Jun 272014

The main point to raise is that calming the housing market is not just a question of doing accountancy tweaks.
It’s how the market is managed that needs the tweak.

There’s a problem with the estate agent instruction-gathering machinery.

The thing is, agents are all too willing to scoop up new instructions in competition with each other, irrespective of whether the client wishes to ask too high a price for the property being sold in the prevailing market, taking account of relevant locational considerations. This is a continuously inflationary approach which has been built into the housing market for decades but need serious revision.

The problem is, there’s a cost for having too many over-priced houses on an agent’s books and this has to be spread across all the other vendor clients. That’s because of the no sale - no fee method of charging which is used. In addition, the cost of maintaining this extra sales data on the various portals does add up and is cumulative. This fundamental problem is not dealt with by tweaking the accountancy of the housing market.

It has been noted in recent media coverage that it’s the successful sellers, the ones who price their properties realistically, that are subsidising the cost of all the unsuccessful sellers, whose properties are overpriced and languish on the market for weeks at a time! Also a significant number of these vendors eventually give up altogether causing even further financial loss to the agents, as well as feeling they have had a poor service from them!

Agents should ask themselves, how many vendors would be happy to keep their property on the online portals for weeks on end if they were the ones whom had to pay for the cost up front, whilst knowingly trying to achieve an unrealistic price for their property as compared with everyone else.

What’s even worse is the practice amongst estate agents of competing with each other by chasing each prospective buyer to the extent of hounding them to make a decision to buy what ‘their particular client’ is selling before it is too late. This is basic arm-twisting and is patently bad practice, especially when the house in question either stays on the market or comes back to the market rather quickly afterwards.

Though agents appear to be trying to help the buyer, really they are trying to effect a sale on behalf of the vendor. This is the biggest turn-off for buyers as it effectively destroys any trust between buyers and estate agents and is therefore seriously counter-productive. This whole model of how best to serve buyers, whilst acting on behalf of sellers needs urgent and fundamental revision.

The Bank of England FPC’s latest proposals to re-unite the two-pace housing market are unlikely to achieve that objective.

Forgetting interest rate rises and MMR restrictions for a moment, the situation described above clearly points to the need for a complete revamp in estate agents’ core practices? If that happened we would all begin to see a new, better and more vibrant housing market in this country.

The definitive way for estate agents to achieve such a game-changing move is fully explained in our earlier article written by a retired estate agent having many years experience in the sector.

Is the government of the day likely to be doing anything much about any of these issues any time soon? “I fink-nottle!” he says.

The views of firms or individual estate agents themselves are sought for moderation and online discussion here please?

Posted by:
Earlier article produced and updated: Full details of our proposals.

Jun 122014

Here’s the common misconception:
Rising house prices are forcing people to have to borrow more? Wrong!

It’s borrowing (or to be precise, being able to borrow more to pay more) that results in rising house prices!!

Debt resulting from such higher house prices could actually destabilise our nation’s economic recovery.

That’s why this problem requires to be resolved.

Our ‘reasoned‘ conclusion and the solution is briefly: -

That estate agents were never originally intended to just sell houses. Their original role was in fact to manage estates.

What they do now is too much of an abridged historical agent’s role and this has become a major part of the current problem. They have become too specialised, by concentrating mainly on trying to get the best price for each vendor in what are ever changing economic circumstances.

The recent house-price increases across the housing market flow from a lack of clarity about what the true state of the market really is coupled with an inappropriate level of available mortgage finance.

Whatever the circumstances the Government owes it to us all to be clearer and more explicit about the action they are taking to stabilise the housing market and the effects they expect such actions to have on the market.

Instead it looks for all the World to us that they are tilting towards using the housing market to help get the whole economy going again; basing this on re-floating the housing market at pre-2008 prices!

The problem with this idea is its effect, which is extremely inflationary for the housing market just at a time when most people can no longer afford to pay such high prices; unless they decide to borrow very substantial sums of capital in order to do so.

If this policy should fail, those who have relied upon it and invested heavily in it, buying-in at the increasingly eye-watering prices currently being set, will end up loosing their life savings.

Our advice is that anyone thinking of risking their life savings ought to be made fully aware of what the stakes are before they consider buying-in because believe it or not, house prices do go down as well as up.

Although The Mansion House speeches of 2014 go some way towards dealing with the recent house price spikes, more needs to be done before this government leaves office in 2015.

It is clear the Government needs to apply non-monetary policies (in addition to monetary ones) to stabilise house prices at levels which most working people can realistically afford.

As well as restricting high loan to income, high loan to value and extended term loans, non-monetary measures concerning the methods used by agents to leverage house prices need to be considered for early implementation.

The reason is that the housing market is still too imperfect to be able to function correctly when our country is emerging from a downturn.

Contrary to popular belief it’s not simply about matching demand with supply. That is only true where markets are perfect ones and the UK housing market is very far from that, as most economic commentators will readily appreciate.

Full details of what needs to be done to return the housing market to ‘horizontal‘ once again and start generating an appropriate level of turnover for both house-owners and the estate agents working for them may be read in our earlier article:

Posted by:
Earlier article produced and updated: Full details of our proposals.