How might the property market function better without CV’s
I posed the question in the recent opinion piece as to whether we should get rid of property CV’s. It certainly captivated interest across many media outlets – NZ Herald / TVOne Breakfast and Interest.co.nz. The online debate on these sites has been extensive with comments from valuers, real estate agents and the general public. On balance I sensed that the feedback was supportive of the premise to move away from this fixation as to a property’s market value based on the Capital Value.
I thought having opened up this debate that the issue should naturally evolve; with the next step being the discussion around a better method to provide a sense of market value for properties to assist buyers and sellers.
I think it is important to make it clear that my focus in airing this issue of property CV’s is entirely centered on the issue of establishing a more appropriate method to provide a publicly available notion of property values. I am not focused on the needs of local authorities to establish a process to levy local rates. That process is necessary and a notional ratable value is a logical path. I will leave that side of the argument.
The value of a property as is so often said, is purely the judgment made between a willing seller and a willing buyer at a point in time. However there is no doubt that this transaction does create a notional benchmark for other similar properties in the immediate area at that time. What is needed is context, so as to judge that a single property sale is either a one-off, or reflective of a trend in pricing.
Every property transaction as a change in the Certificate of Title has to be registered with Land Information NZ (LINZ). This information contains the property transaction value. This data is the made available to the government's state owned enterprise Quotable Value which operates through the brand of QV; which provides valuation services primarily to the residential and rural property markets in NZ.
The primary data of property transactions is licensed by QV to Terralink and to local authorities, and it is in these discrete hands that these property transaction records are held.
The most widely accessible means to explore this transaction history for any property in NZ is via the subscription based services of Property IQ from QV or Property Guru from Terralink. These services are widely used by real estate agents, valuers and financial institutions and government agencies. However the general public cannot access a subscription based service to examine property sales in general, both Terralink through Zoodle and QV through the QV website require individual transactions to access individual records of property sales.
The purpose of this detailed outlining of the structure of this network responsible for collating and disseminating the data, is to compare the NZ situation with other countries. Particularly the UK, the US and Australia.
The US has the most open access marketplace for property data. It is in the publicly accessible and open. This liberation of data has fueled smart development of solutions to assist the buyers and sellers to better interpret the market. Zillow, the leading property website in the US provides records online on every property showing historical sales but also as a function of smart tech investment, a highly sophisticated valuation algorithm which creates a Zestimate for every property in the country. The algorithm does not solely rely on public records of the data of a property, but seeks out and uses user-generated supplemental information provided by property owners to more accurately predict the Zestimate. As with all machine learnig algorithms the accuracy and credibility of the Zestimates is growing all the time.
The UK similarly has open data of transaction records which allows the major property websites of both Rightmove and Zoopla to provide local sales information to the public and in the case of Zoopla an online instant free estimated valuation. This system similar to Zillow uses user generated content to give a one-off personalized valuation requiring the property shopper to merely sign in to Zoopla.
Australia is somewhat different in that the dataset is not free open access, however the Valuer General in each state does sell the data records in machine readable format which has empowered websites such as On The House to provide the data of local sales as well as an estimated valuation on all properties, equally the leading property website Realestate.com.au in association with RP Data provides local area sales aligned to property listings on the site.
In NZ by comparison, the transaction records are not open data, despite the fact that it is public record collated by a government agency. The complete data set is not available to purchase in a machine readable format accessible to the public and is only available on a per record basis. This applies whether you approach the local authority, QV or Terralink.
The argument for the support and continuation of this cloak of data is that Quotable Value as a SOE has to return a dividend to the government, and local authorities have to defend the right to earn income from licensing such data. This question is the type of question asked of much of government data here in NZ and overseas. There is a strong and significant argument that we should slim down our government services, open up government data (that is not sensitive or personal) and allow commercial organisations to foster talent to create models and solutions using the data. The outcome tends to "let a thousand flowers bloom”.
So my vision for a new model for NZ would be to provide the home shopper with an online platform through the web and mobile device sharing historical property sales data and a sophisticated computer algorithm to provide an indicative market valuation driven by user generated input to create a “on-request,” personalized indicative valuation.
Some might say that property transaction data should be held by real estate agents so they can provide that as part of their service, but that argument would be the same as that proffered by agents a decade or so ago when they held the only source of listings data. Look how collectively we all (including the agents) have gained from opening this data up through the websites of Realestate.co.nz and Trade Me property.
We need to accept that nowadays people have the tools through smart technology and feel empowered, they want to be able to make better-informed decisions especially when it comes to something as important and financially critical as property. Thwarting this through restrictive processes of what is our own data, funded from our collective taxes seems ridiculous when the model based on overseas examples shows no downside and only upside. That is my view.