The Unconditional Blog

The impartial voice of the industry

 
12

NZ Property – the least affordable in the world?

Posted on: January 22nd, 2008 | Filed in Media commmentary, Money Matters

There is nothing like an alarmist headline to sell newspapers! – and this one today was certainly right on the money, shoving Sir Edmund off the stage.

So is it true that we live in the world’s most expensive country where we pay the largest percentage of our income on property as the headline would make you think?

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I decided to have a read of this report – 4th Annual Demographia International Housing Affordability Survey – 52 pages of detailed analysis and statistics; and as we all know those damned statistics can be portrayed to paint many a varied picture.

So image my surprise when I discovered the following facts of this report:

1. It is not a report of 6 countries property markets as the headlines claim – it is a report on 227 individual property markets, which in scale terms are mostly as big as or bigger than the whole of NZ

2. NZ is not the least affordable country (or aggregate of collective markets) – it is equal with Australia at a multiple of 6.3 times median price to median income, UK is 5.5, Ireland 4.7, US at 3.6 and Canada at 3.1

3. Using this multiple scale of median price to median income across these 227 markets, the report sets out the markets in ranked order with Los Angeles the most unaffordable (so much easier than saying “the most least affordable”!) you then step down through 5 US cities including San Francisco and San Diego before you get to the first non-US city – coming in at #6 Mandurah in Western Australia at a multiple of 9.5! Then descend through markets in the UK, Australia, Canada and more of the US until you get to 20th place at a multiple of 7.5 – Tauranga. Auckland comes in at 31st place on 6.9, Christchurch 34th place at 6.6 and Wellington 46th place at 6.1.

Now does this really point to us living in the most expensive country in the world?

So what does this report tell us really (as opposed to what the newspapers want to tell you). Well first off this report has an agenda which to be fair they do not hide. The authors actively and passionately believe that restrictions on land use on fringe land adjacent to cities should be freed up to allow for the ever growing expansion of cities. This theme is neatly segued by the former reserve bank governor and former leader of the National Party Don Brash who writes the forward to the report – naturally bringing the government to task for putting blocks in the way of such needed progress.

On a less political point of view the report really tells you what you already knew – the laws of supply and demand. If you create demand through economic growth in a market, this sucks in companies which suck in workers, this demand puts pressure on housing stocks and if you apply constraints on new supply of land and property then the solution is increased prices. If income wealth distribution does not significantly change then the median income does not budge and property looks to be more and more unaffordable.

Where is the evidence of this? – look no further than the top 10 of most unaffordable markets – West Australia (mining explosion), San Francisco (tech explosion), Bournemouth / Brighton (tech explosion and London exodus).
Equally look at the top 10 most affordable markets in the survey and low and behold you see the former rust belt of the US and the remotest parts of Canada (Canada has an Invercargill as well!) – places where either people are leaving in droves or people never came.

Can anything be done about this unaffordability in NZ? – simply put no, we live in a more and more global world market for property where talent moves to where the opportunities to work and enjoy life are rich and plentiful. With this migration of people follows money and companies, with this comes the pressures and demands on property, especially as in absolute terms NZ property prices are still cheap when compared to main global centers such as London, New York, San Francisco, Sydney, Singapore, Hong Kong etc.

This was the strategy espoused by Professor Richard Florida in his book “The Rise of the Creative Class” – basically you cannot stand against a tide of change, for NZ the skill is in harnessing the talent and wealth that comes with our natural attraction for this new immigration and build a lasting and vibrant economy and community in our unique part of the world.

5

Real Estate Agents – understanding their role

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

What is a real estate agent? – How they differ from a real estate salesperson?

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Whilst on the face of it this may seem a rather simplistic question it actually belies a deeper understanding of the structures of the real estate industry. It is important to bring clarity to this matter especially as this year it is likely that the government will seek to pass a revised law governing the practice of real estate agents – a law that in its current form dates back to 1976, and clearly in need of updating.

