Both of these sets of data are geographically defined as being the compete Auckland Region comprising the current 7 local authorities. The sales data is sourced from all of the licensed real estate offices selling properties which are in this region.

To this data I have analysed the realestate.co.nz data of property listings which uses the same geographical boundaries as the REINZ data and is compiled from the listings of licensed real estate offices for properties listed in the region. The website is the most comprehensive source of property listings of real estate agents with over 94% of all offices loading listings to the website.

As a point of note the NZ Herald article made its assertion based on data from Barfoot & Thompson sales data as representative of the Auckland market. There is potentially some error in this assumption as B&T operate extensively in Auckland as well as Northland and down through the middle of the North Island – of the current 7,568 listings on their website 17% (1,322) are for properties outside of the Auckland region.

Taking sales data first. The fact is that sales in Auckland are back from the extreme lows of 2008. At that time average monthly sales were around 1,406, the most recent 6 months in Auckland have seen an average of 2,059 up 46%; however the average through 2007 (albeit clearly recognised as a heady peak of the market) was 2,537.

The chart below details sales over the last 3 years with the respective months of Aug / Sep / Oct / highlighted in red. The key thing to note is how the sales level appears to be relatively stable over the period since March 2009 at a consistent level similar to 2008 albeit 50% higher.

Auckland property sales 2007 to 2009 REINZ Realestate.co.nz

Turning to pricing which is naturally the key concern to most people as most people only want to buy or sell one house.

The Real Estate Institute have with the assistance of the Reserve Bank produced a very credible Stratified House Price Index which stands up to the extreme scrutiny of economists and academics as it is not impacted by the externalities that affect average or median price as a function of the performance of house sales within differing price bands.

The data for this House Price Index goes back to 1992 and the Auckland data is presented in the chart below:

Auckland Property Price - Stratified House Price Index REINZ Realestate.co.nz

The striking rise through the last decade is most evident from the graph as is the fall from the peak and the subsequent resurgence. However what is also very clear from the graph is the fact that using this credible house price index the market price in Auckland has not as yet returned to the peak level seen in July 2007 – the current price index is still 5.8% below the peak.

In terms of actual stratified median price from the same data the current (Oct 09) price in Auckland is $480,510 and the peak in July 2007 was $510,197. This does contradict the article which stated that Auckland prices had “recovered all the losses experienced over the past two years“.

It is useful to match side by side the sales across the Auckland region with the sale price as the chart below does. There is a recognised fact, in that prices tend to follow sales volume trends and the rise and subsequent decline in volumes and price through 2007 and into 2008 would attest to that, as would the volume rise and price rise in early 2009. The key issue now though is the trend of price rises extending whilst sales volumes have moderated – this could foretell a softening of prices in the coming months.

Auckland property sales and price Realestate.co.nz

As a further support to the view that the Auckland market is stabilising and not about to create an inflated bubble is the additional data set of listings. The chart below tracks the number of new listings added in the market in the Auckland region matched to sales. What is interesting is how conspicuous is the rising level of new listings which is leaving a fair gap from the monthly sales – this would indicate that the market has a growing stock of houses for keen buyers.

A growing inventory of new listings takes pressure off prices and buyers feel less pressured to have to “grab a property” in the fear of missing out which was the symptom so conspicuously seen back in the peak of the bubble through 2006 & 2007.

Auckland property market new listings and sales 2009

Overall I believe that in analysing this comprehensive and robust set of data there is more than enough evidence to take the view that the Auckland market is fairly well balanced and therefore unlikely to suffer a “painful property recession” – however forecasting the property market is never an exact science and only time will tell, after all this data is all historical – telling us what happened, nothing for certain ever tells us what will happen!

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NZ Property Report – November 2009

Posted on: December 1st, 2009 | Filed in NZ Property Report

Click here to download pdf version of the full report (1.7MB)November tends to herald the last month for listing property prior to the Christmas break and this year shows the traditional seasonal rise in listings. However the steady growth in listings seen over the past 3 months have begun to outpace the rate of sales of property across the country leading to a further growth in inventory levels in November – taking the equivalent of stock on the market to 36 weeks.

That is to say, based on the current rate of sale, it would take 36 weeks (8.3 months) to clear all the stock. The lowest point of this property cycle was reached in June when inventory reached a low of 31.5 weeks (7.3 months) – since then it has grown for 5 successive months.

