It’s plainly obvious, there is still a crisis within the UK housing market and despite all attempts to improve things, this hasn’t been cured merely by applying financial measures alone.

Sadly the previous administration’s policies were simply not working fast enough (or well enough) to resolve the ongoing UK housing crisis.
Something else now needs to be done !!

Originally published Dec 5th 2013. (Last updated by ph, 16th July 2016.)

– – – –

The Hendry Solution

A considered argument set out with reference to all recent Conservative and Coalition budget statements.
“The best way to smooth out housing market peaks and troughs – in turnover (and also smooth out price peaks themselves of course) is fully explained in the following article.”

There IS a better and quicker way, besides that of building more houses which, by any degree of estimation, must take nearer 10 years than 1 if that is to be implemented.

The housing market is broken, with prices being forced up beyond most people’s ability to pay. It’s not just about supply and demand, as I am about to explain.

It’s about money finding its way into the housing market illicitly and without sufficient financial checks. It’s about selling agents appearing oblivious to this and a number of other problems – since their primary remit is simply to try and get the highest price possible for each property which they can sell.

Yes, estate agents may well try to maintain that house prices are decided simply by supply and demand but this does not bear any serious scrutiny at all.

Consider for a moment:
Dodgy money (or the money that requires laundering) which has caused significant house price inflation recently …
Over-borrowing The rules for ascertaining who should be permitted to borrow, for what reason and exactly how much should be tightened – especially whilst such large sums are able to be borrowed so cheaply …
Lack of valuation knowledge There’s a general lack of adequate valuation knowledge (and experience) possessed by most agents in the property sector currently …
Meaning that lies / deceit and basic misinformation is rife whilst competing agents are forced to utilise this in the hope of gaining more instructions to sell or let …

It simply cannot be denied that these unacceptable factors are playing too large a part in deciding current-day house prices and that such matters have not been addressed so far by those elected to govern.

True market prices can only be determined by supply and demand in a perfect marketplace. The present UK housing market is very far from perfect, it must be said.

The Article:
“The Hendry Solution”
This is the fix to make the market work efficiently over the longer term.

In brief it is essentially about engaging one single estate agent to ‘find’ your next house, negotiate the best terms AND sell your present house too! This is a simple but profoundly important proposal – and yet no-one else has so far proposed it.

By doing that, parity between what you pay and what you get for your existing house would be maintained and also, gazumping should practically be eliminated.

It’s akin to employing a stockbroker when you are buying (or selling) shares.
These methods are well tried and tested and could easily be rolled out across the UK housing market.

The housing market needs improvement and the best way to accomplish this is to legislate for a complete new breed of estate agent (instead of trying to build thousands of new houses in a vain attempt to satisfy a supposed national demand!

Let’s call them (provisional idea), “RHAs or Registered House Agent(s)“, (unless a better name is conceived).

The main job of the new agent should be not only to sell clients houses but also to ‘find and secure’ their client the house they are seeking for themselves and for their families.

RHA or Registered House Agent’s ‘Moving Contracts’ or ‘MC agreements’ should replace traditional ‘Selling Contracts’. This would be a simple but a game-changing improvement.

The proposal is that we should do away with old estate agents’ sole selling contracts altogether and bring in Registered House Agents’ ‘MC agreements’, where each RHA or Registered House Agent engaged would be contracted to facilitate a vendor’s complete move from one property to another.  The aim of this is to bring greater satisfaction to all those in the throes of moving house and to get the whole UK housing market operating far more smoothly – in all possible economic conditions and, it should be said, without the need for government-backed mortgage guarantees for those needing to get onto the first rung of the housing ladder either.

I also claim that our method would help to stabilise house-prices across all regions, instead of tending to make them rise in some areas and not in others. That alone would be a very valuable market improvement.

In addition, estate agents would be more empowered by becoming more responsible for ‘the progress’ of sales of properties across the whole UK (and would gain more control of the volume (or lack of volume) of house sales completions.

The current government’s plan to increase the availability of mortgages, especially for people starting to become house owners cannot be the right approach. As has patently been seen in the past, it will merely result in higher prices; which is the very thing that people simply do not need currently.

[As an aside, if and when government mortgage guarantees should no longer be available and/or interest rates should rise, market prices would be adversely affected and excessive prices would have to suffer from financial withdrawal. There is no other exit strategy from this situation.]

Below is a condensed description of the new ‘RHA or Registered House Agent’s strategy:

In order to become more even-handed in their dealings, and so be of better service to all of their clients, estate agents must start acting both for buyers and sellers, instead of only for sellers or vendors.

This means traditional estate agents would need to become involved primarily in searching for and introducing the present seller to their next property as well as selling their existing one (if any).

To do this the forward purchaser’s agent would become the agent that negotiates both the terms of purchase of the next property and the terms of sale of the house to be sold as part of the move. We’re calling these ‘RHAs or Registered House Agents’. They would, in fact, be advising on both finding and selling houses for their clients in this explanation.

In order for this to happen, estate agents must stop using sole selling contracts and begin offering agency ‘Moving Contracts’ or ‘MC agreements’ for their clients instead.

This would mean that the primary work of the estate agent would become to locate and then introduce acceptable houses for each buying client, whilst at the same time, retain responsibility for negotiating the sale of the client’s existing property – the one to be disposed of as part of the proposed move. One thing this solution can do is to massively reduce the rate of sales chain failures.

To explain how this would work in practice, let’s use the term ‘the subject property’ to mean the house being sold, and the term ‘the object-property’ to mean the house to be purchased.