A real estate agent is a term widely banded around in the industry only legally applies to individuals who hold a license conferred on them by the Real Estate Licensing Board, itself an independent body separate from the Real Estate Institute. A real estate agent holding a license can operate a business to act on behalf of buyers and sellers to sell real estate for financial reward (earnings are related directly to a successful sale – no sale, no fee).

In NZ there are approximately 1,900 licensees who can legally call themselves real estate agents, this compares with around 17,000 individuals who the public call “agents” who transact the service of real estate, but are legally real estate salespeople. A real estate salesperson has to work for a licensee, acting under that license; they cannot hold a license themselves without first attaining the experience and qualifications of a licensee.

Simply put when you see a real estate office in the local high street it is likely to be owned by a licensee and have based there any number of salespeople who act under the license of the owner, as well as the guidance and ultimately the oversight of the licensee.

To become a real estate salesperson you need to be a person of good character (as adjudicated by the Licensing Board). They also need to demonstrate competency in the comprehensive understanding of the laws that apply to real estate transactions, as well as some of the practices of real estate marketing and contract preparation. This competency is generally undertaken during a 2 week salespersons course provided by a training provider.

By contrast a real estate agent has to be a qualified salesperson with a minimum of 3 years practical hands-on experience in real estate and has attained a branch manager or licensee qualification which can take many months of study.

Clearly the capabilities and experience of a licensee reflect the standards and professionalism to warrant the term real estate agent and the confidence of the public to ensure that their dealings with a real estate office are under the watchful eye of a professional well qualified to handle an investment of many hundreds of thousands or millions of dollars. It is also important to realise that our structures and approach in NZ are not that different to other countries. Just last month a similar clarification article was posted by R. Eric Bramlett in the American Chronicle detailing the role of a Realtor.

6

Are house prices falling?

Posted on: January 16th, 2008 | Filed in Money Matters

The figures for December are in and it is important to strip away emotion and look at the facts when it comes to housing statistics especially as the media continues its insatiable desire to create alarmist headlines:

Cheaper houses may be on the way as market tanks
Property prices slowing
House sales, prices fall in December

The fact is that sales have slowed – the Real Estate Institute (REINZ) report a total of 92,101 properties sold in 2007. This compares with 102,042 in 2006 – that’s a 10% decline. In the month of December sales slowed to just 5,597 – the lowest single month since September 2001. It is clear then that property is not being bought as fast as it has been in the past few years.

Are house prices falling?

The key question then is how long does it take to sell a property? For December a reported 36 days – the average for the whole year was 32, the average for 2006 was 34! – so does that mean properties are selling about as fast as normal and there are just less properties being offered for sale?

The slightly misleading figure is this “median number of days to sell a property” – it is not an indication of how long on average it should take to sell a property, it just the median number of days to sell those properties that sold. A truer representation of the pace of sale of the market can be seen from statistics on the website. Currently there are 92,067 listings on the site of which 55,331 are residential properties for sale. Now 12 months ago when the market was considerably more active and monthly sales were averaging around 8,500 per month the number of listings of residential property on the site was over 52,000. So it is very clear that property is backing up and inventories are rising. The big question then is, is this leading to falling prices and are bargain hunters out on mass?

The median selling price for December was $345,000 this was down 2% compared to November. A trend or a one-off? Looking back over the 2007 year shows some interesting volatility of prices. Prices were down 0.4% in Oct as compared to Sep, July prices were down 0.7% as compared to June and that month was down 0.7% compared to May. It is important to remember that median prices are always more volatile when sales quantities fall. So it is not clear if we are seeing a true trend or a seasonal adjustment. Either way you look at it the fact is that 12 months ago the median selling price was $327,000; in December it was $345,000 a 5.5% increase in a year.

The last point on pricing, and a very important one not highlighted in the REINZ press release – the total value of all property sales reported in 2007 was $37.8 billion. That represents the highest year ever on record, 1.1% higher than 2006. That total value was made on a much quieter sales volume as cited earlier of 92,067 – so that means that the average selling price of all properties sold in 2007 was $411,196 – representing a 12% increase in the average price. Now normally median prices are quoted in monthly stats, but taking a year of data the average provides some relevant information and clearly 12% increase is significant.