The current rate of sales of property from REINZ statistics shows a 12 month total (Nov 08 – Oct 09) of 67,197, this is up 10% on the prior 12 month period but down 31% when compared to the 12 months to October 2007.

This growth of inventory is not spread evenly across the country with the major centers seeing inventory falls whereas provincial NZ is where the significant inventory rises are being seen. The biggest rises are being seen in the Central North Island, Northland, Marlborough, Gisborne and Southland.

Asking Price

NZ Property Report - Nov 2009 Asking price realestate.co.nzThe vendor’s expectation of asking price for properties coming onto the market in November grew slightly to $419,586.

This price represented a 1.9% rise in asking price when compared to the moving average of the past 3 months (Aug/Sep/Oct).

The asking price of new listings in November last year was $404,913 representing a 3.6% year on year increase.

New Listings

NZ Property Report Nov 2009 Total new listings Realestate.co.nzThe number of new listings coming onto the market rose slightly to 13,857, from the October total of 13,550.

Despite the uplift in listings during November the level of new listings over the past 12 months continues to show a 11% fall with 147,813 new listings in the recent 12 months as compared to 165,690 in the prior 12 months spanning 2007/8.

Inventory

NZ Property Report - Nov 2009 Inventory levels Realestate.co.nzThe overall level of available inventory as measured by equivalent weeks of sales grew again in November – the 5th consecutive month of rise from 31.5 weeks in June to the current level of 36.0 weeks.

Whilst inventory tends to rise approaching Christmas the levels this year are up on the 33.9 weeks in 2007 but down on the extreme peak of 52.6 weeks in November last year – a time when property sales stagnated.

Regional Summary – Asking price expectation

NZ Property Report - Nov 2009 Regional asking price expectation Realestate.co.nzThe national mean asking price showed little movement in November from October as the stability of the market saw a level of vendor expectation being met by buyer demand. Overall there were 13 of the 19 regions showing increases with Gisborne registering the largest increase and Central North Island the biggest fall – both regions affected by small base of data.

The price rise in Auckland of 4.1% is a direct result of the tightness of the market with inventory levels remaining tight as the flow of new listings seems to be being met by a steady demand. The same inventory tightness in the other major centers of Wellington and Canterbury does not seem to be directly impacting asking price at this stage.

Regional Summary – listings

NZ Property Report - Nov 2009 New listing by region Realestate.co.nzThe pendulum has swing in the direction of a buyer’s market as the inventory of property on the market is being bolstered by rises in new listings which is meeting a steady, yet uninspiring sales level. Of the 19 regions round the country 10 are seeing degrees of buyers markets with positive year-on-year increases in listings.

The regions of Central North Island, Hawkes Bay, Taranaki and Nelson all saw rises of more than 20%. Only one region – the Wairarapa showed a significant fall of 59% as compared to November last year.

Wellington continues to see a low level of new listings, just 1,114 in November down 17% compared to last year.

Regional Summary – inventory

NZ Property Report - Nov 2009 Regional levels of inventory Realestate.co.nzThe regional make up of the market from an inventory perspective points to a growing buyers market with 11 of the 19 regions showing inventory levels as measured in weeks of equivalent sales running significantly above long term averages.

The only conspicuous regions reversing this trend are the 3 metropolitan regions of Auckland, Wellington and Canterbury all of which are showing inventory levels well below long term averages and well below the national average.

These major metropolitan regions are showing characteristics more akin to seller’s market and has prompted some to speculate an emerging property bubble. The breadth of data by reach region clearly refutes this assertion.

Lifestyle Property

NZ Property Report - Nov 2009 New listings of lifestyle properties Realestate.co.nzLifestyle listing numbers remain constant over the past 3 months with 1,191 added in November. This represented an 8.1% increase on prior year. Over the past 12 months 11,561 new lifestyle listing have come onto the market a 16% lower amount than in the prior year 12 month period. Significantly lower listing have been seen in Marlborough and the West Coast over the past year both close to 50% down whilst Nelson and Bay of Plenty have seen growth – albeit less than 10%.

The truncated mean asking price for November was $608,616 a 2% increase on November last year and 4% up on the prior 3 month average.