Two new documents would be involved with this new process :
An ‘MC agreement’ entered into by buyers initially just with one agent; or a series of ‘MC agreements’ with different Registered House Agents (instead of just having a ‘sole agency selling contract’ with one estate agent as generally happens now).

A pre-contract ‘lock-out agreement’ with a set time duration, during which the vendor of the property concerned could not accept other offers until the specified lapse-time occurs without incurring defined penalties. These would primarily be aimed at the vendor if they should default without just cause, but some form of recompense, payable to the vendor, ought also to be reserved in the event that the buyer was the party that decided to withdraw prior to actual exchange of contracts.

Clearly, all buyers would be advised to ensure that satisfactory property surveys have been carried on the object properties being bought before signing a lock-out agreement (or even a further MC agreement). Having a professional survey is normally advised for most types of residential property being purchased anyway.

Once the whole scenario is reasonably well understood, these new methods should prove to be self explanatory and quite easy to follow!

Firstly: – let’s look at the new scenario from the point of view of the person selling their existing house, ‘the subject property’.

The parties to the ‘lock-out agreement’ would be: –
(Documents to be signed at the buyer’s conveyancing solicitors)
Vendor 1 (the vendor of the property currently being sold) who would agree not to continue marketing that property, either themselves or via any RHAs during the agreed duration of the lock-out contact.
The Buyer, whom would be given the promise of a clear run to try and exchange contracts during the agreed duration of the lock-out.
Both parties would be agreeing to incur penalties if they should default.

Secondly: – let’s look at the new scenario from the point of view of the person buying their next house, ‘the object-property’.

The parties to the ‘lock-out agreement’ here, would be: –
The Buyer (i.e. vendor 1, the owner of the subject property as above) Whom again would be given the promise of a clear run to try and exchange contracts during the agreed duration of the lock-out contract.
Vendor 2, agreeing as in the earlier case, not to continue marketing that property, either themselves or via any RHAs during the agreed duration of the lock-out.

NB. Under these revised arrangements, no selling agent fees are involved anymore in either case of course. The buyer’s solicitor will arrange payment of the buyer’s RHA, on satisfactory completion of the actual sale – as is the situation at present.
In each case, it should be noted however, the ‘RHA or Registered House Agent’ is paid on completion by the buyer (instead of by the seller as happens now).

Whichever agent was working on the ‘sale’ of each property, would simply be informed (by the vendor or their solicitors) when to stop marketing at the appropriate time; that is after signing a lock-out agreement (which is broadly what happens currently when terms are provisionally agreed).

(If deemed important in the particular situation at hand, relevant ‘RHAs or Registered House Agents’ could, of course, be asked to endorse the specific lock-out agreement concerned.)

To explain in essence, this would mean there is the need for two lock-out agreements to be signed by each buyer.

One with the purchaser of the property that they are selling.

A second, between themselves and vendor of the property which they are buying.

It should be emphasised however, that each buyer should always sign the lock-out agreement relating to the house they wish to buy first.
They should sign the lock-out agreement for the house they are selling second. Both should, of course, ideally be signed at their solicitors office, at the same time, one after the other.

Doing this should not be any more complicated than owners signing pre-contract papers in general.

For those who wish this, here is a more detailed description of the new ‘Registered House Agent’ strategy:

Firstly from the vendor’s viewpoint:
A. Under the Moving Contract or ‘MC agreement’, the agent would act for vendors (as now), but instead of merely being a selling agent, would act primarily as their buying agent.  In other words, the same agent would find them their next house, ‘the object-property’, negotiate the best terms with that property vendor’s agent (whether that agent has an ‘MC agreement’ or not), and also sell their existing house.

As a follow-up but unlike the existing arrangements, the RHA or Registered House Agent with an ‘MC agreement’, acting for the buyer, would request ‘the object-property’ vendor to instruct their solicitors to sell their property to buyer 1.

At the same time a three-way pre-contract agreement called a ‘lock-out agreement’ would be signed, the parties being as mentioned above.

The basis of the agreement which would be legally enforceable would provide for a set lock-out time, during which the forward vendor (i.e. the seller of the property in question ‘the object-property’) would not continue marketing the property or show any more viewers around it and agree not to accept any other offers prior to an ‘exchange of contracts’ with the named buyers, providing that this occurs within the agreed time limit. If the terms of the agreement were broken, the party disadvantaged may seek to claim the sum set down in the agreement by way of damages or compensation.

In addition to bringing more certainty in concluding negotiations between the parties, the effect of this would be to stop (or substantially reduce) gazumping happening in the intervening time. As stated earlier one thing this solution will also do is to massively reduce the rate of sales chain failures.

[N.B. If the agent which happened to secure the best deal for the vendor, both for the sale of their existing property and the purchase of their preferred next property did not already have an ‘MC agreement’ with that particular client at the time, one could be signed retrospectively, or in other words at the same time as the lock-out agreement was to be signed by ‘the object-property’ owners; and this would effectively over-ride all other ‘MC agreements’ in the same way that a last Will and Testament over-rides all prior wills.]

B. If an existing, or alternatively a new agent were to obtain an offer involving a higher price on ‘the object-property’ – acceptance of this would become subject to the expiration of the pre-contract lock-out agreement and would merely give the existing buyer of the house in question, added impetus to make sure that a legal contract for the sale of land and buildings was concluded as swiftly as they could do so and within the lock-out timescale. There should be penalties specified in the agreement aimed primarily at the vendor of ‘the object-property’, if they should default without just cause but also in respect of the purchasers. However the opportunity to default if either party wished to would remain, as no contract for the sale of land would yet be in place.

