Here we go again—property prices are on the rise and all sense and order has flown out the window

As the successful bidder ducked his head and stepped into a glass-fronted room to seal the deal, people in the packed auction room applauded. It was a heartfelt moment during a dreary event, the sale of mortgagee properties.

I have never been to an auction before but I’m guessing people don’t usually applaud. We clapped for the man and his lifestyle block because he quite obviously was in love with it, because we imagined that this love would mean great things for the property and his family, and frankly that made us feel warm in a cold room with a somewhat flinty atmosphere.

The other bidders—property developers, I would say—were emotionless, no bad thing for an auction bidder, of course, but up against the lifestyle block man with his enthusiasm they just seemed mean. "Let him have it," you wanted to say, as they pushed the price higher by increments of $10,000 (a good second-hand car) and then $5000 (a leather lounge suite) and then $1000 (a pair of designer chairs, or a kitchen benchtop, or a new fridge) until they finally stopped, picked up their jackets and left.

There’s much about the whole real estate game that feels a bit mean, especially in Auckland, where prices are crazy, even now. The parameters of play are never entirely clear. What price does the vendor (or in this case, the bank) want? How many people are genuinely interested in the property? Is the CV any indication of what the property will sell for? Can you believe what the agent tells you?

I don't particularly want to pick on real estate agents, who get the same kind of abuse as lawyers and journalists, but their international reputation for obfuscation and slick verbiage is, in my experience, entirely accurate—and spookily so given cultural and geographic differences. Just as so many male real estate agents seem to wear gold link bracelets and overpowering cologne, so too do they smile maddeningly and refuse to offer a sensible indication of what sale price they are seeking. "What do you think it's worth?" they ask, and unless you work for Quotable Value what does your opinion matter anyway?

An agent rang me to get an opinion on a house we looked at last weekend on a whim—at over $1.2 million CV it is well beyond our reach. "What do you think it's worth? he asked. I told him low to mid $700,000s. I don't fricking know. Thing is, my "opinion" on the matter will have been noted and taken back to the vendor, who will either be incredibly disappointed or deem it useless, and rightly so.

A somewhat dilapidated old bungalow in our neighbourhood recently went on the market. It has heaps of potential as agents like to say, and its lounge, kitchen and one bedroom look out on to the estuary. It could be amazing. It could also be a money sinkhole. There is no listed price, but the CV is well over $1 million. I asked the agent what she thought was a reasonable price for the property and she told me she didn't know. I believe her, to a point. The property hasn't attracted a lot of interest, which would point to a below-CV sale price, but the owner is not keen to go below $1 million, which would be a crazily high sale for our neighbourhood.

At this point I wouldn't be surprised if it didn't sell at all, despite the amazing view and potential, which means prospective buyers and the owner will have to dance this mad jig again.

Enough mystery. Why can't house sales be more like car sales—and doesn't that tell you something about the hideousness of buying real estate, given how awful it is to buy a car? At least with cars, though, there is a sticker price. You know roundabout where you stand in relation to the car's affordability.

I think all houses should be advertised with stated sale prices. How much less stressful would it be to visit an open home if you knew what the owners wanted for it? I'm tired of going to open homes for properties that I gather, after awkward back-and-forth with the agent, are not affordable to me. Just post the price on your ad and if you get a huge response, then people can fight to out-bid each other, but at least give us some idea of whether we even have a chance.

 

Comments (8)

by stuart munro on October 16, 2009
stuart munro

I think you'll find that part of the problem is that NZ has both a disproportionately high number of real estate agents for our population, and that, by world standards, the fees they charge are very high. This has probably been due to declining employment prospects for moderately educated people, the outcome of the policies of the reigning parties over the last 2-3 decades.

There is no sign that either major party has any intention of coming to grips with what remains on a per capita income basis, some of the least affordable housing in the world. This dysfunctional real-estate focus is also a feature of the US economy, and a major contributor to its current weakness. A mature government would move to address the problem. Ours is going to pretend it doesn't exist.

by Eleanor Black on October 16, 2009
Eleanor Black

True, although there has been talk about introducing cap gains tax on investment properties, which would make owning multiple properties less attractive and push down demand. You think this govt isn't really serious about that, Stuart?

by Nick R on October 16, 2009
Nick R

There's another reason why real estate agents won't give you a straight answer when you ask about price.  The Commerce Commission has been prosecuting them under the Fair Trading Act if they advertise a property with a specified price range  - buyer enquiry over, etc - and the vendor then rejects an offer within that price range.  The Commission's rationale is that it is misleading to advertise properties as being available at or over a specified price unless the vendor is going to seriously consider offers within the price range.  The mischief they are trying to avoid is people wasting their time making offers that have no chance of being accepted.

This has backfired.  The agents can't trust vendors to stick to initial price indications - so the safest way to avoid misleading anyone is not to give any price indication to purchasers at all.  That way there is no risk of anyone being misled as to the price of the property.  Simple and effective, but frustrating for purchasers who now have to guess which houses they might be able to afford.

Cheers, Commerce Commission!  Thanks a lot.

by BeShakey on October 16, 2009
BeShakey

From memory the Commerce Commission actually took someone to court for saying Buyer Enquiry Over $X, when the vendor had said my minimum selling price is something greater than $X.  The agent argued both that the BEO is only a guide to the general value rather than a specific guide, and that at vendor may over the course of time actually accept a lower price than they initially indicated.  The Commerce Commission lost that case.

So from the cases I'm aware of Nick R is wrong both in terms of what the case was about, and what impact it has had on agents practice (which would be none since their practices were upheld as being legal).

by Tim Watkin on October 16, 2009
Tim Watkin

I had a memory that Calyton Cosgrove was trying to do something about estate agents, and lo and behold you can see here that he passed a new act last year. It includes an independent authority handling complaints against naughty agents and a register of their naughtiness. Anyone know if it's made one whit of difference?

And this government has got its tax group working on ideas... capital gains tax, land tax etc. So not quite ignoring it Stuart. But the proof of the pudding is in the eating. Will the report offer new solutions or the same old ideology; and if it does, will the government actually do anything about our real estate focus or just file the report in the bin?

by Ashley Campbell on October 18, 2009
Ashley Campbell

Annoys me, too Eleanor. When I bought my house, eight years ago, I refused to even visit any properties that didn't advertise a price. It cut some out of my choices, but meant I knew what I was looking at. Having said that, with sites such as QV Online and Terralink, it's relatively easy to find out the rough value of a property these days. If ever I move again, I'll still avoid auctions like the plague, but will consider other properties that have not listed prices as long as I'm confident about researching their worth.

by stuart munro on October 19, 2009
stuart munro

@ Eleanor & Tim, I think we can be fairly skeptical of any government professions about real estate reform, people like Gerry Brownlee are likely to oppose any substantive change - and if change is not substantial it will not address the problems.

Real estate became the investment of choice post '87, and governments have had ample opportunity to address the problem. But they are terrified of alienating solid middle class voters (as they should be).

Years ago I tried to talk the Greens into a capital gains tax on 3rd & subsequent properties - which would target large scale investors rather than upgrading families etc., but apparently I was not sufficiently persuasive.

If you look at who the government has been taking advice from, Brash et al, you can infer that nothing substantial will happen on real estate.

These guys need to visit Biarritz. It's almost a ghost town. Two hundred years ago it was the fashionable property area for Europe. This is what they are making of New Zealand, with a 20% drop in occupier ownership in the last two decades, the lower middle class are being squeezed out of the New Zealand dream.

by on March 06, 2010
Anonymous

[Spam. Redacted.]

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