So that all provides some different perspective on the market statistics – as to what it means for the coming year, I would be interested in your views.

2

Commemorating Sir Edmund Hillary in a meaningful way – think big and be bold

Posted on: January 16th, 2008 | Filed in Media commmentary

hillary.jpgWhilst this blog is designed to share insight and perspectives on the real estate industry in NZ, sometimes there are matters that could benefit from a broader discussion as they that have repercussions for real estate at a macro-economic level. The debate over the proposal for a national holiday to commemorate the life of Sir Edmund Hillary is just one such issue.

A public holiday is just that, a day off work – not typically a time to reflect on the achievements and principles of a great New Zealander. If such a day were instigated, as the years would pass so the memory of the great man would pass with it, and Sir Ed was not a man to take a holiday – he was committed and hard working.

For an alternative approach I would like to suggest a more radical idea (one that was suggested to me today over a coffee by a friend) – why not establish a trust fund for all young people to exemplify the principle of Sir Edmund. We are also not talking about a few small funded scholarships per year – why don’t we be brave and try to make a difference to our country and our economy in the name of the great man.

Let’s get the government to be bold and fore go just 1 day’s tax revenue from all hard working and committed New Zealanders. We all know that the government surpluses are taking up too much space in the basement of the Beehive, so why don’t we create an annuity – a rough calculation would put it at $100 million. They have the money and they sure have plans to get rid of it this year so why not do something bold and meaningful with it – something that we can all share in the legacy of.

A fund of $100 million well managed and administered by valued trustees could kick start our global economic ambitions affording many hundreds if not thousands of scholarships each and every year to help young NZ’ers grow and develop skills in this global marketplace – young people who like all NZ’ers love this country and relish the opportunity at some stage to return home to raise a family and in so doing bring back to this country skill, expertise and cash. Which is key for the long term wealth (culturally as well as economically) of this country – something that I am sure Sir Edmund would have been truly proud to put his name to.

6

Real estate video – the good and the bad

Posted on: January 12th, 2008 | Filed in Cool sites, Online marketing

It’s a cliche I know, but when it comes to the good and the bad in this world (and especially in the context of real estate) – you never have to look any further then the USA, and in the US it doesn’t get any better than New York. This city has this week been playing host to Real Estate Connect a real estate industry conference bringing together real estate agents and technology companies in what has become a valuable insight into global trends in real estate marketing online.

I have had the pleasure of attending and sharing the NZ experience with my US and international colleagues; hot on the list of emerging trends this year has been the role of video in real estate marketing. Real estate video is a perfect match for video – rich images, exuberant personalities and persuasive selling – the pivotal ingredients of a 3 minute mini-movie!

However as you can image there is clearly a vast difference between the professional video shoot in the made-for-TV school style as opposed to the amateur handycam style. In wishing to reflect this emerging trend I was delighted to stumble across a fantastic site which today hosts a perfect snapshot of what I am alluding too “Best of the Bad – So bad it’s good”

Intothebox.tv - the good and the bad of real estate videos

This video is but one of a daily diet of short videoblogs created and hosted by Rachel Natalie Klein on “IntotheBox.tv” – describing itself as the “home for daily videos about real estate-obsessed NYC”. This is the best videoblog I have come across and adds richness to New Yorker’s day by providing an inspiring and entertaining video-bite on the city’s second favourite passion after money – real estate.

It certainly is worth diving into her archives to capture a spirit of New York from a real estate perspective, but also to see the capability and effectiveness of videoblogging as a communication medium – could we potentially see such a feature revealing the true lives behind the curtain of life in Remuera!?

Alistair Helm

0

Back to work? – how property websites provide a comfort blanket to ease you back

Posted on: January 7th, 2008 | Filed in Website searching

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It’s back to work today for a fair number of diligent workers after the perfect summer holiday – blessed with summer like-weather!

What’s really interesting is the level of interest in the website around this time of year, the image above was featured as part of a outdoor billboard campaign last year and was not designed to create distractions from the workplace environment, rather it was reflecting what actually happens in the workplace these days!