C. In the event that the lock-out time period was unavoidably exceeded or formal contracts for sale were not exchanged in time, the pre-contract lock-out agreement would expire, or lapse.

The owner of ‘the object-property’ could, of course, then carry on using their existing RHA or Registered House Agent, and/or instruct more RHAs, by using ‘MC agreements’, both to find them their next house and sell their existing one – the one that was the subject of the abortive sale.

The vendor of ‘the subject property’ however, (i.e. the buyer whose lock-out agreement has just lapsed), may simply carry on with their search for another suitable property, again using their existing RHA via an ‘MC agreement’, or signing up with additional agents using more ‘MC agreements’ if this should be deemed necessary.

It should perhaps be explained here that existing estate agents with traditional selling contracts shall, in the interim period and while these new procedures became fully accepted, slightly confuse the picture until sufficient numbers of estate agents began offering this new and improved service. For this reason a consensus in favour of the necessary change, including Government legislation confirming this would ideally be needed.

Secondly looking at this from the buyer’s viewpoint:
1. An estate agent with an ‘MC agreement’ would initially be commissioned by a vendor as above, both to find that particular buyer their next house, ‘the object-property’ and negotiate the best terms they can on that purchase, as well as conclude the sale of their existing house (if any).  Once ready, the relevant agent (or the agent offering the buyer the best overall terms), would request the forward vendor to instruct their solicitors on the terms agreed for sale, as in ‘A’ above.

The successful ‘RHA or Registered House Agent’ would be paid on completion of the combined sale of the purchaser’s existing house and the legal completion of the house being bought, ‘the object-property’, using similar machinery as currently exists with conveyancers.

A pre-contract lock-out agreement, as explained in the vendor’s example above, would be signed again by ‘the object-property’ vendors, the buyer, and their ‘RHA or Registered House Agent’.

As already explained above, this would simply provide for a set lock-out time during which the forward vendor (i.e. the seller of ‘the object-property’) would agree not to continue marketing the property or show any more viewers around it and would agree not to accept any other offers prior to exchange of contracts with the named buyers, provided that this occurs within an agreed time limit. However, as previously explained, there would remain the opportunity to default if either party wished to, as no contract for the sale of land would yet be in place.

As explained above, the primary effect of this would be to stop (or substantially reduce) gazumping happening in the intervening time, by formalising the terms provisionally agreed between the parties which would be an extremely valuable addition.

In other words, unlike existing ‘selling agents’, the RHA or Registered House Agent with an ‘MC agreement’ would be primarily helping the buyer to find their ‘object-property’, and would assume responsibility for both transactions, but importantly, they may also sub-contract out the sale of the existing house to other RHA or Registered House Agents if this should prove to be necessary, e.g. where the RHA concerned is not active in the area in which the existing property is located.

This would mean that the active RHA or Registered House Agent with an ‘MC agreement’ would have had to have found a buyer for the house being sold (‘the subject property’) before they could conclude a deal for the forward purchase ‘the object-property’. This, of course, should happen in the normal course of events, in most cases, anyway but currently it does not always.

2. Again, if any other agent should attempt to contact the owner, or the owner’s ‘RHA or Registered House Agent’ handling the purchase of ‘the object-property’ with a different offer worth considering, they would be told the house is currently sold, (subject to contract), of course. An agreed pre-contract lock-out agreement with a set time duration would be running, such that the vendor of ‘the object-property’ could not accept other offers prior to exchange of contracts. As already explained this is designed to stop, or substantially reduce, the occurrence of gazumping within the agreed time-scale but would not be an actual contract for the sale of land so would be straightforward to have executed.

As a result, any new estate agent (even one with an ‘MC agreement’), may still offer a higher price – making the offer subject to the expiration of the existing lock-out agreement. Again, this would merely give the existing buyer more impetus to make sure a legal contract for the sale of land and buildings to them was concluded as swiftly as they could do that.

3. In the event that the time was exceeded and the lock-out period expired or lapsed, ANY estate agent may then legitimately try and finalise acceptance of a new offer and if they did so, new terms with new people would then be substituted. Under these circumstances it is easy to see why having an effective lock-out agreement would help the performance of the housing market as a whole, primarily by setting down agreed time-scales for the progression of conveyancing under the terms of the offer.

Assuming the new introducing agent was working for a different or prospective buyer but still via an ‘MC agreement’, then again a new pre-contract lock-out agreement having a new lock-out time provision would be executed with the new purchasers (to replace the expired one).

Obviously in these circumstances the earlier purchaser would, by that time, have lost their rights to conclude a purchase of that particular property.

To clarify the procedures for ‘lock-out agreements’ once again:
Where it’s ‘the subject property’ being sold first (as is normal), the parties to the lock-out agreement would be:
a) Vendor 1. The owner of ‘the subject property
b) Buyer 1
c) If deemed necessary, Buyer 1’s ‘RHA or Registered House Agent’ (who would get paid on simultaneous completion of the sale and purchase, by buyer 1 via their solicitors)

If it’s ‘the object-property‘ being bought, the parties to the lock-out agreement would be:
d) Again the owner of the property being sold (vendor 2 in this case)
e) Buyer 2 (i.e. vendor 1, the owner of the subject property as above)
f) If deemed necessary, Buyer 2’s ‘RHA or Registered House Agent’ (if any) (who would get paid on simultaneous completion by buyer 2 via their solicitors)

NB. No selling agent fees are involved anymore in either case.

