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Alfie Moon

Estate Agents - Recovery And Price Rises Vs Transactions

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A Daily Telegraph article within the last 10 days or so reported that the journalists e-mail box was being bombarded by Estate Agents cheering the MoM house price rise reported by the Nationwide Index. Apparently the Estate Agents were 'over the moon' that house price rises had returned and that this now meant a full scale 'recovery' was in progress. Presumably the same will happen with the Halifax report today.

When will Estate Agents get into their heads that house price rises (particularly on such l;ow volumes) is extremely bad news for them? When will they stop equating house price rises with recovery? When will they start to realise that house price rises in the current context of the economic environment and cycle of the property market will only strangulate and kill off any chance of a sustainable recovery for the property market leading to a deeper and longer house price crash in the long run? When will Estate Agents start to understand that they need to equate recovery with rising transactions, and that a sustainable rise in transactions will only come with falling prices - and that they need to actively encourage price cuts?

See the following:

http://www.estateagenttoday.co.uk/News/Sto...e=news_features

Your Move group cuts its losses

Wednesday 5th August 2009

LSL today appears to report a similar story to Connells, with revenue down but cost cutting becoming the order of the day.

However, while group profits were up, the estate agency operation – Your Move, and Reeds Rain – still made a loss, of £0.9m. This was down from £5.2m. The estate agents handled 35% fewer house sales year on year. Costs in the estate agency division were reduced by 27%.

This morning, LSL reported a 17% increase in group profits for the first half of the year from £9.3m last year to £10.9m. This was despite a large decline in revenue, down from £93.1m to £74.1m.

Surveying profits in the group were described as resilient despite a 48% fall in mortgage approvals.

LSL has managed to reduce its huge debts, from £18.6m to £43.1m.

Roger Matthews, LSL chairman, said: “The Group is well placed to build on the first half's performance during the remainder of 2009 and to deliver significant growth when market conditions improve.â€

But he also warned that market conditions remain uncertain due to the continued shortage of widely available mortgage products, particularly for first time buyers.

With the so called recovery they have achieved 35% fewer house sales and seen a 48% fall in mortgage approvals.

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June 2009:

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.

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when? only when the last few buyers take their ball home and transactions are down to 2 a month. until then, they'll probably be locked in a spring 2007 mindset, right up to the point where the furniture goes and the windolene appears

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"When will Estate Agents get into their heads that house price rises (particularly on such l;ow volumes) is extremely bad news for them?"

Think of it like this. From 2000 odd to 2008 house prices rise estate agents do well. Then in 2008 house prices fall and estate agents do badly.

From this some estate agents might come to the not unreasonable conclusion that rising house prices are good for estate agents.

Estate agents are not rocket scientists. A high IQ or advanced appreciation of economics is not necessary for the job. That is not to say it isn't a skilled job - but the ability to perform deep thinking analysis is not a fundamental requirement. Being able to persuade people to do what you want them to is much more important.

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I would imagine that they (and many other people) believe that rising prices will bring the sellers out. All the people that bought post 2004 and have not yet seen prices rise enough to pay off their huge credit card bill, car HP and MEW for a boob job. If you can persuade them that prices have gone up enough its now time to sell.

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