It may interest you to know that the busiest days of the week on the website are Monday and Tuesday – usually around lunchtime. What is even more interesting is the fact that the first workday back after the Christmas and New Year break tends to be the days with the highest level of visitors. In many ways the power of the internet when used for real estate provides a far more efficient means of keeping in touch with the property market than trawling through endless magazines and newspapers (which doesn’t look so good on the office desk!).

This year appears to be continuing the trend with the first day back (Monday 7th) looking to achieve a traffic of over 27,000 visitors sessions on this one day alone, so if you are one of these web searchers – happy hunting!

These facts of New Zealand real estate also echo those of this recent international survey of workplace usage of the internet by Burst Media provided in the results of their latest survey from early December showing that most respondents indicated that surfing while on the job is often not work related. One-fifth of respondents state that the workplace is the main locale for where they access the internet.

Pretty interesting results from the survey speak about boredom. Respondents indicate that surfing while on the job is often not work related, with over a quarter of online time at work spent on personal activities. When asked why they surf the web at work for personal use, respondents most frequently cited the need to stay informed during the day, other reasons were boredom, staying in contact with family and friends and convenience (i.e. faster Web connection than home, more accessible computer, convenient time to conduct online services).

Only one-quarter of employees feel guilty about using the Internet on company time, so grab that comfort blanket and ease yourself back into workplace life!

5

Google “Street View” mapping will add richness to real estate websites

Posted on: January 2nd, 2008 | Filed in Media commmentary, Online marketing, Website searching

Too much information.. invasion of privacy… big brother watching us. Those are the emotive headlines at the news that Google is out in force capturing ground level images around NZ with camera mounted cars driving down your street.

Twenty years ago it was a very real concern as to the degree with which our privacy was being impacted by advancements in technology. Those Orwellian visions have materialised in a very different form from that envisaged at the time, far from being restricted and controlled, I would judge that in today’s world we are more empowered and enlightened than ever to make better decisions.

The ubiquity and pervasive power of the internet has transformed our lives – where would we be without its ability to answer our every question and provide us with a communication tool which has truly destroyed the tyranny of distance and brought NZ to the shop window of the world (or probably brought the world to the NZ shop window).

So given we should not fear this new level of information, lets look at what “Street View” can do for real estate online.

To start with let’s not forget what the current service offers as mapping has really only been available on real estate website for just over a year – street layout and satellite images to all areas of the country (satellite image resolution is variable, however with time the coverage and definition will only improve). This facility enables a very intuitive ability to search for property for sale based on where you want to live.

As an example let’s say you fancied buying a bach on the Coromandel and you fancied checking out Matarangi – the Google mapping on the site clearly shows where all the properties are located along the beach front and allows a clear understanding of which ones are real “beach front”. The standard view can be enhanced to show the satellite perspective as well – all photographed on a perfect summers day from 183 km above us.

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Now the new capability of Google Street View will provide images taken from 1 metre from the ground rather than 183kms. This will provide the opportunity to not only see the house you are interested from the front gate of the property so you can see the true perspective of the house, you will then be able to spin round and look in more detail at the neighbourhood – what the adjoining properties look like, and also what’s at the end of the street!

All of these enhancements and developments will provide a richer and more valuable experience for real estate search – for both the buyer and the seller enabling a more informed buyer to better evaluate prospective properties. Bring it on! – greater openness and access to information empowers the future.

0

The growing proliferation of Property Developer TV shows

Posted on: December 21st, 2007 | Filed in Media commmentary, Property Investing

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As the fad of Big Brother and Survivor reality TV shows wains, we seem to be being bombarded with a flood of property developer style TV shows replete with budding millionaires all hell bent on proving that they can do what others can’t.

Not satisfied with the terrestrial operators portfolio of Property Climbers, DIY Rescue and A year to pay off the mortgage; coupled with Sky’s portfolio of Property Ladder, Renovation Rescue and Takeover my Makeover; we now have the new kid on the block of “How to be a property developer“.

