Estate Agents Losing Their Faith

[Realistbear]

http://www.bloomberg.com/news/2010-07-19/u-k-real-estate-agents-are-losing-faith-in-house-prices-chart-of-the-day.html

U.K. Real-Estate Agents Are Losing Faith in House Prices: Chart of the Day

By Scott Hamilton and Anthony Feld - Jul 19, 2010

Play Video

July 19 (Bloomberg) -- Poppy Trowbridge reports on the glut of U.K. homes coming onto the market and the prospects that price gains of 7 percent since January will be wiped out by year end. (Source: Bloomberg)

U.K. real-estate agents are losing faith in the outlook for house prices, signalling values are set to fall this year, according to KBC Peel Hunt.

They should have faith in the HPC and see higher volumes at lower prices brings in commissions.

[Mr Yogi]

Once estate agents cotton on to the idea that lower prices = more sales = survival then they will be the main driver of lower asking prices.

I remember in the early 90's when estate agents would turn down instructions if they felt that the vendor was being unrealistic in their expectations. EAs need quick turnover - not properties sitting on their books for months costing money to market but bringing nothing in.

1% of something is a lot more than 1% of fook all!

Edited July 20, 2010 by Mr Yogi

[@contradevian]

Once estate agents cotton on to the idea that lower prices = more sales = survival then they will be the main driver of lower asking prices.

I remember in the early 90's when estate agents would turn down instructions if they felt that the vendor was being unrealistic in their expectations. EAs need quick turnover - not properties sitting on their books for months costing money to market but bringing nothing in.

1% of something is a lot more than 1% of fook all!

Some EA's I gather have additional fixed charges for advertising on top of their commission.

[Mr Yogi]

Some EA's I gather have additional fixed charges for advertising on top of their commission.

Not while the market was booming, they didn't!

That some have now introduced such policies speaks volumes about their confidence in making sales in the current constipated market.

Syrup of figs is needed and estate agents are the guys who will administer it. Their very survival is at stake.

[Pent Up]

Once estate agents cotton on to the idea that lower prices = more sales = survival then they will be the main driver of lower asking prices.

I remember in the early 90's when estate agents would turn down instructions if they felt that the vendor was being unrealistic in their expectations. EAs need quick turnover - not properties sitting on their books for months costing money to market but bringing nothing in.

1% of something is a lot more than 1% of fook all!

Estate agents are the ones that value the property not the vendor. The vendor may insist the EA markets higher than their valuation. I think they beginning to see that lower valuations are the way forward. I've seen 1 bed houses in Chelmsford on an estate with many of the identical layout style etc. Sways used to be marketed at £135k/£140 these are sticking and a new listings came on recently at £129k I think these will probably sell quite quick but it's good to see.

[Bloo Loo]

Estate agents are the ones that value the property not the vendor. The vendor may insist the EA markets higher than their valuation. I think they beginning to see that lower valuations are the way forward. I've seen 1 bed houses in Chelmsford on an estate with many of the identical layout style etc. Sways used to be marketed at £135k/£140 these are sticking and a new listings came on recently at £129k I think these will probably sell quite quick but it's good to see.

Even the enlighted are starting to beleive one hundred and twenty nine thousand pounds is good value for a 1 bed residence.

such is the power of the media and the constant HPI message.

129K for an entry level..must get away from the parents place, should reflect the starting salaries of the young.

most start on 12-15K.

10 times mortgage anyone??

[Pent Up]

Even the enlighted are starting to beleive one hundred and twenty nine thousand pounds is good value for a 1 bed residence.

such is the power of the media and the constant HPI message.

129K for an entry level..must get away from the parents place, should reflect the starting salaries of the young.

most start on 12-15K.

10 times mortgage anyone??

Indeed. They are still ridiculously over priced. I would have thought it's mainly 'investors' who are buying these currently. Can't post a link to one as I'm at work but they are tiny! Studio flats described as houses really.