Apartments

NZ Property Report - Nov 2009 New listings of apartments Realestate.co.nzNovember saw 643 new apartments listings come onto the market, up a significant 27% on November last year, however well down on the peak of 2007 when 983 new listing were added in November. Over the past 12 months a total of 6,385 new apartment listings have come onto the market – down 8.5% on the prior 12 month period.

The Auckland market representing in November 59% of all new listings shows a small increase in listings on a 12 month rolling basis with 3,970 listings in the 12 month period. The truncated mean asking price nationally was $364,384 which was 6% down on the 3 month average – Auckland saw listing asking price down 8% at $323,307.

The full report can be downloaded here (1.8MB pdf document). Additionally the raw data is accessible here as an Excel spreadsheet enabling anyone to analyse the raw data and establish any trends or observations. Usage rights are governed by attribution to the source of the data being Realestate.co.nz. The next NZ Property Report for December 2009 will be published on this blog on Friday 1st January at 10am.

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Will the new law change the way homes are sold?

Posted on: November 29th, 2009 | Filed in Buying / Selling a home, Media commmentary, Other interesting reads:

istock_000004343314xsmallAn article in the Herald on Sunday makes the assertion that the changes to the Real Estate Agents Act 2008 will change the way properties are sold.

I would hold that the new law will not change the way that homes are sold.

The article states that :

A property lawyer is tipping more sellers could opt to sell privately to get around new rules making real estate agents disclose defects in the home to potential buyers.

What I interpret this statement as saying is “if you (the seller) want to hide known defect in your home, then don’t use an agent and sell privately so you don’t have to disclose defects”. I find this surprising coming from a lawyer, after all, the seller always bears a responsibility to provide factual information regarding a property when questioned. More importantly any half-smart buyer contemplating parting with over $350,000 for a median priced property is surely going to get expert reports on the condition of the property.

To think that in some way private sales of houses would be judged by the buyer to be a less risky purchase or to think they can approach it in a more relaxed manner is staggering.

The new Act certainly places a greater responsibility on the agent. This is good. The principle of the Act is to bring greater transparency and greater safeguards for buyer and sellers. The real estate industry has embraced the new Act and sees these added responsibilities as further evidence of the professional service they wish to provide buyers and sellers.

To provide some clarity to this issue the Act details the professional standards of conduct expected and required of agents in section 6 of the Code of Professional Conduct and Client Care.

6. Standards of professional conduct

6.1 An agent must comply with the fiduciary obligations to his or her client arising as an agent.

6.2 A licensee must act in good faith and deal fairly with all parties engaged in a transaction.

6.3 A licensee must not engage in any conduct likely to bring the industry into disrepute.

6.4 A licensee must not mislead a customer or client, nor provide false information, nor withhold information that should by law or fairness be provided to a customer or client.

6.5 A licensee is not required to discover hidden or underlying defects in land but must disclose known defects to a customer. Further, where it appears likely, on the basis of the licensee’s knowledge and experience of the real estate market, that land may be subject to hidden or underlying defects, the licensee must either-

(a) obtain confirmation from the client that the land in question is not subject to defect; or

(b) ensure that a customer is informed of any significant potential risk so that the customer can seek expert advice if the customer so chooses

6.6 A licensee must not continue to act for a client who directs that information of the type referred to in rule 6.5 be withheld.

It is important to recognise that these are rules and whilst they need to be read in conjunction with the Act the fact is that such rules are never cut and dry as to the exact manner of their application. The article in the paper states that

“for example, an agent should be able to tell of a house is at risk of being a leaking building based on when it was built or what it is made of.”

If this was to be taken literally it would mean that every agent would tell every buyer that every home built over the past 25 years using a timber frame with a cladding system which is not adequately ventilated is potentially a leaky building! The fact is the only way to identify a leaky home is to undertake a professional survey by a professional company who, using testing equipment can establish the likelihood that the property has become effected by internal frame damage. This is exactly what a building report undertaken by the buyer should tell the buyer. There is no way a real estate agent can provide this service. They are not qualified on such matters nor put themselves out in the market to be surveyors and building inspectors.

Having said that the new responsibilities placed upon the real estate profession are there to safeguard the interests of the buyer and the seller, and this is where this issue becomes really interesting.

In the vast majority of cases involving a property transaction a property buyer is at the same time a seller and visa versa. So to think that sellers are not going to want as much professional disclosure as buyers is illogical. This is why the code of professional conduct and care speaks to the agent providing that to both sides. How the view that private sellers will somehow be happy with that when they are also buyers is hard to believe.

