As a recent re-entrant to the property market (in the SE) – and having worked through the credit crunch – I am quite simply shocked at how asking prices look remarkably similar to the highs of 2006/2007…but the real problem is how these prices seem to “stick” with vendors. The house-market has all the hallmarks of a broken, crooked ill-functioning system. Price setting is “opaque” and price discovery was (until very recently) hard to obtain.

A quick look at property-snake yields dwellings that have been on the market for an eye-popping 300+ days..sitting at 2007’s asking price…which the agent undoubtedly used to reel in the vendor, playing upon their greed and ignorance of macro-economic conditions, coupled with the bonus of getting a %-based fee for the agent – if it does get flogged for an inflated value.

Much talk seems to take place about what can/needs to be done to “reform/fix” this market, and this discussion needs to take place. Clearly – any market broke to this degree is in need of some fundamental changes.

For starters – if agents worked off a flat fee (non % based) it would remove part of the agent’s incentive to see sold prices raised-up beyond fundamental values. Secondly – if the “sole-agent” clause was made redundant – it would naturally force agents to directly compete and again remove another incentive for agents to inflate asking-prices (ad-infinitum) to win business. Profit would be made by volume and “turnover” and thus the upshot of all this would be to provide liquidity to the housing market…at realistic prices…which is what any “market” is supposed to do, in the first place!

Where I disagree slightly with the author of the article above is that a properly functioning market cannot (almost by definition) be insulated from events which happen in the wider market and economy..such a circumstance is known as a “bubble”. I’d rather have a larger degree of market forces in control of my (and by extension – all other) property value – rather than a 19 year-old agent with no qualifications simply ramping up prices as the answer to any and every shock in the economy.

House price shocks (up and down) would be much more quickly translated to asking prices…and the market would function somewhat normally (relative to how it currently functions).

In short – the agent needs to be cut out (with the help of proper regulation). And I hope this web initiative takes off…as the only way to have a proper market – is to have a proper market-maker!

Those estate agents (or owner-occupiers not employing any) who fail to understand this are courting disaster if they want to move before Christmas.

The remaining ones rather suggest that you need to have a session explaining the basics of valuation. Then all will become clear. We are trying to be helpful by responding, as we imagine you are hoping for a response.

“WE, at property-match, are aiming to help the market by offering a better way in which to buy and sell houses by trying to ensure that houses placed online with us, have been properly valued beforehand.”

“Obviously we would first encourage you to obtain a valuation of your house, based on Land Registry data. We can help you to order one of these before you actually start the whole marketing process.”

A few questions, if I may:

What will the cost of this “valuation” be?

Who will attend the property in order to “VALUE” it?

What guarantee will the “valuation” carry in terms of
a) accuracy?
b) effecting a sale at the “valuation” price?

What comeback will the vendor have if the “valuation” still results in the property achieving a lower sale price?

Is the “valuation” accredited by any housing industry professional body ie. Royal Institution of Chartered Surveyors?

How does the “valuation” actually determine the “value” of MY property when it is based upon Land Registry historic information of OTHER properties?

What if a vendor does not want this “valuation”? Will you still market their property? At what price? THEIR required price?

Can the “valuation” you recommend be used for mortgage purposes? If not, why not?

You use the phrase “proper valuation” several times in the above blog. How does the “valuation” you are recommending comply as a “proper valuation” as per RICS definitions?

I am sure that I will think of other questions – however in the meantime I look forward to your response to those above…

This article is actually about facing the music and tuning the prices we are being asked to pay back to true market value.
I’m suggesting that instead of making more money available to reach the old prices, a more realistic approach, of tuning the prices to what we can each actually afford may be the better solution.

What do you think about that please?

Gold is World tradable but houses in the UK are not.

Investment in houses, and attendant fluctuations in house price levels, is a far more complex model to understand than gold commodity prices. Here are some of the main factors needing to be outlined:

The number of mortgages taken out has a significant affect on consumer spending and hence house prices themselves.
Higher house prices lead directly to more consumer spending as people feel wealthier.
However, the converse is also true, a reduced amount of mortgage borrowing has an exponential (or skewed) affect on consumer spending.

To explain in more detail:
1. An increase in the number of mortgages approved results in an accelerated level of consumer spending, and hence house prices will increase disproportionately.
2. Reduced consumer spending has a more marked affect on house turnover than on house prices.

I advocate that it is this relationship that needs to be adjusted, so that fluctuations in house turnover levels are reduced. This should be done buy allowing house prices to take more of the strain at the expense of preserving levels of house turnover.

3. If we can maintain a more steady turnover in house purchases, consumer spending will be preserved, as a lot of other purchases are generated through a steady turnover of house sales.

If house prices continue to increase, more equity is withdrawn by owners increasing their mortgage borrowing. This accelerates consumer spending but eventually there must be a time of correction, as house prices pause (or even fall back) until enough wealth is created by new entrepreneurs in the populace, to allow them to raise new mortgages on houses they may like to buy. This is where first-time buyers come in, as an absolutely essential ingredient to the maintenance of stable house prices across all areas. Without first-time buyers in every specific area, that area will eventually suffer from both price and turnover stagnation.

In essence, consumption levels in the UK are stimulated both by HIGHER house prices and the extra spending associated with moving house.
However, these consumption levels are more significantly affected by a SLOWDOWN in the number of houses bought and sold.

This means that it would be better, for the economy, to maintain a steady throughput (or turnover) of houses, than it would be to keep prices high and then suffer repeated and significant reductions in house turnover, as a direct consequence.

I am in touch with my local MP about this and would, in the meantime, invite both press and the general public’s comment about the benefits of taking up this argument to help to stimulate much needed growth in our economy.

One thing worth saying is that if interest rates should rise in the way you mention, not only would house-prices be adversely affected because of the cost of borrowing on mortgages but also gold prices themselves would be adversely affected too because people investing in gold would then be able to get a better rate of return on their investment(s) from the markets and from banks or building societies.

There’s not much sign of that happening in the short/medium term right now, so gold and houses are both good investments currently; provided the true market price is paid, not more.

The thing about gold is, the market price of it is well known. What makes investing in property a little more complex is that market prices are not necessarily those being quoted by the seller (or by their estate agent).

Careful analysis both of the current market price in the locality concerned and an ability to adjust for advantages and disadvantages between the comparison sale and the property being ‘valued’ is essential.

For more information, please see our advice page on:

http://www.property-match.co.uk/match2/Asking_Price.html