[Bloo Loo]

Indeed. They are still ridiculously over priced. I would have thought it's mainly 'investors' who are buying these currently. Can't post a link to one as I'm at work but they are tiny! Studio flats described as houses really.

Mate of mines Son bought a place in that building opposite the Old Marconi building in Sun Street in about 2002.

£100K then....the corridor echoed, indeed, my mate said it was like living in a prison, such was the noise. Still, it had the advantage of a Pizza place within walking distance.

[lets get it right]

Once estate agents cotton on to the idea that lower prices = more sales = survival then they will be the main driver of lower asking prices.

I remember in the early 90's when estate agents would turn down instructions if they felt that the vendor was being unrealistic in their expectations. EAs need quick turnover - not properties sitting on their books for months costing money to market but bringing nothing in.

1% of something is a lot more than 1% of fook all!

We're a long way from this yet. In the early 90s I was told by an agent 'I'll put this on the market for 150k and not a penny more. If you want it on for more, find another agent. I've got plenty of overpriced properties I can't sell already'.

That was after 18 months of a rapidly falling market - when prices had already gone down 30% - 40% - and the local high street had gone from 13 estage agency offices to 6.

As I say, we're years away from this yet - because this market won't fall like the market in the late 80s - because then we had interest rates at 15% - now they are at 0.5%

[Alfie Moon]

We're a long way from this yet. In the early 90s I was told by an agent 'I'll put this on the market for 150k and not a penny more. If you want it on for more, find another agent. I've got plenty of overpriced properties I can't sell already'.

That was after 18 months of a rapidly falling market - when prices had already gone down 30% - 40% - and the local high street had gone from 13 estage agency offices to 6.

As I say, we're years away from this yet - because this market won't fall like the market in the late 80s - because then we had interest rates at 15% - now they are at 0.5%

I disagree - I suspect that we may reach this stage within 12-18 months rather than years. Interest rates were 15% for a very short time in the 1990s and are indeed 0.5% now. But house prices are already falling whilst the Base Rate is at 0.5% - just imagine what would have happened in the 1990s if the Base Rate dropped to 0.5%! Also, we currently have the context of property transactions that have already been in a state of ongoing collapse for years - since the Autumn of 2007. We now also have the context whereby the MSM is feeding the public a daily diet of scary economic news (rather than a constant diet of denial and reassurance), including about the property market. I suspect that we will move to the stage whereby Estate Agents start cutting asking prices aggressively, refusing unrealistic vendors (we have the current context of the market being flooded - 30k new properties per week which is = to 1.5M per year), or run the very real risk of going out of business.

I also suspect that we will, within 6-12 months see significant numbers of Estate Agents going out of business which will add panic as a pressure for Estate Agents to adapt to the falling market conditions rather than their continuation of pretending thaty the boom years have never gone away (currently they are looking more and more silly by the day for holding up this pretence and not visibly adapting to the economic reality that they are trying to operate within).

Edited July 20, 2010 by Alfie Moon

[keeprenting]

As I say, we're years away from this yet - because this market won't fall like the market in the late 80s - because then we had interest rates at 15% - now they are at 0.5%

Oh come on. The market fell substantially faster in 2008 than in the late 80s, despite low interest rates, so this is clearly wrong.

I expect that we will be back to "crash cruise speed" of about -1 to -1.5% a month soon.

[Pent Up]

Oh come on. The market fell substantially faster in 2008 than in the late 80s, despite low interest rates, so this is clearly wrong.

I expect that we will be back to "crash cruise speed" of about -1 to -1.5% a month soon.

Also didn't rates shoot up after the crash? In the early 90s. While prices were stagnating

[Caribbean Beauty]

Agents will have some success in persuading vendors to drop their asking prices but it will be limited - those with 90%+ loan to value (likely to be the majority of those keen to sell - many of whom will also be in NE) will be unable to sell since by the time legals and EA commissions are deducted, there won't be enough wonga left to pay off the bank. So the transaction cannot even proceed even if a buyer is found - unless the vendor agrees to pay the bank the shortfall in cash. Not many desperate vendors around with tens of thousands in savings.....