Overriding this issue in the context of private sales is the fact that the consideration in choosing to sell privately or through an agent is in the main not purely around the amount of disclosure or even the fee. The fact is negotiating a property purchase is a complex and time consuming activity which surprises the many people who think they can sell privately, and who then end up employing an agent. That is why still with all the greater access to open marketing on the web the number of private sales continues to be around 10% – very similar to most other countries internationally – selling a property is far more than just advertising, and equally should not be shrouded in attempts to deceive or hide key facts.

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Do you really need to subscribe to another property website?

Posted on: November 27th, 2009 | Filed in Agent Tips, Buying / Selling a home, Featured, Online marketing

istock_000007459744xsmallThis opinion piece is written primarily to address a question that I seem to be hearing more and more from within the real estate industry.

It also has relevance to property owners looking to sell your property. That is because I believe many agents when presenting a marketing campaign will boast – “we will feature your property on 5 websites” – with the next agent boasting “well we will place it on 9 websites!”

The reality is the number of websites is completely irrelevant – you could be on a million websites and still be missing the most important website – that is the point – you have to be on the right site – not every site.

Additionally the idea that your house in particular or NZ property in general should be featured on a US or UK sites is a misnomer – people from overseas do not look for NZ property on a UK site or an American site – they are smarter than that and seek out a NZ site.

Lastly the notion of an “International Property” website is at best misleading, and at worst a waste of money – except if you consider Google to be “The International Property Website”.

Given this preamble here is my address to the real estate profession on this topic.

As a real estate professional you clearly have a responsibility to promote your client’s listings to the optimal extent you can. Clearly promotion these days involves the web as the key medium used by property buyers. However, a critical question should be asked as to how many websites you should feature those listing on?

One of the greatest benefits of the web is that it has almost limitless capacity – estimated these days in the region of over 1 trillion web pages! – but clearly within this number are a significant proportion that are never going to be viewed – with a classic 80:20 rule applying – potentially in the case of the web and any specific category on the web more like the 95:5 rule, or even the 99.99:0.01 rule!

It is for this reason that I believe that you should think before offering your listings to be presented on just any website that happens to come along. In my judgement there are a number of questions that you should ask yourself or the prospective website.

  1. A website is meaningless unless it has visitors – you should ask the owner of any website to provide statistics such as Nielsen or Google Analytics. The key metric is unique browsers, this measures unique visitors and should allow you to judge and compare websites based on true audited audiences. Another critical issue is true traffic – not how many visitors they think they will have or how many they had last year – how many last week or last month.
  2. A website is a business – you should ask the owner of any website how they make money to pay to support the site. Are they relying on advertising or are they expecting you to pay. The question you should ask at this stage is “who needs who, the most” – is this website looking to use your listings to attract an audience to then make money from advertising?
  3. A website needs to have a track record and a planned future – you should ask the owner of any website how long they have operated and how they will support the website in the future. You do not want to find that the website closes down in 2 months or worse still is sold to someone else that you have no relationship with.
  4. A website should have a clear policy on copyright – you should get a copy of any websites terms and conditions. Make sure that you retain copyright such that this website cannot “sell” your listings / content onto anyone else for their profit; nor can they alter or change any of the content without your permission.

The expression of “there is no such thing as a free lunch” applies equally to the web as it does to any other form of business; and just as in any other area of business you have to be honest and say to yourself – do you want to waste your time uploading, managing, reviewing and checking your listings on 6 or 10 websites when in reality more than half of them generate very little traffic, no enquiries, but do take up your time?

The consumer in today’s online world is getting smarter – they more and more turn to Google to answer their everyday questions. Google does one thing exceptionally well – it makes sense out of the complexity that is the mass of information available to us these days. It is Google’s stated aim to organise and make accessible the world’s information. That being the case why not let Google help you judge as to which websites to put your content on.

Think about your prospective buyers for your home or one of your listings. Think about the kind of question they would type into Google – now do that yourself. Have a look at the results – these results on the first page should be your guide, these are the websites you should be on.

google-search

If you were to be really clinical then there were only a few websites you should place your listings on.

Naturally every listing should be on your own company website as well as major property portals. The reason for this is the fact that people want ease of searching and value comprehensive content that is what a major property portals can offer you.

