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Just how competitive is real estate in New Zealand?

On the face of it the New Zealand real estate industry is incredibly competitive. There are more than 10,000 licensed agents all fighting for just 76,000 property sales a year. That’s barely one sale per agent every six weeks of work, one income-bearing sale  lean pickings indeed!

Some might argue that there are too many agents fighting for a slice of the real estate cake. That might well be true but, on the face of it, it certainly looks to be a highly competitive industry. Further to support this belief is the extent of marketing undertaken by individual agents eager to secure your business, all showcasing their skills and experience.

The differentiation of one real estate agent from another, or one real estate company from another in New Zealand is paper thin – they all have a list of glowing referrals as long as your arm and offer "Free Appraisals" as if this was a compelling point of difference.

However, when was the last time you saw a New Zealand real estate company undertake this type of advertising?

I am grateful to Robert Brown who snapped this photo from a train in Kent, England.

For clarity let me share the text of the advert:


You wouldn't take a slow train, so why us a slow agent?

"Strutt & Parker sells houses faster than any other agent in Sevenoaks. And whether in town or country, we achieve on average, 99% of the guide price".


Now that kind of messaging in advertising certainly gets me interested. 

To have this type of insight and performance metrics to guide my decision as to which agent to use would be far more powerful than endless testimonials that all praise the agents to the skies. 

The problem with testimonials is that they are curated. When was the last time a testimonial expressed anything but glowing endorsement? In today’s world, negative reviews as part of an open dialogue of customer feedback is far from being viewed as the death knell of a business. Far from it in fact as the honest balanced feedback is judged positively. Having rich comparative data on agent performance would be a great competitive advantage for any real estate company or individual agent.

A New Zealand real estate company that could deliver this performance as demonstrated by Strutt & Parker would not only be able to gain new customers, it could also attract the best agents. Such competition would certainly force other real estate companies to seek to better understand why their performance lagged behind the leader. This would engender competition in the industry, drive efficiency and enhance customer satisfaction.

Although I am sure there will be detractors to this article and this fundamental question, there is no denying the fact that real estate has metrics. Be it the days-on-market, the asking price to sales price ratio, the marketing investment vs return, or the market share of a real estate company (there is one company for which such data exists  Barfoot & Thompson). The key question is, do real estate companies hold themselves accountable to these metrics and do they want to from a public accountability perspective?

The Real Estate Institute as the industry association with the majority of licensed agents and offices as members has within itsCode of Agency Practice the following clause:


Clause 9.
Ensure that all advertising and marketing materials and conduct of the Agency Member and their employees is a fair representation of all relevant facts, and therefore not in breach of any relevant statutory requirement (such as the Fair Trading Act 1986 and the Commerce Act 1986). 
Ensure advertising and marketing content does not denigrate other competitors or the wider real estate profession or practitioners. 

The second paragraph is the key as the industry interprets this (or has agreed to interpret this – based on conversations I have had within the industry) as companies and agents should not use data from the Real Estate Institute published sales data to undertake comparative advertising which would "denigrate other competitors."

We live in a digital world, one in which we can evaluate our tradespeople, our local cafe and every product we want to buy. We can use the collected wisdom of the global community to guide our decisions, so why is it that the decision to seek to find a professional to facilitate the largest transaction of our lives cannot be better informed through access to performance data?

This is not to say that the decision of the choice ofagent or real estate company should be a purely objective decision, because the feel and fit of the right agent is also key as are referrals but a third leg to the decision stool adds stability and surety to the decision.

Former Realestate.co.nz CEO Alistair Helm is founder of Properazzi.

 

Comments and questions
11

Ask developers who are selling direct to the market!

Real estate agent models could be as flexible with their cost structures. The smaller bontique agencies are.

I think you'll find someone in their feeding chain of the big agencies is too greedy, and it shows.

For one off sellers, I recommend a smaller agency and agent with an established track record or new agent who has a good track with sales in other fields, The main means of attracting buyer interest is now the internet, which now (almost) levels the playing field.