The answer to those folks who mewed or bought with massive mortgages? Jingle mail, just like the early 90s.

[Timm]

Where is the chart?

Is it on the video?

[Caveat Mortgagor]

Not sure why so many people have so much faith in estate agents.

I get the impression that a lot in my area are also into btl. I spoke to a few ea's before the market peaked - many were slowly building portfolios. Some were only young lads and probably earning basic salaries of about £12k!! Cant lose with bricks and mortar syndrome. No science to what they were doing - just a simple mantra.

I can't see these people gladly talking the market down.

The real falls will come from fear setting in amongst the sheeple. The good news for those of us wanting to see hpc is that at present the media seems to have an agenda of letting it all out. The fear that is needed to drive the next leg down could feasibly arrive as a result of the recognition that the banks are going to get tougher on repo's and the possibility of a moderate increase in interest rates - things really are so distorted that i dont think we have to wait for the repo's and rate rises to actually start. The anticipation of these two factors could drive the market given the current media sentiment.

Things really are at a tipping point. Its finely balanced. But I cant see the EA 'profession' helping to move things along.

Edited July 20, 2010 by Caveat Mortgagor

[corevalue]

Agents will have some success in persuading vendors to drop their asking prices but it will be limited - those with 90%+ loan to value (likely to be the majority of those keen to sell - many of whom will also be in NE) will be unable to sell since by the time legals and EA commissions are deducted, there won't be enough wonga left to pay off the bank. So the transaction cannot even proceed even if a buyer is found - unless the vendor agrees to pay the bank the shortfall in cash. Not many desperate vendors around with tens of thousands in savings.....

The answer to those folks who mewed or bought with massive mortgages? Jingle mail, just like the early 90s.

In the 80's, a colleague in negative equity (about £10K, IIRC) sold his flat in London, and bought a 3 bed house in Cambridgeshire for £15K less than the flat, neatly getting out of neg eq and into a proper house. The word will be downsize.

Those fools who have bought a 1 bed "studio" apartment at top price in a provincial city might have, er, difficulties. The BTL mob, screw 'em. The value of your investments may go up...or down. I would dearly love to see an effective LTV stick across the BTL vandals, I know of one with a 100% IO mortgage at fixed rate, paying £200 a month for a place he rents for £800. As a saver, that really grinds my gears. Unfortunately, I can't see of anything the government can do to stop that abuse, apart from dramatically raising interest rates.

Where's the bond vigilantes when you need them?

[sbn]

Not sure why so many people have so much faith in estate agents.

I get the impression that a lot in my area are also into btl. I spoke to a few ea's before the market peaked - many were slowly building portfolios. Some were only young lads and probably earning basic salaries of about £12k!! Cant lose with bricks and mortar syndrome. No science to what they were doing - just a simple mantra.

I can't see these people gladly talking the market down.

Things really are at a tipping point. Its finely balanced. But I cant see the EA 'profession' helping to move things along.

If they've got BTL's they will find the pinch of falling prices & rising interest rates especially painful. So they will need money to cover these losses. What could they do to find that money? Being estate agents 'n'all.

[red]

Once estate agents cotton on to the idea that lower prices = more sales = survival then they will be the main driver of lower asking prices.

I remember in the early 90's when estate agents would turn down instructions if they felt that the vendor was being unrealistic in their expectations. EAs need quick turnover - not properties sitting on their books for months costing money to market but bringing nothing in.

1% of something is a lot more than 1% of fook all!

I fear you are assuming EAs have the intelligence to work this one out. Don't forget, many of them now have only ever known a bull market in property.

Also, they too often think that in order to secure instructions they need to blow a little smoke up the vendor's @rse and give them a higher-than-achievable valuation.

[lets get it right]

Oh come on. The market fell substantially faster in 2008 than in the late 80s, despite low interest rates, so this is clearly wrong.

I expect that we will be back to "crash cruise speed" of about -1 to -1.5% a month soon.