In each case, it should be noted, the ‘finding’ or Registered House Agent is paid on completion by the buyer (instead of by the seller as happens now).
The agent which was working on the ‘sale’ of each property would be told when to stop marketing by the vendor at the appropriate time (as happens currently).

In essence this means that the agent doing the selling only has to market ‘the subject property’.
After a buyer is found, it’s the buyers agent that would do the ongoing work, including managing each purchase through to completion – instead of the selling agent as at present.

The Effects:
In the above situation it is then possible for the ‘failed’ buyer to conclude a deal to buy a different house using either the same (or a different) ‘Registered House Agent’ using ‘MC agreements’ with whomsoever they appoint as agents.
Flexibility for each buyer is thus is significantly increased.

Once terms have been provisionally agreed on a different ‘object-property’, and they have a purchaser for their own house, they could again arrange for a pre-contract lock-out agreement to be executed for that property.

This new method of securing an offer on a house should mean increased choices becoming available for buyers, because each buyer would have increased access to more estate agents helping them to find suitable properties.

It would also enable buyers to make final decisions based on the very best opportunities currently available, both in regard to the selling of their existing house and in regard to the purchase of their preferred next house. As just explained, this would be accomplished by enabling buyers (if they should think it necessary) to appoint multiple estate agents to work for them in their search for the property that best suits their requirements.

By freeing up buyers in this way, the housing market would start functioning more like a perfect market than it has in the past. This would be of considerable advantage to all the players involved – both business-wise, and by increasing the choice of property for buyers.

Essentially, the only thing that an estate agent would not be able to do, using ‘MC agreements’, would be to act solely for a vendor of course, and this is the primary change which I advocate should now happen.

I accept that ideally this might need the government of the day to give it their backing, if (and as is most likely) traditional estate agents are reluctant to make such a change themselves. It should be stressed however, that the advantages for estate agents would seem to me, patently to outweigh the disadvantages by some very considerable measure.

[As an aside, there would need to be a retained flexibility for those vendors without any forward purchasing intentions to sell without having to use a new ‘MC agreement’ and instead merely use an estate agent as their selling agent – as happens at present. However for this to work, there would need to be a provision in agency law that if a later ‘MC agreement’ were signed by the same client it would take precedence over a traditional sole or multiple agency selling contract and that the latter would be superseded by the former.]

Unlike the plan to build large numbers of houses very quickly, which is doomed to fail in the short-term because of the logistics of building them, this improvement to the way in which the housing market functions could be made very swiftly indeed.

TV programs such as BBC 1 Panorama’s ‘The Great House Price Bubble?‘ investigating the pros and cons of ‘Help To Buy’ mortgage guarantees, screened on Monday 11th Nov. at 2030hrs, and Channel 4’s Dispatches ‘The Property Market Undercover’ the week before, have recently investigated the current situation and found continuing serious misfeasances in the way that houses are sold. Since we are still in the aftermath of the worst financial crash since the 30’s it’s only right that something fundamental and of significance should be done to change and improve the operation of the housing market.

But why?
Let’s look at the following extracts in the news recently:

Seen 11 Nov 13:

Seen 14 Oct 13:
“In the period 1997 to 2007 significantly more than a million housing transactions took place each year in England & Wales. In the period 2008 to 2012 the number of transactions has not been above 662,000 with numbers averaging 640,000 over the last five years.” These numbers quite clearly demonstrate how constrained the market has become, with many would-be borrowers citing the inability to save the level of deposit required by lenders as their primary reason for not entering the property market.

What could existing estate agents do better?
Lots of things – and they need to; before they even consider becoming new, and improved “House Agents”.

For a glimpse of some of the current and ongoing problems associated with traditional estate agency, please see the following links, which will open in a new tab or window. These would all be resolved by using ‘MC agreements’.

communicate your way to faster completions – recent pdf on estateagenttoday.

Also seen Fri 11th Oct 13:
Chris Leslie, Shadow Chief Secretary to the Treasury, said: “If ministers are serious about helping first-time buyers, they should bring forward investment to build more affordable homes.
“Rising demand for housing must be matched with rising supply, but under this Government house-building is at its lowest level since the 1920s.
“Unless George Osborne acts now to build more affordable homes, as we have urged, then soaring prices risk making it even harder for first-time buyers to get on the housing ladder. You can’t tackle the cost of living crisis without building more homes.
“Rather than waiting a year, the Bank of England should immediately review the details of the scheme. How can it make sense that a policy which should be about helping first-time buyers will allow taxpayer-backed mortgages for homes worth up to £600,000?
“And we need to know how much the Treasury intends to pocket in fees from people who take out Help to Buy mortgages. How will this money be accounted for in the public finances? George Osborne shouldn’t make struggling first-time buyers pay over the odds as he desperately tries to fill the hole in his failed deficit plan.”

So, what should now be done?
Recognise that there are problems with the hue and cry to build more houses, faster. The problems are twofold.
Firstly, as we all know, to build substantial numbers of houses takes time. This needs ‘forward’ planning. It simply cannot be done in an instant, or even in a year!

Secondly, however many houses are quickly built, they will only form a tiny percentage of the total number of houses already available and so can only have a tiny affect by lowering the prices paid for them.

Instead, the way to improve the market and in so doing, get fair prices for all is to change ‘the way’ houses are currently marketed by improving current methods.
The methods used by estate agents nowadays, have been used for several decades, without change, and understandably now need a radical shake-up.

Unlike the plan to build large numbers of houses very quickly, this could be done very swiftly.

