In a challenging market, real estate consumers1 have become more likely to empower themselves with quality information on properties and the buying and selling process, according to new research commissioned by independent conduct regulator, the Real Estate Authority (REA).
REA’s latest Annual Perceptions Research – based on field work conducted in the first half of 2023 – also indicates more consumers are making use of a range of information sources – including professional advisors, real estate salespeople and REA’s own consumer resources – to navigate a challenging property market with confidence.
REA Chief Executive Belinda Moffat says, “at REA we strongly encourage consumers to do their homework before buying a property, to ensure they are equipped with the information they need to make good decisions. Equally, we educate and guide licensed real estate professionals on the importance of providing consumers with disclosure of relevant information and time to take advice from professionals. Buying or selling a house is one of the biggest transactions a person may ever undertake, and has high emotional and financial consequences. The research released today indicates that more consumers are getting the information that they need, which is a positive shift in what is a challenging real estate market.”
Buyer due diligence on the rise The research found that more than nine in ten (93%) consumers obtained information on a property before making an offer. Among those consumers, the use of robust information sources has increased on the previous year’s research:
– 48% obtained a building inspection report by a certified building inspector — up 2%
– 15% obtained a building inspection by someone who is not certified – down 5%
– 41% obtained a Land Information Memorandum (LIM) – up 7%
– 40% undertook a title search – up 7%
– 34% obtained property files – up 8%
– 32% obtained other Council documents – up 2%2
REA Chief Executive Belinda Moffat says it is encouraging to see more consumers are undertaking quality due diligence.
“While these results may have been influenced by an increase in buyer caution under challenging market conditions, from REA’s consumer protection perspective this is a positive trend and we would like to see it continue regardless of market movements. Too many New Zealanders still risk entering one of the most financially significant transactions they will ever undertake without adequate information about what they are buying. Quality property information is available, and REA urges consumers to take advantage of it before making a decision on such a significant transaction.”
REA consumer resources highly valued The research also found consumers are significantly more likely to have overall knowledge and confidence in the real estate industry when aware of REA or its websites (rea.govt.nz and consumer information site settled.govt.nz).
– Of consumers who are aware of REA, between 78-79% agree that REA provides information which is: o Clear o Independent o Trustworthy o Accessible to everyone3
– Nine in ten consumers (89%) felt more confident after visiting settled.govt.nz4
– 70% of those who visited settled.govt.nz were seeking general information, while 30% had a specific question. Of those who had a specific question, 97% found the answer on settled.govt.nz5
– 90% of consumers who received the REA Residential Agency Agreement Guide found it useful6
– 91% of consumers who received the REA Sale and Purchase Agreement Guide found it useful7
Consumer knowledge about the end-to-end real estate transaction process was significantly higher for those who know about REA.
– 57% of consumers who are aware of REA, and 54% of those who have interacted with settled.govt.nz rate their knowledge of the end-to-end process with respect to real estate transactions highly.
– However, only 24% of consumers who are not aware of REA8 rate their knowledge highly
Ms Moffat says REA continues to focus on increasing consumer awareness of its regulatory role and enabling greater access to its information resources. REA has a particular focus on reaching the wide range of communities in New Zealand.
“REA produces detailed and independent information on the real estate buying and selling process, as well as information about the conduct standards consumers can expect from a licensed real estate professional, and how to make a complaint if things go wrong. We provide this information in a range of languages through consumer guides we produce. Consumers tell us these resources greatly increase their confidence and sense of empowerment when navigating real estate transactions – which is precisely what they are designed to do.
Consumer empowerment is one of the keys to a successful transaction and the prevention of harm. Driving awareness and enabling access to these resources across New Zealand’s diverse communities, including to first home buyers, is one of REA’s consumer protection priorities,” Ms Moffat says.
REA’s consumer guides, which real estate salespeople are required by REA to provide to their clients and customers, have recently been translated into six languages and REA has begun distributing them via community groups and centres.
“We encourage all providers in the real estate system to share these important guides with their clients.”
Real estate agents influence on consumer confidence REA’s research also emphasised the importance of licensed real estate professionals (licensees) supporting consumers with quality information on the real estate buying and selling process. According to the research:
– 59% of consumers reported that they would go to a licensed real estate professional to find out more about the real estate transaction process; this was the most common information source reported9
– Consumers reported that the most important contributing factor (20%) in feeling empowered during a transaction was good explanations by the real estate agent, alongside consumers’ own knowledge and experience10
– 21% of consumers said they experienced an issue with a real estate transaction in the previous 12 months, with 48% of those issues being agent-related – down from 75% in the 2022 survey11
– Of those agent-related issues, consumers reported that the most significant related to information transparency and quality12
Ms Moffat said these results also reflect the important role played by the regulatory system REA oversees in supporting high levels of integrity and conduct in real estate agency work.
“Buying and selling real estate involves a great deal of technical, financial, and legal detail. REA expects real estate licensees to use their professional knowledge to support consumers to navigate these complexities.
They must be able to accurately explain to consumers the details of the various methods of sale, disclose known property defects to buyers, explain commission arrangements in detail before a listing agreement is signed, as well as inform consumers that further information and an independent conduct complaints process is available via REA.”
REA supports all licensees to maintain an up-to-date understanding of their regulatory requirements through tools including a compulsory Continuing Professional Development (CPD) programme which is refreshed every year, written guidance on specific regulatory matters, and sharing complaint case decisions that illustrate compliance risks and issues.
Overall consumer confidence maintained Despite challenging market conditions in the preceding 12 months, REA’s research indicates overall consumer confidence levels in New Zealand’s real estate industry remain stable.
– High levels of confidence that the industry is professional, well-monitored, well-regulated, fair and transparent are reported on average 9.2% more often among real estate consumers than among the general population14
Ms Moffat says that this latest research reflects well on the real estate sector overall and indicates a positive trend in consumer behaviour.
“New Zealand currently has around 15,800 real estate professionals licensed by REA, and most work hard to maintain high standards of professional conduct while working on behalf of their clients. This is reflected in the levels of confidence reported by real estate consumers which has increased over time with the strong focus on high conduct and consumer protection. This is an achievement for the regulatory system and profession in a year where market conditions and severe weather events have put both consumers and the real estate sector under significant pressures.
“REA is pleased to see real estate consumers accessing important information about properties and the transaction process, which helps to reduce the risk of harm. We are particularly pleased to see consumers use and value REA’s information resources, and we will be taking every opportunity to ensure more consumers across all communities are aware of these resources and of REA’s regulatory role and services,” Ms Moffat says.
“REA remains focussed on helping people confidently engage in fair transactions with trusted real estate professionals. A key purpose of our research is to understand the views of consumers and the general public so that we can ensure we deliver the best service we can. Our research has provided insights we are applying to our work programme. By releasing the report we aim to share these valuable insights for the benefit of the real estate sector, consumers, public and wider property system.”