Maybe you don't remember the late 80s? When the joint mortgage tax relief was removed, the housing market just STOPPED. Literally overnight there were no first time buyers in the market (and no army of BTL scum to take their place) and the market stalled and fell like a stone.

[Caveat Mortgagor]

If they've got BTL's they will find the pinch of falling prices & rising interest rates especially painful. So they will need money to cover these losses. What could they do to find that money? Being estate agents 'n'all.

I completely agree. But its a barrier many dont recognise. Can you imagine ea's wanting to drive down prices and lose 20 / 30 / 50k on their 'investment' just to earn a few hundred quid commission? When they are in the potential clients houses they have just as much of a mental block from reality as the fantasy-land vendors.

We must recognise that when an ea goes to get an instruction from a would be vendor, its not just the vendor that cannot afford for that house to sell at the prevaling market rate. A large percentage of ea's cannot afford for their client to set a new price level for the area.

Edited July 20, 2010 by Caveat Mortgagor

[Fudge]

Friend of mine just put their house up for sale.

The EA told them to knock 10K off the valuation as "there is a recession on".

[lets get it right]

I disagree - I suspect that we may reach this stage within 12-18 months rather than years. Interest rates were 15% for a very short time in the 1990s and are indeed 0.5% now. But house prices are already falling whilst the Base Rate is at 0.5% - just imagine what would have happened in the 1990s if the Base Rate dropped to 0.5%! Also, we currently have the context of property transactions that have already been in a state of ongoing collapse for years - since the Autumn of 2007. We now also have the context whereby the MSM is feeding the public a daily diet of scary economic news (rather than a constant diet of denial and reassurance), including about the property market. I suspect that we will move to the stage whereby Estate Agents start cutting asking prices aggressively, refusing unrealistic vendors (we have the current context of the market being flooded - 30k new properties per week which is = to 1.5M per year), or run the very real risk of going out of business.

I also suspect that we will, within 6-12 months see significant numbers of Estate Agents going out of business which will add panic as a pressure for Estate Agents to adapt to the falling market conditions rather than their continuation of pretending thaty the boom years have never gone away (currently they are looking more and more silly by the day for holding up this pretence and not visibly adapting to the economic reality that they are trying to operate within).

I hope you're right.

But I've heard so many arguments (and made them myself) over the last 7 years as to why the market ... should / will / is about to / is / must ... fall that I no longer believe any of them. Where I live property has been seriously overpriced based on any normal salary multiple / interest rate equation you care to use for best part of 10 years ... yet prices now are the same as they were in 2003 - maybe even a little higher.

[sbn]

I completely agree. But its a barrier many dont recognise. Can you imagine ea's wanting to drive down prices and lose 20 / 30 / 50k on their 'investment' just to earn a few hundred quid commission? When they are in the potential clients houses they have just as much of a mental block from reality as the fantasy-land vendors.

We must recognise that when an ea goes to get an instruction from a would be vendor, its not just the vendor that cannot afford for that house to sell at the prevaling market rate. The ea cannot afford their client to set a new price level for the area.

Few hundred quid? it was about 2% last I heard! on an average place down here, thats about £6K - you dont need to shift too many of them to make up your losses!

[Caveat Mortgagor]

Few hundred quid? it was about 2% last I heard! on an average place down here, thats about £6K - you dont need to shift too many of them to make up your losses!

I believe you have confused the commission paid by the vendor to the agency (which you are correct can be many thousands) with the commission earned by the monkey on £12k per year basic.

[catmandu]

I was in an EA last week and asked how the market was: "We've never been busier - don't even have space on the walls to display everything."

I didn't feel any need to help her take that to the next logical conclusion.

I've been confident of a crash for some time, but most of the time it was only my own reasoning and HPC which helped me keep the faith. Now for the first time the media seems to be helping. Today's news on an increase in renters is another indication that the masses are being informed of what's coming and are holding out. I've probably said this before but I think things are going to change quite soon. Looking forward to the next months of housing reports coming out. Just imagine too if inflation figures jumped 0.5% suddenly (wishful thinking rather than economic argument based, but the risks are there)