I forecast that by replacing traditional estate agents’ selling contracts with MCs, the housing market would quickly start recovering and the direct result of this would be, more builders starting to build more houses, as there would then be a ready market for them.

Some More Recent Quotes:
Richard Lambert, chief executive officer of the National Landlords Association, said amount other things:

“It is extremely disappointing to see The Coalition reduce the significance of housing within Government. Given the significant challenges facing households throughout the country, it is essential that housing takes centre stage in the political debate.” We agree.

And Andrew Tyrie, chairman of the cross-party Treasury Select Committee, said that ministers had failed to allay its concerns about the housing market. He warned that with the “chequered history of government interventions in residential property, great care will need to be taken”.

Also, ‘Help to Buy’ was labelled mad and “very dangerous” by the Institute of Directors.

We agree with this remark too, which then begs the question:
“Exactly what should be done, by whom, and when by?”

The answer clearly is: – The present government should bring in ‘Moving Contracts’ or ‘MC agreements’ to replace ‘Selling Contracts’ before the next General Election.

Here’s food for thought?
It’s definitely within the grasp of top estate agents to permanently improve the UK housing market now.

I’d certainly be interested in your thoughts and observations and would be happy to publish any that are constructive.

Peter Hendry, author of this report.

Recent online articles involving discussion amongst estate agents generally

Posted by: Peter Hendry, Housing Valuation Consultant

The recent government consultation into improving the buying and selling process within the UK housing market ought to be continued by the post EU-referendum government.

Why? Because the prices in the UK housing market do not correspond anywhere closely enough with average buyers’ ability to purchase. There needs to be a complete review of how the UK housing market functions. We are being told that this is about to happen but in my opinion (as a retired surveyor), any such review should quickly establish the main cause of the over-pricing problem.

If you look at how stock markets work, around the world, one sees that it is the purchaser who decides whether to buy as well as what to buy, in conjunction with their appointed agents – the chosen stockbrokers.

The second point is that since UK housing values have now reached very significant capital values, no-one can argue that purchasing a home of their own is not, in part, a capital investment as well as a practical one.

Buyers therefore need a service that has due diligence and can act in a similar way to the stockbroking industry.

This would mean a complete change for estate agency such that agents would need to start acting not just for sellers, as at present, but for buyers too. This needs to be done in a similar way to stockbrokers acting for those wishing to buy (and sell) shares on the London stock market.

Doing this would be a relatively simple but vital change which would allow house prices to follow ‘buyers’ inclinations more closely and thus enable the housing market to operate far more efficiently than it has been doing for several decades past.

For more detail about what needs to be done to effect this change and exactly how we can go about doing it please refer to our article headed ‘The Hendry Solution’ which explains all the primary procedures involved in this.

Of course these changes would need to be considered and acted upon in Parliament, if they are to be implemented by estate agents. The onus of achieving this must rest with our elected government which should therefore immediately start helping to resolve this crisis as part of their post EU-referendum work.

If anyone should require any further information about these key proposals, they would be most welcome to contact me/us.

Posted by:
Earlier article on our blog site: Full details of our proposals for properly reforming the UK housing market.

The best way to self-manage rising house prices in the UK

Are there no agents bothered about the current house price levels? No, and I’m not surprised, as they are mainly interested is getting the best price possible on each individual sale and in earning themselves commission based largely on this!

The government idea of taxing rising house prices may well scoop extra funds for the treasury but it can’t deal with the underlying market difficulties which beset the UK housing market. The problem is that nowadays, being able to simultaneously sell and also buy a house to move into is fast becoming a distant dream. Taxing all the transactions won’t help!

The only way to deal with this problem effectively would be to bring in agents that could act for each client both in selling their existing house and buying their next. Only in this way can price parity start to be achieved once again. It must be done by agents starting to advise their clients on relative value differences.

The old notion of estate agents simply having to get the best price possible is really only a partial business service. It is no longer adequate in this modern and data-centric world of ours.

Price disparities abound nowadays and these will need to be swiftly resolved in order to get the rate of completed transactions increasing and thus to build-up public confidence in current market pricing, once again.

Sole agents simply selling houses for owners was, of course, a turn of the century idea, commenced in the wake of the last world war. It is now long overdue for revision.

For this reason increasing the supply of properties to buy, by building relatively few new houses (percentage-wise), cannot deal with the current problem within the marketplace. This is because it’s a price-setting problem.

There are far better ways of dealing with the house-price crisis.
For more on this problem and for full arguments for a need for a change to estate agency law instead of this, please read:
Earlier article published on this blog site

Posted by: Peter Hendry, Housing Valuation Consultant

The Case of the Feathering of Lenders’ Nests First!

Yes, money lenders decide to relax lending criteria to allow for repayments by borrowers aged up to 85 years and no, this is not just a one night nightmare! To put it into layman’s language, “it’s a tail wagging the dog scenario” and it’s really happening!

The joke is that instead of helping those trying to buy later in life, as is inferred in the press article (link below), this will actually have the effect of making things worse, since it will cause more house-price inflation – not less.

It’s obviously a money-making exercise being promulgated by several if not most of the mortgage-lending institutions, promoted under the guise of helping more people to buy. How very dare they. 😉

Yes, banks and building societies are now beginning to advance mortgage loans to those whom are up to 85 years of age!

The effect will be that many of the already retired had better contemplate getting themselves back to work, if they’re going to even stand a chance of keeping up with the sort of price-increases on everything that this plan will help cause.

