Just as the rise and rise of the motor vehicles sent shivers down the spine of the local blacksmith, there’s a shiver now down our modern workforce. Why? Because they’re wondering how their desk jobs will stand up against the benefits and efficiencies of Artificial Intelligence, or AI. This is a hot topic within the real estate industry, and there is more than one principal currently pondering just how AI might disrupt the industry. This month we contemplate just what AI might mean for the industry. And for those currently hoping agents may be wiped off the face of the earth, spoiler alert: unfortunately, we aren’t going anywhere.
The First Disruption
Pre the modern wonders of the internet, there were few ways to know what homes were for sale at any given time. For the serious buyer, the options were;
- Visit your local real estate office and enquire as to what was on the market, and then drive around with an agent to any homes which they thought may be suitable.
- Wait patiently for the Saturday paper and their static display of ‘latest listings’.
In NZ, the first big shock to the industry was when Trade Me listed every house available with every agency on their website without seeking permission first. I distinctly remember being in the office as chaos ensued. It was a genius move from Trade Me’s end! Now buyers could look at the whole market and make their own decisions on what they wanted to view. How could this be? Ripples ran through the industry. This would be the death of agents. Now buyers had choice over the homes they viewed, and owners could sell their home themselves, saving thousands in commission! All of this took place around twenty years ago. But despite the shift, there are more agents now than there were back then.
The agent was the gatekeeper of the information which, I’m sure, has contributed to a decades long dislike of our profession.
The internet didn’t break the industry, but it did refocus the importance of being the vendors’ agent.
You have been using AI already
While most of us probably believe we have only just become acquainted with AI through the use of Chat GPT, it is likely to have been creeping into our days for some time now. It’s the anticipated end to a sentence you haven’t yet typed, liaising with chat bots to answer specific questions, or establishing a likely sales range for a home of interest on sites such as Homes or OneRoof.
While incredibly handy as a starting point, it is impossible for an algorithm to accurately predict what a buyer might offer, and a vendor might accept. Take for example the offer of an emotional buyer who has found their dream home vs that of an investor. Or the motivations of a vendor who is divorcing or is no longer able to afford the mortgage vs. someone simply testing the market for a premium.
Sites using an algorithm can access otherwise tricky to access sales data to provide a prediction for a home in a certain area, based on floor size and the number of bedrooms. We know a lot of buyers use these sites to help establish a starting point for value, although few can tell you how they came up with the price. Where it can cause significant issues for vendors is in a rapidly falling market such as 2022. Online portals make use of historical sales data for their predictions, but in 2022 they could not keep up with the rate of decline in the market. When the gap between market value and the online assessment increased beyond the level they saw value at, the buyers stopped showing up to open homes. It’s at times like this, salespeople need to find ways to advertise to the public at large to ‘ignore all online estimates’. This is a task much harder than you may think.
So, while pricing algorithms have their place, they are just history to try and make sense of the future, and for the serious buyer they are no replacement for good quality market knowledge.
Helps with Due Diligence
As a team we labour over the review of LIM and building reports, manually writing and updating disclosures prior to bringing homes to the market. Recently, we have checked our work against the results of Chat GPT and noted that the results were very similar. While we are not at a point where we can trust the tool entirely, we look forward to a day when we can. The reduction of human error and labour savings will be entirely beneficial for the business.
While we are liable for the information we represent, Chat GPT offers a great starting point for buyers looking to review the important information provided when buying a home. For buyers with limited knowledge of construction and council requirements, the ability to quickly identify and clarify the potential pit falls of a property before seeking further, often expensive technical and legal advice, is hugely beneficial.
Council AI
While it’s not AI, modelling has been used by councils to predict a range of potential issues. After the Boxing Day Tsunami the Wellington city council painted “Tsunami Lines” all around the city. Properties on the wrong side had the potential to be swept away from a tsunami. Our latest concern is flooding. A shaded blue area washed over part of someone’s property under the heading “potential flooding” literally wipes $10,000’s off the value, if you can even get an offer. Buyers don’t see this as modelling, they see it as ‘only a matter of time’. Nor can they apply logic to typography. A home on the side of a steep hill is more likely to fall off that hill, than suffer from a flood. Twenty years on, and with no evidence of a tsunami, we’re all still here, worrying about flooding.
Don’t Surrender Your Brain
Search tools and AI are great and have allowed information to flow more freely. But like anything you should always apply a certain level of scepticism with the information you are served. The recent launch of Google’s AI service turned up results which said humans were fine to eat rocks. But beware of pebbles! So, while AI search engines fail to differentiate between a factual and satirical article, common sense is best applied.
Use with caution (for now)!
The Wellington Market
It has been a tough few months in Wellington. The job market has been hit hard, household budgets are under significant pressure and businesses in the CBD are doing it hard. The government continues to be the backbone of the city, and while they aren’t spending, we can expect the market to be subdued for some time to come.
Despite the threats, I believe that the Reserve Bank will cut this year, nothing substantial but enough to start easing the pain mortgage holders are experiencing at present. While it pains me to say, prices have come off a little since the beginning of the year.
The mantra now is: Survive until ’25.
Wellington Market Quick Stats
What’s on in Welly?
Light Cycles by Moment Factory, 11 May – 9 June 2024
See Wellington Botanic Garden ki Paekākā in a whole new light after dark this autumn. Light Cycles, an illuminating outdoor experience from Moment Factory, is coming to Wellington as part of Aotearoa New Zealand Festival of the Arts.
Click here to purchase your tickets
Visa Wellington on a Plate, 1-31 August 2024
How many burgers, events, and pop-up restaurants can you fit into one month? You’re about to find out, when the city’s favourite foodie fest returns. Visa Wellington On a Plate (VWOAP) has been running since 2009, bringing culinary delights to hospitality venues across the city and region. This year’s festival focuses on the crowd pleasers of previous years — events and burgers.
Click here for more information
New Zealand Symphony Orchestra Season, 18 May – 14 Dec 2024
In 2024, the orchestra will bring audiences more of the best international artists plus an array of top Kiwi talent. The touring programme will see the orchestra perform over 100 concerts in over 30 communities. Be among over 100,000 people across the motu who experience live orchestra music.
Meet the Ben Stevens & the Team
If you, or anyone you know, could benefit from a considered market assessment by Wellington’s only licensed agent and registered property valuer, please do not hesitate to call. We are always happy to help.