So don’t be suckered into the first offer that comes by email saying that they have just the site you have always been looking for! – after all if you had been looking for such a site would you not have already found it and be on it!!

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Real life example of mortgagee sale

Posted on: November 24th, 2009 | Filed in Buying / Selling a home, Money Matters

istock_000007731653xsmallI found this article from the NZ Herald very interesting in the representation of how a mortgagee sale eventuates and the experiences of the former homeowner.

The article cites the former owner as complaining that her agent wrongly advertised her property – specifically advertising it as a two bedroom apartment as opposed to a three and also identified it as being on a different floor than was the fact.

As to the issue of the accuracy of the advertising, I do not wish to comment, as the facts are not a part of this discussion. The key point of interest though is the exposure of the fact that in such a case (as with most such cases) the former owner has so little decision making role in the process of a mortgagee sale, although of course they hold a significant financial interest and consequential liability. In this case the former owner is proposing to sue the bank for damages as a consequence of the sale proceeds being less than the outstanding mortgage.

The reality is that in taking out a mortgage to buy a property the prospective owner is liable to the lender for the total outstanding borrowed sum throughout the term of the loan irrespective of the situation in the market. That is to say if you borrow $250,000 to buy a $300,000 property you are liable to the outstanding amount of the loan regardless of the value or sale price of the property at any time during which the lender is registered as the first mortgage on the property.

If as is often the case with a prospective mortgagee sale; circumstances tend to start when the borrower fails to meet the repayment obligations. The first situation which will probably arise is that the lender will try and communicate with the borrower to find out the circumstances of why the repayments have not been made. In most cases lenders are really keen to work with the borrower to assist them to continue to meet the repayments. It is worth noting that in most cases the lender has no desire to take over ownership of a property – they are far keener to continue to have the borrower owning the property and paying the loan – this is in the long-term interest of the lender.

If due to the specific circumstances the borrower cannot meet the repayments and the borrower cannot sell the property for whatever reason to repay the loan then the lender tends to see the only solution left open to them being a mortgagee sale.

Once the lender has instigated the legal proceedings to undertake a mortgagee sale then the borrower ceases to have influence in the outcome. So in this hypothetical example if the property had fallen in value to say $250,000 and the outstanding loan had risen to $260,00o (as a consequence of outstanding loan repayments or example) then the lender will try and sell the property as speedily and as efficiently to recover as much of the outstanding amount as possible.

In a mortgagee sale the original owner has no say in the sale price agreement – that is now the decision of the lender, as it is the lender that has taken over primary interest in the property and is seeking the most favourable outcome to secure their liability.

So again in this situation if the property is marketed (the control of which lies with the lender, not the owner) and is sold in an auction or other form of sale for say $240,000 then the property owner (now the former owner) will be liable for the shortfall. Within this calculation of shortfall must be considered the costs associated with marketing and selling the property including agent fees, as well as any other fees which the lender judges appropriate as is defined in a lending agreement.

So in this example the sale of the property is agreed between the lender and the new buyer of the property at $240,000. This sale price would have a hypothetical real estate agent fee of say 3% ($7,200 + GST) plus say $500 + GST of marketing costs (advert online or print). These costs would be judged as reasonable and have to be recovered by the lender. So the original owner of the property ends up with a liability to the lender of $20,000 (the balance between the sale price and the outstanding loan) together with a further $8,662.50.

This calculation and example are purely hypothetical it is not meant to represent a true example or to be taken as a normal situation – the example is provided purely to show what can be the true liability in taking out a loan on a property and recognizing the risks and liability that a borrowers signs up to when committing to a mortgage.

Disclaimer: This post is not intended to be taken as advice, it is provided so as to assist in understanding some of the implications of mortgages. I am not a lawyer, financial advisor or real estate agent. The comments and observations are drawn from reading and discussions on the subject matter over many years. As with any transaction of land and property, legal and financial advice from suitably qualified persons is always a wise move.

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Mortgagee data provides valuable insight into economic situation

Posted on: November 22nd, 2009 | Filed in Buying / Selling a home

The latest data released by Terralink International show that mortgagee sales (registered sales of property and land detailed as having been sold on behalf of the registered owner by the mortgagor) have again hit a new record high of 343 in the month of September. This figure is up from August when the number had declined slightly to 241 after a peak of 321 in July.