Some say; the real underlying reason for such a crazy policy is that there is already a huge black hole in the pension funding which is needed to make existing pension payments, and that the only way out is to make many more of us carry on working for much, much longer – but they don’t always tell you the underlying reason, do they.

Resourced from BBC:
Nationwide raises home loan age limit to 85 years

For more on this problem and for full arguments for a need for a change to estate agency law instead of this, please read:
Earlier article published on this blog site

Posted by: Peter Hendry, Housing Valuation Consultant

Banking governance, relating to the UK housing market, should always be both focussed and determined in monitoring the safe distribution of loans, using carefully constructed, industry-wide lending limits.
This should apply both to developers and to consumers, or the house buying public.

At present and in the wake of the failure of BHS and the continuing difficulties at RBS, the over-riding impression is that banking governors are failing to achieve this and are certainly failing to do so as far as the housing market is concerned. Some are not even attempting to limit loans connected with housing, resulting in unequal and uncontrolled escalations in prices across this particular market.

Without diligence concerning the considered and appropriate distribution of loans to responsible applicants, whether to business or by way of mortgages, the supply and demand curves across the whole housing market will continue to be catastrophically distorted, by condoning a business model that favours those entrepreneurs whom are able to acquire the largest loans. Those whom are not able to do this will thus always be the losers!

Until this vital aspect within the UK economy is adequately addressed and the rules re-adjusted, the existing lack of supply of required housing for those whom are UNable to afford the consequent prices, will continue.

So far, none of the political parties campaigning for appointment to a position of power and influence in this country seem to be including this, as being an essential criteria to be on their agendas or even in their manifestos.

Is the reason for this because the laws of competition themselves mean that if one banking organisation decides not to address this issue properly, and thus secures a business advantage, none of the other competing ones will willingly do so?

N.B. I shall be more than glad to amend this claim as soon as any currently active political party should become able to challenge their lack of effectiveness in this important area.

Posted by: Peter Hendry, Housing Valuation Consultant

Housing Market Policy Concerning Owned Property Is Also All At Sea These Days !

Unfortunately there was nothing much in the March 2016 budget to assist the housing market to recover from the historically extremely low volumes of house sales which we are seeing currently.

I’m afraid this article is therefore a bit of an indictment concerning our parliamentary system as a whole and the latest budget statement in particular.

Sadly, it appears that none of the political parties active within Westminster have the necessary policies to deal, effectively, with the parlous state of our ‘owned property’ in the UK housing market.

About the only thing going for us at present, seems to be the notional understanding (or presumption) of freedom of speech (and by extension the written word), that we all believe we enjoy and which still is supposed to be permissible; therefore I continue!

In a nutshell, the problems we are experiencing within the owner-occupier side of the UK housing market, need to be examined and overcome using better ‘organisational methods’ rather than going at them solely with financial tools or instruments. Unfortunately, all the governments seems to want to do is merely throw whatever financial tools and instruments they currently have at the problem and currently they appear to have none. They have demonstrated, time and time again, that this is the best they can come up with. Unfortunately, as is now clearly apparent, earlier applied remedies have not worked, will not work and cannot work.

So what is the alternative?
Again in a nutshell, it is to change the way in which those buying and selling property in the privately-owned housing market, go about marketing their houses.

A question: What’s wrong with the age old way of going about this (or simply using estate agents to sell houses)?
The answer is that the present method only services half of the transactional equation within the marketplace. In other words it only serves those trying to sell.
All those wishing to buy are left almost entirely to their own devices and must instead flounder around attempting to negotiate a fair deal in what is, in reality, a financial ‘forest’, an environment where to have to negotiate successfully, takes knowledge, experience and stealth. As most people do not buy houses regularly, buyers in this environment are rendered largely UNfamiliar with doing this and are thus largely UNprepared for what they will need to do, especially when it comes to deciding the appropriate price that one should pay for any particular property which may be available and which they may want to purchase currently.

How can this situation be changed or improved?
First of all it can and of course must be done in a cost-neutral fashion. Owing to the state of government finances, which are certainly stretched to say the least, a cost-neutral approach is clearly an essential requirement, if the necessary changes and improvements highlighted are to be successfully put into effect.

Secondly, it must be accepted that the old ways of doing certain things are no longer good enough for today’s ways of life. People need to see that these need to be improved.

The next question to be contemplated is exactly how best to go about improving the UK housing market?

Having spent the majority of my career in property surveying, advising landlords, tenants, buyers and also sellers over the years, I believe I have enough perception to know what the best changes are for achieving a transformation of the UK housing market from one of relative chaos, to a market which is understandable to and usable by all the players.
You will need to read on to gain an overview of how all this might be achieved.

Under my suggested changes the rules of participation would be more clearly apparent to all. The way the market would operate would become more economically perfect than has ever been the case before.

The brief details of what needs to be done to accomplish this are set out below, followed by more extensive details for those whom may be interested in delving much deeper into exactly how these proposals would function.

I welcome any questions or comments about the pros and cons of these proposals and I could be available to discuss these by prior arrangement, if that should be felt to be a worthwhile thing to do.

To me, the latest Budget Statement does not satisfactorily address these issues and falls short of dealing with what is urgently necessary for the good of the housing market and those hoping to participate in acquiring new or better housing for themselves in this country.

For more information on the best and only way to deal successfully with the current housing market problems (including helping countless numbers of households achieve better housing in advance of dealing with the bigger picture of planning for more residential property to cope with the increasing demand), please refer to the previously written “Hendry Solution”.