Agents get 75% of commission for listing, 25% for selling

Big brand agents list up hard, lots billboards at your cost & get 2nd tiers to actually sell

Select your agent on what they personally sold - not what listed. OOOOOPs you are not supposed to know that

Any bunny can sell a house as a salesperson as long as it is listed .Hardest part of real estate is getting the listing.All the hard work is done getting and servicing the listing.Not sure where you got your. OOOOPS from.Try it sometime.There is always room for one more,in the world of commission agents.

Seems someone has hit a nerve here

Smoke + mirrors game

People signing up are led to believe thats the person selling their house + who will work night & day on it. OOOOOPs they race off to list more for all the moo ha whilst unknown plebs sell

Anonymous raises a interesting point in selecting a agent on what he or she has sold.

When I was in commercial real estate and had access to who sold what in residential sales it use to amuse me the tactics of so many residential real estate companies.

One that intrigued me and most noticeable in the large nationwide franchised agencies but probably also applied to the botique agents as well was in the window display.
Photos of properties listed by the franchise group throughout the city and not just by that agent whose window you are looking into and all those sold stickers shown on the properties.

You can be forgiven for thinking wow these guys must be really on the ball, Only if you are in the know you know that in reality the sold stickers also apply to all the franchises in the group that have sold not just that particular agent.

The particular agents window you are looking into may have only sold via their office agents say 2 of the twenty sold properties on display.

It all about perception and image creating.

I wonder if the teachings of today in training new recruits into real estate sales hammers home the point "fake it until you make it" like they use to.

It really is all crap in the assumption that only large real estate agents can really deliver the 'results and best prices and that they have the best marketing plans and exposures with so many unsatisfied buyers waiting in the wings.

Dedicated botique residential real estate agents can deliver as good as results if not better in regards to pre and post sale services.

No one has a sole agency on buyers but yet many large nationwide agencies still give the impression that they do.

The internet , ease of communication and technology is changing the way the public see agents and what value they bring to a sale.

The industry is still very much in its infancy of what is around the corner for them........

Just like video killed the radio star, piratebay killed the video stores, trademe and online will kill real estate agents.. their days are numbered mark my words

Can't agree with your comments " kill them"...

Do think though the model will change considerably and agents as we know them today will play a different role in the sale and purchase role and their fees and justification of such will also come under serious attack.

To survive they agents will have to embrace the change and adapt to what the client demands.

At the moment it could be said that many agents play too big a part in the decision making process in relation to most aspects of a sale and purchase of residential property.

The cost of selling is incredibly expensive.

I have in the past challenged agents that charge fees in excess of 3% plus marketing costs to a public debate on how they justify such charges for selling and to date no one has stepped up to accept.

Having owned a real estate company for over 15 years and also several non related businesses at the same time , I do have experience to draw on.

I believe given the rapid recent increase in property plus the huge reduction in marketing due to modern technology that the fees for selling a residential property is well out of kilter to justify the value some agents bring to a deal..

Sole Agent. Advertising. ~500k (NZD) property, total fee - 3000 NZD fee.

Last time i sold a house in NZ

Sole Agent, Advertising, ~640K property, total fee - 21,000 NZD fee.

Listing your home on trademe and hoping you will sell it for the best price is reckless. 2 out of 3 of my listings are sold to buyers that don't speak English but come through our local buyer network. These people do not search on Trademe... how can they when they can't even spell it. List with the biggest agency in your network... they have the buyers and the resources to ensure you will get the best result.

eventually a buyer will find a listing. doesnt really matter which company (assuming all the usual adverts) the real value to sellers is a very good negotiator at the moment of sale. This can mean $$$$$ more for a seller. Commissions % are irrelevant. More money in he sellers pocket is prime.
How to identify that person is the real key. I wasnt a brilliant marketing agent but i always got exellent prices , never needing to reduce commission.

We sold our own house in 7 days at the top end of valuation by listing it on Trademe with a fixed asking price. If you can take good photos (or even pay for them to be taken), know what you want for the property, and are happy to show people round it's not especially hard work. No one knows more, or cares more, about the sale of your property than you do. Also, people generally hate the stress and uncertainty of tenders and auctions - a fixed price is a compelling offer, and tends to avoid the bargain hunters.