This trend is dramatically portrayed in the chart below which tracks the mortgagee sales as a % of all residential property sales in each month since 2000 and clearly shows this significant and steady increase over the past 18 months .

NZ Mortgagee sales - % of all sales to 2009 Realestate.co.nz

As noted previously these sales stats are not limited to just traditional residential homes, they do include investment developments of houses, apartments some of which have not been completed construction. The commentary from Terralink in the media release states that around 20% of these sales relate to traditional family homes.

It has been interesting to track these sales over the past year as against the rise in mortgagee properties listed on realestate.co.nz. The chart below matches the inventory of listings of mortgagee property to sales by month over the past 3 years.

NZ mortgagee sales and listing data for period 2007 2008 2009

What is clear in reviewing this chart is the fact that sales have now exceeded inventory – this is a function of two factors. Firstly inventory (which is clearly not growing) only relates to individual residential dwellings which is only a subset of sales, and secondly the clearance rate of mortgagee properties is general very quick which ensure no significant build in inventory – this is a good sign of a healthy property market.

The key fact of mortgagee sales, is exactly as with unemployment, and as a function of unemployment itself the rise of mortgagee sales significantly lags the economic recovery. That is to say as the economy recovers as all the key indicators now show the delayed lag effect of unemployment still has the ability to impact individuals who loose their jobs and potentially end up loosing their homes. The reported statistics published at the beginning of this month showed unemployment has continued to rise now reaching a 9 year high at 6.5%.

Looking to the future there are positives to be taken from this mortgagee sales data as stated above. A high clearance rate of mortgagee properties is a good sign – compare the scenario in NZ where the current level of listings of mortgagee properties at 344 out of the total inventory of 56,112 – a mere 0.6% to the US – this recent report shows that almost 10% of all family homes with a mortgage are in some stage of foreclosure up from 2.65% a year ago.

Another observation of the state of the NZ property market as measured by the mortgagee foreclosure is the extent of consumer interest in searching for mortgagee properties – a category very actively searched on realestate.co.nz.

Prior to the recession searches for mortgagee property constituted a small component of keyword search on the website – roughly around 700 per month. As the economic recession hit the activity of searching grew and grew through 2008 passing 5,000 per month and peaking at over 9,000 in early 2009. This latter peak as with the peak in early 2008 were influenced by extensive media reporting. The full data is presented below showing the 34 months since the beginning of 2007.

NZ mortgagee keyword search 2007 to 2009 realestate.co.nz

The recent trend of searching is somewhat lower than equivalent months in 2008 potentially indicating that the focus on this category is less about seeking bargains and consequentially buyers may well now be seeing mortgagee listings (few as they are) merely as options in a purchase selection rather than a specific purchase option or investment option thereby reinforcing the view that the property market is far more balanced than a year ago.

The richness of data accessible these days as demonstrated above is so vital in providing insight to enable people to make well informed (or at least better informed) decisions.

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Building your investing skills – fast, fun and so real!

Posted on: November 20th, 2009 | Filed in Money Matters, The lighter side

The Investment GameI am sure like me there are many times when you hear about the results of an investment proposal after it has grown in value or fallen in value and you wished there was a way you could have experienced the risk and challenges of the investment market without risking your home and livelihood.

Well there is now a game, which having played it recently I can say is as close to real investing as you can possibly get. The Investment Game developed locally by Frank Newman brings out the real competitive characteristics often not seen since the last time you played Monopoly.

openbox_lrHowever the comparison of this game to Monopoly really starts and ends with the fact that it uses virtual money and is played on a board – this game is vastly different and far more challenging and engaging.

The game is certainly not for kids and the word game is only true as in there is a winner who at the end of the allotted time has the greatest wealth – pretty simple, but wait to see how the game operates. The game is played on a table with the ubiquitous board, player pieces and dice – however without a PC on hand this game goes nowhere – this game comes to life around the virtualisation of a marketplace defined by a share market, a property market and the financial market.

boardvisual_lrEveryone starts with identical wealth and selects their investment strategy – combination of shares, property, education and derivatives. Set against this chosen path the players face the changes and trends in the market which as perfectly life-like, especially as they are based on real data of market movements of the past 20 years.

This is as the profile and feedback says more of an education that a pure game, however it does not lack that aggressive and at times manic pace of ambition which pervades any good team game. This game is fun and having played it with the team at realestate.co.nz the other week – we collectively decided we want to play it again, a 90 minutes game certainly didn’t feel like we did justice to it, so I suspect we will have a re-match very soon.