Earlier article published on this blog site. This gives full details of our proposals for resolving the price inefficiencies within the privately owned UK housing market itself.

Posted by: Peter Hendry, Housing Valuation Consultant

Added on 6th March 16:
A strong message to all house sellers

Here is our best advice ‘whilst’ the housing market continues to perform badly as far as individual sellers are concerned …

In order to overcome this, I suggest individual sellers can do one important thing. Change their stance when appointing their selling agent.

What each seller should do is find and appoint an agent that not only has a branch office in the area in which they are currently selling but also has one in the area in which they are intending to buy!

Each seller should then simply ask their agent to request their other office to forward all details of properties available in the buying area (even those not actually on the market with that agent).

Having viewed these and made a shortlist of the houses that are suitable to buy, you should ask the selling agent to help you to acquire the house you wish to move to, as part of the deal for selling the one you are moving from!

If your appointed agent is really worth their salt they would take this request seriously and help you to buy, using their local connections and knowledge – including price comparisons of course.

If they are not genuinely worth their salt however, it is clear you ought to find another agent that can do this on your behalf.
It perhaps ought to be realised that agents are not generally geared up to offer this type of extra service at present.

However, this is the way forward to unblock the log-jam of stalled transactions which are clearly evident across the whole of the UK housing market currently.

The way to achieve practical implementation:
1. Since the present arrangements for engaging estate agents to act for you are tilted very much towards them preferring to act in the capacity of you being a vendor-client, my proposal is first of all to find the house(s) that you most want to move to and in doing so, discover who the particular agents acting for those vendors are.

2. If one (or more) of the agents are multi-branch and also have offices in the area where you need to sell, instruct their local branch to sell the house you are moving from.

3. Then, ask that branch to liaise with the branch where you are planning to buy.

On the basis that the firm in question should collect fees from both ends of the transaction (upon successful completion), there is a greater chance they will represent you reasonably favourably, as far as the overall position is concerned.

The above is, in essence, exactly what the following paper proposes should be achieved by estate agents across the UK, with government help for them to facilitate this ‘better service‘.

Do let us know if you agree strongly (or otherwise) with these proposals as being a way forward for correcting the ongoing and moribund state of this particular market.

[The only way forward – for all Owner Occupiers.]

As is plainly obvious, there is still a crisis within the UK housing market and, despite all attempts to improve things, as reported by the Chancellor of the Exchequer, this crisis still isn’t being resolved.

Sadly, and it is being admitted, there is a growing crisis of lack of home ownership with only a projected half of dwellings expected to be owner occupied in the near future.

Contrary to this statement however, it is also being said that a symptom of this is that there aren’t enough houses being built to cope with the level of demand currently arising, resulting in increasing house prices? This is most odd. There’s more to this, much more, as I shall explain later. In the meantime I’m pointing out that these two positions are mutually exclusive ones, meaning that one of them (specifically the latter one), is patently wrong.

The suggestion that the resultant outcome from this is always going to be increasing prices for all is also flawed. Therefore doubling the housing budget, as is being announced by the government won’t resolve the crisis and to think so is indeed sheer economic nonsense. The correct view concerning this happens to be held by our shadow chancellor Mr J. McDonnell MP right now.

A lack of skilled builders, as currently reported by The RICS is a well-known and more pressing problem. Simply throwing money at this in the way the present government now reluctantly intend, by allowing increasing borrowing both by individual owner occupiers as well as by builders and developers, is a flawed and inadequate short-term policy, which is doomed to fail.

This policy has already failed in fact, since new private house building is now at a lower level than it was as long ago as the 1920’s !

By contrast I’m saying there is a remedy for this and that if it were applied, a solution to the crisis in the UK housing market would very swiftly be achieved.

In order to explain the mechanics of the solution I firstly want us to look, critically, at certain aspects of the current problem – and notice what has occurred in the past, in order to understand exactly how these problems are currently manifesting again now, and why.

During the most significant more recent housing crises, after the second world war, a similar situation arose in that there were insufficient houses available for the predicted and fast increasing population which was, perfectly correctly, being projected. At that time national debt was high (as now) and money was scarce (unlike as now). The correct and only solution to this problem (at that time), was for municipalities to get building more houses as fast as they could and as cheaply as was reasonably feasible. The building of huge numbers of new council housing was the outcome.

However, as we can see from later evidence, doing this failed to permanently resolve what has become an ongoing problem, insufficient housing for the level of demand being experienced (or an ongoing imbalance between housing supply and housing demand).

This type of imbalance arises too suddenly for the private construction industry to be able to react to it and build more houses in time to cope with the actual increase in demand levels. The result, from a purely economic point of view is: – rising prices. The effect of this, should in theory be the building of an increased number of new houses. Unfortunately what we are currently seeing is a failure of sufficiently increasing numbers of houses actually being built. Therefore, something is lacking. It must be that the current politico/economic model itself is lacking in some fundamental way.

What is causing it?

Having seen that simply building huge numbers of extra houses in the form of municipal homes doesn’t resolve the situation in the longer run, we are now trying to do it almost exclusively by using private house-building initiatives or private housing developers. This is not the first time this has been tried on a national scale since the 20’s and it won’t be the first time it will fail.

The problems we are now seeing are understandably slightly different to those of the post war era but are no less stressful and, it’s no less vital for them to be resolved. What we are seeing today is the monetization of housing and house building which is now largely being carried out by huge publicly quoted companies. The smaller builder has been all but squeezed out.

