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Market Comments - Ask The Expert
Q. To what extent are estate agents to blame for the current
crisis in the housing market?
Q. Why do estate agents persist in sending me details of properties
that I can’t afford, and don’t match my criteria?
Q. After all the doom and gloom, we now hear that prices are
expected to start rising again. Who and what are we supposed to believe?
Q. Are we really seeing the end of the British love affair with
property, as a leading national newspaper suggested recently?
Q. To what extent are estate agents to blame for the current crisis in the housing market?
A. Firstly, there isn’t actually a “crisis” at all. The housing market is undergoing a difficult period, and in some parts of the country, and for some groups of people, those difficulties are fairly major. But, not everywhere, and not for everyone. There are millions of homeowners out there with entirely manageable mortgages, and no plans to move house anytime soon. For them, there is no crisis whatsoever. Then again, the drop in prices is actually a godsend for first-time buyers – not to mention anyone planning to trade up to a larger property.
As to whether estate agents are partly to blame for the current problems, I’m afraid to say that the answer is a resounding “No.” Obviously, agents weren’t responsible for the credit crunch. The banks managed to do that all on their own. Nor – contrary to popular belief – were agents anything but marginally implicated in the price explosion of the preceding 10 years. The Government, yes. The media, certainly (remember all those TV programmes extolling the virtues of property speculation?). The lenders, who threw huge mortgages at practically anyone with a pulse, most definitely. Even - let’s be honest - largest sections of the Great British Public, with their insatiable desire to make a quick buck. All of these bear some responsibility for the boom that preceded, and led to, the current slowdown.
But estate agents? No. Can we sell a house for more than someone is prepared to pay for it? No. Can we do a “hard sell” on anyone and make them buy a property they don’t want and can’t afford? I don’t think so. Do we encourage gazumping by persuading vendors to renege on an agreed sale that’s already in progress, in favour of a marginally higher bid which might (or might not) materialise a few weeks further down the track? Hardly. After all, although we are legally bound to try and get the best possible price for our clients, there are all sorts of reasons why a higher offer may not necessarily be a better one. Besides, remember we only get paid when a sale actually goes through.
So there we are. Of course, as in any other industry, there are both good and bad estate agents. But collectively responsible for all the current woes in the housing market? ‘Fraid not!
Q. Why do estate agents persist in sending me details of properties that I can’t afford, and don’t match my criteria?
A. This is a complaint often levelled at estate agents, and on the surface, I accept that it might be annoying – particularly when you’ve gone to all the trouble of detailing your requirements.
Nevertheless, things aren’t always quite as simple as that. The fact is that while people may start out with a clear idea of what they want in a home, this can change quite quickly once they actually start looking - for all sorts of reasons. People’s individual circumstances may change. They may realise that they need a different type of accommodation after all, or they may decide that another area might be more suitable. Very often, they may simply decide to breach their own self-imposed price limit, if they see something that they particularly like. Most of us have done that at some time or another.
Experienced estate agents understand this. It’s not that they haven’t taken on board what they have been told. Nor is it a case of trying to push an applicant into buying something bigger than they need. It’s simply a recognition that, human nature being what it is, people often change their minds. I personally have lost count of the number of times that a buyer has absolutely insisted that they are only interested in, say, two-bed bungalows in one particular area - only to end up buying a three-bed semi somewhere else entirely. By the same token, I’ve also known instances where an agent has scrupulously observed a purchaser’s stated preferences – only to see the same person end up buying something completely different through another agent altogether!
Agents will also sometimes send out details of more expensive properties because they are aware that the sellers concerned might be prepared to consider offers.
All this aside, however, if you really don’t want to see any properties outside your search criteria, then you need to make this absolutely crystal clear right at the outset.
Q. After all the doom and gloom, we now hear that prices are expected to start rising again. Who and what are we supposed to believe?
A. I assume you’re referring to the recent report from the National Housing Federation, the body that represents housing associations across the country, which concluded that prices are likely to rise by some 25% by 2013.
In more detail, this 5-year forecast - based on research carried out on behalf of the NHF by the highly reputable Oxford Economics organisation – predicted that prices would fall by 4.4% during the current year and by a further 2.1% in 2009, before recovering in 2010 and starting to rise again by 9% in 2012 and 2013. According to these figures, increased demand and falling supply are expected to push the cost of the average home in England to £274,700 in 2013. The report points to the fact that people are living longer, are delaying getting married, and are more likely to get divorced – all factors that increase demand for property at a time when only 75% of the new homes needed each year are currently being built.
This of course contrasts dramatically with the dire predictions of property market meltdown that seem to have been the staple fare of the media over the past 6 months – and just goes to show that you shouldn’t necessarily believe everything you read in the papers. It also comes as a timely reminder that economic data can be interpreted in all sorts of different ways.
But, who and what to believe? Well, certainly no-one can accuse the NHF of having an interest in talking up the market. Their only agenda might be to try and pressure the Government into accelerating the new-build programme, with particular emphasis on affordable housing.
At the end of the day, perhaps there’s only one thing we can be sure of in all of this: whatever happens in the short term, as a long-term investment bricks and mortar are as safe as houses!
Q. Are we really seeing the end of the British love affair with property, as a leading national newspaper suggested recently?
A. The short answer to this is “No!” Yes, I know that’s what you’d expect an estate agent to say, but all the facts of the case – not to mention the lessons of recent history – bear me out.
Obviously, house prices are currently undergoing a significant – and many would say long overdue – correction, given added impetus by the credit crunch and other economic factors. This was confirmed recently by the latest figures from the Nationwide, which suggested that average prices fell by 2.5% during May – the largest recorded monthly fall since the building society began publishing its index in 1991.
However…it’s important to maintain a degree of perspective on these things. The fact is – as the Nationwide themselves reminded us – prices are still 5% higher than they were 2 years ago, and 10% higher than in 2005. And in any case, such national figures mask a significant degree of regional variation. In some areas of the country, prices are reported to be holding up very well, and, according to the National Association of Estate Agents, a degree of stability seems to be returning to the market as a whole.
Of course, the press in particular are full of dark forebodings, based on comparisons with the last period of falling prices, in the early 1990s. But again, the Nationwide point to a number of reasons why today’s borrowers are better placed to weather the storm – from the fact that fewer homeowners bought at the top of the market than last time, to the tendency of today’s borrowers to put down larger deposits. All in all, they conclude, such factors “should ultimately lead to fewer overstretched borrowers, and hence a more stable and sustainable market.”
There is no denying that confidence in the market has temporarily been dented. However, the underlying economic factors – low unemployment, historically low interest rates and, above all, the insatiable demand for property – remain. In the long term, bricks and mortar remain just about the best investment you can make – whatever the papers say!
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