This time we are no longer just flys-on-the-wall of other people’s nightmare renovation at their own cost (I always suspected that the TV stations inputted some money?), the latest offering decides to up the stakes to a whopping 250,000 pounds (c.$700k) for each of 2 couples to spend to see who can accumulate the most in a year from property speculating and/or renovation.

Now clearly choosing 2 couples who had a modicum of practical ability and a couple of brain cells would be just too dull for TV, so the selection is a perfectly targeted Gen X couple with the baby-on-the way matched to a couple of “air-head” middle aged friends who have no appreciation of what paint is let alone how to do any DIY.

Now I don’t actually have a problem with the programme or the participants as clearly there is a market for such programming or TVNZ would not have invested our hard earned tax dollars in it – and clearly I watched it! – no what really amazes me is the fact that despite this type of programme there are still people in this day and age who treat property buying with less respect in terms of background research than they do buying a TV.

This show let alone any of the TV shows never seem to show people using the best source of information available in our modern age – the ubiquitous personal computer linked up to the internet. How would anyone with any desire to succeed in real estate not approach the market from the best source of information – real estate websites? – well these TV shows clearly do as they portray their guinea pigs aimlessly walking into a real estate office as the best means of assessing what is available to buy on today’s market.

Why is it that the TV channels never want to show the reality of so many of our daily lives – our use of the internet to search out information before buying anything?

Could it be that TV companies believe that their very future – like that of the newspapers is in serious jeopardy from the encroaching power of The Microsoft / Apple / Google triumvirate?

1

Property investors – podcasting brings wisdom from US to NZ

Posted on: December 16th, 2007 | Filed in Online marketing, Property Investing

Real Estate GuysI just wanted to share this link with you if you are an existing or prospective property investor looking for advice and wisdom from those who have been in the business for a good while.

The Real Estate Guys is a syndicated weekly radio programme that is available through iTunes. It delivers a fast paced discussion forum of topical issues and advice surrounding investing in real estate in the US market. Whilst this might not be at first glance a great use of your one hour; all I would say is it is worth a listen as before long you may be like me addicted. Best of all it is free, and there is a sense of being a part of a conversation with people who are as passionate about property investing as you are.

The content is as relevant to NZ despite the references being to the US – although of late the focus of many of their programmes is international real estate investing – including a programme recently highlighting investing in Melbourne.

Technology advances bring this world ever closer. This podcast is for me a great example allowing me to choose what I listen to and when I listen, and as for the ads – well they are fun, but you can always fast forward!

As for property investing in NZ well at this time there are over 600 listings on the site under the search of property investor – everything from a $75,000 ex state house in Dannevirke to a development opportunity in Dannemora, Auckland for $3.5m

4

The Joneses – “virtual” real estate or “real” real estate?

Posted on: December 14th, 2007 | Filed in Buying / Selling a home, Media commmentary, Online marketing

The news that The Joneses are planning to list on the stock exchange next year is in someways not surprising. It has many of the hallmarks of a “venture capital funded” / “new business model enabled” IPO. Initial investors are keen to see their risk capital rewarded by a broader share ownership which will afford expansion opportunities as well as realisation of early gain in value.

The enticing figure quoted by Chris Taylor of enabling investors to secure a share of a $1.2 billion market will certainly sow the seeds for a healthy interest in the reverse listing.

What caught my eye was a reference in the article on Stuff that stated that The Joneses planned to branch out into “second-tier” markets, and hoped to have 10 -15 offices in the next few years.

Now my understanding of the business model of The Joneses is that of a “virtual” real estate company – there are no offices of The Joneses on the high streets of Auckland, Wellington, Christchurch and Dunedin – they are a highly developed customer management and marketing business that creates demand through advertising to meet the supply created through exceptional service – that’s the idea at least as I read it, so what is with this idea of 10 – 15 offices??

I personally share the views expressed very well by Mike Green – the MD of Harcourts on his blog that there is a very real prospect in the future of high streets devoid of real estate agents. Expensive office space is currently used to “house” real estate agents who seldom spend any time in the office. Additionally the days of prospective buyers wondering in to offices to find out what was for sale have been completely replaced by online searching.

So what are the future plans for The Joneses?

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