The game is 100% kiwi owned and developed and with the support of key sponsors (full disclosure here Realestate.co.nz is a sponsor) this excellent game is available in stores or by online ordering which Frank Newman has set up through this link. The game costs $149.95 plus $10 post and packaging within NZ.

This game would make a great Christmas present or client gift – it has been rated as the best new game of the year by the NZ Games Association.

21

What has changed in the real estate industry with the new Act

Posted on: November 18th, 2009 | Filed in Buying / Selling a home

reaa-logoQuietly and without major fanfare the structure of regulation behind the real estate industry changed yesterday – the first major change for over 33 years.

The Real Estate Agents Act 2008 came into force on the 17th November. The changes are to be welcomed by buyers and sellers as they have been welcomed by the industry itself – an industry directly employing over 15,000 people with an annualised transaction value of upwards of $50 billion.

The outgoing Act of 1976 was certainly in need of revision and the industry itself had been looking to have it amended many times – far from the notion portrayed in the media. The nature of business in general has changed markedly over such a long period as has the scale of the business of real estate. Note, the much quoted fine of $750 for a breach by an agent – that was based on the average commission earned on a property transaction back in 1976 – so that clearly needed amending as it has been in the new Act which now establishes fines of between $10,000 and $15,000 for an individual ($20,000 to $30,000 for a company) as well as other punitive actions as well as compensation.

However the central component of the new Act is not the fines – the intent as described by the new Real Estate Agents Authority in its press release is to:

Promote and protect the interests of the consumer and to promote public confidence in the performance of real estate agency work.

The new Act has established this new organisation of the Real Estate Agents Authority (REAA) whose role is to both provide information to assist consumers in the buying and selling of property as well as to license all qualified real estate professionals and manage the regulation and complaint process should they be brought against any person operating as a licensee in this industry.

The Real Estate Institute of NZ (REINZ) formerly held the role of regulatory body under the former Act and unencumbered from this role the new look REINZ can now clearly focus on being a representative organisation providing valuable services and advocacy for its members. Among its valuable contributions is the monthly sales statistics and property price data.

For the consumer looking to buy or sell a property (as with any real estate transaction including commercial and business sales) the most visible experience of a change will come in the form of the following:

1. A public register of all licensees who are licensed to provide real estate services. This service is provided by the REAA to be able to verify that a person holds a license and the class of license. It is not designed to be a search to find agents in a particular area as the location detail in the case of a salesperson refers to the location of the office from which they operate or under which company license they operate with.

2. A code of professional conduct and client care under which all licensees are required to operate. This guide sets out the standards of service and care that a licensed real estate professional should provide to a consumer (both a buyer and a seller) as well as an outline of the processes for complaints should they arise.

3. A clear guide to the obligations that a licensee provides when a Property Agency Agreement is presented to a seller as a proposal for a licensee to list a property – this has to be provided and acknowledged by a seller at the time an agency agreement is presented to a seller.

4. A clear guide to the Sale and Purchase Agreement and what a buyer should know before signing such an agreement to buy a property.

These highlighted components are not to be taken as a exhaustive list of the changes to the Act – more as a reflection of key components. More information in regard to the new Act and its impact on buying and selling a property can be found on the website of the Real Estate Agents Authority or by speaking to a real estate professional. As in all matters regarding property transactions, it is appropriate that a lawyer be consulted prior to making an agreement or signing any document.

Whilst the new Act brings with it many changes, in many ways the process of buying and selling a property does not change. If you are looking to sell your property you will more than likely select an appropriate real estate professional to market and sell your property for which you will pay a fee as a commission together with advertising costs. That professional will use their experience and skills to market the property to maximise interest and solicit buyers with whom they will negotiate on your behalf to secure for you the best outcome that suits your needs.

As a property buyer you will still continue to undertake research into the options for the purchase of a property using appropriate material and information available online and in other media. You will identify your chosen property and then at that stage liaise with the real estate professional who will be acting on behalf of the seller to negotiate a purchase of the property on terms that are acceptable to you.

The overriding intent and desire of both this Act, the new Authority and the industry at large is to see a more open, transparent, accountable, professional, respected and trusted industry which provides exceptional service to property buyers and sellers.

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