On top of this, the banks and building societies are aiming to take control by beginning to offer more and more by way of loans. Loans to builders to help them get building and loans to borrowers to help them buy more houses. Yet, the problem of insufficient numbers of houses becoming available continues whilst the prices themselves have become an added yet acute problem for everyone – except, please note, those in the business of lending money to the housing industry.

Healthy profits are currently being made by banks and the building societies right now.
Healthy profits are currently being made by building companies or contractors right now.
Healthy profits are currently being made by land owners themselves right now.

Yet, housing supply (meaning houses coming onto the market as being ‘For Sale’ is still falling well short of current housing demand and it’s also falling short of balancing projected or future housing demand.

My conclusion concerning this chronic dilemma, is that leaving the building of sufficient new housing to the financial institutions and the publicly quoted house-building contractors alone will not effectively resolve the crisis, any more than the municipal house building solution might have done in the forties.

For all the Chancellor’s giving of financial incentives to big companies in the industry and providing financial stimulation by way of increased borrowing capability to buyers; this isn’t working and it can’t work. Financial packages alone cannot resolve this crisis.

What is needed is a change in the way the housing market operates, a change to what is, currently, a very imperfect market.
Instead of simply trying to dish out more money and incentives in order to try and get the housing market to become more reactive to current and projected demand, we should change the way the housing market operates by making it more efficient, in itself.

It would only require changing the method of marketing houses, so that the BUYERS are served more efficiently than they are at present – or simply as efficiently as SELLERS are serviced at present.

This crucial change would make all the difference and would bring more buyers and sellers together in a new and more efficient market that would properly react to current and future demand, in a way that would satisfy the demand. This, in turn would facilitate the building of more and sufficient new housing without needing ever more mortgage finance.

It’s true, house building companies themselves, along with bankers and building societies would no longer make nearly as much money from the housing marketplace but I ask; what could possibly be wrong with that happening for a change?

No-one actually wants to have to borrow so much money that it’ll probably take their whole life to pay it off. So, watch out! …
WE are currently being sold the American model as being the only possible way to obtain a roof over our heads !
This is not America, this is Britain. It’s time we thought like the British and innovated some new and life enhancing ways to improve things. Ways that don’t involve primarily the banks and bankers making a killing first.

Getting estate agents (and financiers whom are supposed to be working to service the housing economy) to see things as they really are when it is in fact they themselves that have been applying the wrong economic arguments in order to suit primarily themselves, is very like trying to push water uphill. !!

The solution I now propose (and have been proposing for some time) is the only viable solution for resolving this housing crisis. It depends, for its implementation, simply upon the ability of sufficient others to want to challenge the autocracy of Britain’s financiers, by coming up with a solution that is more innovative than simply trying to throw more and more money at the problem.

For full details please read: The Hendry Solution.
Earlier article published on this blog site

Posted by: Peter Hendry, Housing Valuation Consultant

This page is our current ongoing one mirroring news stories dealing with the case for a substantial review of the way houses are generally sold across the UK currently.

Seen 5 Nov 15:
Estate Agent Today article
“Estate agents’ share prices hit by Countrywide’s tumble”
Go to: Estate Agent Today article

– –
Seen 29 Oct 15:
Land Registry says 10% slump in sales but prices up 5.3% over a year:
10% slump in sales but prices up 5.3%.

– – – – –
Earlier Articles of Note:

Seen 26 Oct 15:
Recent Kate Faulkner article:
The stresses and strains of being an estate agent – Part 1

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Seen 7 Oct 15:
The Guardian. Affordable housing: David Cameron’s starter homes plan is not the solution
Affordable housing: David Cameron’s starter homes plan is not the solution

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Seen 26 Aug 15
Shelter Policy Blog article
Non-starter homes

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Seen 24th July 2015:
The Telegraph recently published an article about suspicious money finding its way into in the London property market.

Foreign criminals drive up house prices by laundering money into property

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Seen 22 July 15:
The Guardian. A recently released report from economists at the accountancy firm PwC predicts that house price rises of 5% p.a. and a shortage of affordable homes will force the increasing size of required initial deposits to lock huge numbers of people out of the property market completely.

Report predicting prices will lock people out of the housing market
Report from economists at the accountancy firm PwC

– –
Seen 11 November 2013:
House prices in astonishing leap across country claim

– –
Seen 14 Oct 13:
“In the period 1997 to 2007 significantly more than a million housing transactions took place each year in England & Wales. In the period 2008 to 2012 the number of transactions has not been above 662,000 with numbers averaging 640,000 over the last five years.” These numbers quite clearly demonstrate how constrained the market has become, with many would-be borrowers citing the inability to save the level of deposit required by lenders as their primary reason for not entering the property market.

– –
Seen 14 Oct 13:
“In the period 1997 to 2007 significantly more than a million housing transactions took place each year in England & Wales. In the period 2008 to 2012 the number of transactions has not been above 662,000 with numbers averaging 640,000 over the last five years.” These numbers quite clearly demonstrate how constrained the market has become, with many would-be borrowers citing the inability to save the level of deposit required by lenders as their primary reason for not entering the property market.

– –
Also seen Fri 11th Oct 13:
Chris Leslie, Shadow Chief Secretary to the Treasury, said: “If ministers are serious about helping first-time buyers, they should bring forward investment to build more affordable homes.

– – – – –
Earlier Bibliography Still: showing knowledge of the build-up to the present crisis.

(including online articles involving discussion amongst estate agents themselves generally)

The Hendry Solution:
Earlier article published on this blog site

Posted by: Peter Hendry, Housing Valuation Consultant