Just how competitive is real estate in NZ?
On the face of it the NZ real estate industry is incredibly competitive. There are over 10,000 licensed agents all fighting for just 76,000 property sales a year. That’s barely one sale per agent every 6 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 to another, or one real estate company to another in NZ 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 NZ 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 from 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 expresses 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 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 NZ 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 enhanced customer satisfaction.
Whilst 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, 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 its Code of Agency Practice the following clause:
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 or agent or real estate company should be a purely objective decision, 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.