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HappyNudist

Yesterdays Nationwide Figures

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Too much traffic on the site tonight so haven't had time to read all the posts. Apologies in advance if this has already been said.

Look at your average EA. Fixed costs. Rates, Leccy Bill, staff, advertising etc.

Ok, so advertising they can cut back on - small papers and such but big sites like Rightmove? No way. Ask yourself, how do you look for a house? It's rightmove. There are other players sure. I have no idea whether Globrix is free for EA's but I do know that I have never looked at it to search for property, nor does anyone I know.

There are others of course. Some, if not all of them, will cost money.

Rates - can't bugger about there

Leccy Bill - Likewise

Staff - well the basic is...well...basic. That's the whole point about commission. It bumps up a sh1t wage to something you can live on

Now pick an EA in your area, click on the rightmove options and show ALL their properties, let's just assume for the moment that you have Prpoperty Bee installed - what do you see?

A huge 'register' of properties for sale - but volume changing hands? No.

And without volume there is no income stream. 1.5% to 2.5% on a sale sounds a lot, but you really do need quite a lot of them to make money. That volume isn't there. It won't be for some time. And the real problem now facing your average EA is how to get someone to drop the price in the face of positive headlines and positive figures.

I know someone who turned down 8% below asking today as it was 'cheeky' in the light of the 'current market'

8% by the way is around 2005 prices for this property.

So EA's are now fooked - how to get volume of sales with vendors who refuse to drop price?

I speak as an ex EA. To my eternal shame...

Let me illustrate further.

http://www.rightmove.co.uk/property-for-sa...ncludeSSTC%3Don

Yours for a guide price of £175k

http://www.rightmove.co.uk/property-for-sa...ncludeSSTC%3Don

Yours for £175k - but has extra bedroom

http://www.rightmove.co.uk/property-for-sa...ncludeSSTC%3Don

Yours for £160k, still has 3 beds

http://www.rightmove.co.uk/property-for-sa...ncludeSSTC%3Don

Yours for £135k - same as the above

Ok, they are all quite ghastly. But how do you convince the owner of property 1 to reduce the price? Given that others haven't sold for less?

Edited by HappyNudist

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[sNIP}

So EA's are now fooked - how to get volume of sales with vendors who refuse to drop price?

Interesting post makes good sense to me

IMPO it can't be long before we see the next leg down, the low tax, low IR and high Gov. spend cannot continue into the winter.

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Ok, they are all quite ghastly. But how do you convince the owner of property 1 to reduce the price? Given that others haven't sold for less?

Take them to view the other properties. Bring a TV crew to document the lead-up, viewings, and follow-up and you have HPC property-porn ;)

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They won't drop prices. Greed sets in and people ask for top dollar. The same people won't pay top dollar though. No they expect a huge discount on everything as its a terrible economic time out there, so I should expect to get one.

Makes me laugh really. Distorted markets of any kind are always full of fools lagging the trend or falling for the falsehoods.

The easiest cons are based on the same principles. You show one person winning and all the others see a game they too can only win, so everyone jumps onboard. Next thing you know hundreds of people are standing around scratching their heads as to how it was possible they lost money.

I see this housing 'investment' piece as such a giant con trick.

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I was reading a post here a few days ago that real estate transactions were down an astonishing 75% year over year. But the price was up 1% of something over the month. So the establishment was trumpeting this as a great victory that prices were rising.

But you are right if volume even remained 50% below the peak, I would guess 50% of estate agents will eventually lose their jobs. Of course that will play out over years, a gradual grind down.

All they've really done is stop the price falls by freezing the market.

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All they've really done is stop the price falls by freezing the market.

Nicely put! That's exactly right. Now a couple of years ago this level of blatant ramping would have got the massed hordes out snapping up property. Only problem now is that an awful lot of property on RM has been on for absolutely ages (1yr plus) for the simple reason that it's too pricey - but they won't drop the price because of greed and the EA's have lost their most effective bargaining tool in persuading them to do so.

Given that mortgage lending is still hard to come by and expensive unless you have a good deposit (starting at 25%) then I don't see the market picking up.

On the plus side - the banks are going to use this rise and the associated ramping to offload their repo's. Expect a flood coming on in the next 6 months.

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We know that the buyers cannot get the finance, we also know that despite the slowly growing number of approvals that the BBA at the weekend said :

it was "also worth noting that the only people lending are banks", Ms Knight added.

"Building societies can't do it due to their business model and they can't get access to funds as easily."

It was also clear that many borrowers were becoming "stuck in chains" when trying to buy somewhere to live, she said, meaning banks were "granting more mortgages than are being taken up".

We know that :

The number of homes recorded so far as having being sold in May is just over 14,000. Down from 63,000 in May last year and 106,000 in 2007.

And we have also been told recently:

UK house prices (asking) have stopped their recent 'dead cat bounce' according to Miles Shipside and his team at Rightmove. Estate agents now have on average seventy properties each on their books, and are only selling ten per month according to RICS...

However, this RICS contention is not supported by recorded data. With only 35,000 property sales a month, according to Land Registry, and the head count of agents being circa the same this would suggest that agents are in fact only selling on average one property per month.

For all the ramping and the hype , for all the pumping of the dead cat with QE / bail outs / etc etc.....as one paper said last month....

The mainstream media will generate plenty of opinion today suggesting a 'bottom' of sorts has been reached by the housing market. With transaction numbers at lows not seen since the seventies and mortgage lending 60% down year on year this would be a premature assumption when mortgage lending and sales transactions suggest an undeniable fact; the housing market is in fact dead...

Miles Shipside RM's director has been saying since the start of the year that sellers need to reduce 25% .

He has said a few months ago as ASKING prices started to rise :

The latest release of Rightmove's house price index shows asking prices on UK property rose 0.9% this month compared to last month.

The report admits that agent's are being forced to up initial advertising prices to win new instructions, amid the fierce competition for the few quality properties that are currently being put onto the market.

That makes the asking price rise, for me, more like bad news than good news. I understand that agent's are trying to survive in a difficult market, but we need to firm out the price drops that we have had, before we can ascertain if they are enough to bring the market to bottom, and accelerate any further drop that may be necessary

In short, by humouring unrealistic vendors over asking prices, agents may be doing nothing more than prolonging their own misery.

The report also said that lack of mortgage availability is hindering market recovery as sellers who have dealt with the market reality and drastically dropped their asking price are faced with buyers unable to obtain finance. Rightmove commercial director Miles Shipside said:

"Some sellers are still pricing wishfully high, though it is encouraging that elements of the market have adapted relatively quickly to find a new price floor at a discount of around 25% from peak. "

"Until banks get their own houses in order, the active minority of sellers and agents who have drastically adjusted pricing will remain frustrated by the limited functioning of the financial services sector."

So, after its initial optimism the Rightmove index enforces the realisation that the UK property market recovery hinges on two things: vendor realism and mortgage availability. The latter more than likely hinged on a recovery to the wider UK economy, which in my opinion is also necessary to increase buyer numbers sufficiently to bring vendor realism

In the last RM Index he said:

A large rump of less saleable stock remains, with average stock per estate agency branch remaining stubbornly consistent at just over 70 for the last six months. We would normally expect this to fall, given the lack of new stock coming to market, and the pick-up in sales and mortgage approval figures. This confirms reports that fresh stock of the right type is saleable if priced correctly. However, older stock is far less saleable if it does not match current mortgage lending criteria.

We report a further 62,519 price reductions this month of 2% or more in Rightmove’s Property Deal Weekly, compared to 59,072 in our May report. Given lenders’ tight lending criteria and their raising of fixed rates, the pool of potential firsttime buyers who can mop-up this less saleable stock, which includes repossessions, is reducing further.

With limited funds to lend, rationing of mortgages by raising interest rates and requiring large deposits is likely, as demand recovers with the increased number of sales.

.

Of course eventually prices are going to have to come down .......take a look at the brilliant image Dr Bubb provided us with yesterday for the next stage of this crash, whether you like Dr Bubb or not I like the image and what he said further on....

HPC Link

the higher the sentiment swings, the bigger the disappointment and disillusion when it

(eventually) swings back the other way.

When prices are speeding downwards in a few months time, after the rug pull, I will remind people that

the very painful next stage of the crash, would not have been fully possible without the huge surge in false

hopes that we are seeing now.

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I am thinking on these lines from atleast 3-4 months, any positive news about housing market is not at all good for EAs. Few of the EAs have somehow convinced the sellers to reduce the prices to realistic levels, but any positive news .. spin the seller heads and they don't agree to prices... its both sellers and EA loss....

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I'd agree with the Op... raised expectations makes it more difficult for agents to manage price aspiration down leading to new properties coming on at higher and higher amounts..... soem agents and some people will price more reallistically.. but I expect they will be in the minorty....... at some level though those agents who have survived thus far will continue as in the same way that people cannot survive 6 months with no income nor can agents... so 18 months in I suspect those that remain will continue to trade.... and I suspect they have only survived either becasue they have priced some properties more reasonably or have sold really hard or got lucky...... agents I suspect will continue to try and dampen down price expectations.. they'll get lucky in some cases but not in others..... I remain far from convinced that the recent reported price rises will see a mass of housing coming onto the market.

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A lot of the EA's can't adjust to this new market as they have only ever know rising prices.

Like the dinosuars, they will become extinct.

If volumes are back to pre-1998 levels ,then it follows that you only need the same number of EAs as you had then. Maybe a 50% drop ? Maybe even less, given the efficiency of the internet ?

If the RM guy is saying prices need to reduce by 25%, then you know the market is only going to go one way.........

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I am thinking on these lines from atleast 3-4 months, any positive news about housing market is not at all good for EAs. Few of the EAs have somehow convinced the sellers to reduce the prices to realistic levels, but any positive news .. spin the seller heads and they don't agree to prices... its both sellers and EA loss....

I think the theory by behind the "green shoots" spin is actually to talk up house prices in the hope that banks will lift LTV's and not demand a huge deposit from buyers in anticipation of further drops. Its this that has brought the market to a halt

Clearly the banks are not buying it, and don't have anywhere near the funds to lend.

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