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Agents Diary - There Are Eas Out There That 'get It'

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And a positive mention for this website too!

‘So what do you think. Honestly?’ That’s two questions actually, I feel like saying. People often want to know what I think about property prices but only if it corresponds with their take and that usually depends if they’re buying or selling. The honestly bit, that really doesn’t help most of the time. Denial being more often a couple with negative equity, than a river in Africa…

I’m sitting in a pleasantly weathered lounge, which I might describe as a drawing room if the price warrants it. The walls are as faded as the old couple perched attentively on matching threadbare high-backed chairs. Original wooden plate racks run around the room to complement the 1930s carved fireplace with matching hearth. This is the sort of house I dreamt of growing up in. The type of home, with a warm welcoming kitchen and an Aga, that friends lived in and I visited hoping some of the family unity might come home with me. It didn’t.

‘Only,’ continues the old man as his wife watches him lovingly. ‘I don’t want all that bull the kids in shiny suits come out with. You look as if you’ve been around the block a bit, son.’ That’s a backhanded complement if ever there was one, I ponder swiftly, as I wonder just how much honesty I should provide and if it will cost me the business again. I’m happy with the recognition of my maturity and experience but I don’t really need reminding I’m looking as worn out as this house’s exterior paintwork – although you don’t often get called son once you find the first grey pubic hair.

I fence for a while. Talking about market forces, shortage of supply and the fact homes like this one still don’t come to the market often. When they do, they are usually converted to flats, something I’d rather not see if I didn’t depend on property sales for a living.

‘Yes, but don’t you think theses silly prices are unsustainable?’ Presses the old boy doggedly. His wife nods gently in agreement and stares at her husband like some time-warped teenager.

‘I only reflect what the market is saying.’ I reply. I’m as disappointed in the response as he seems to be, judging by his crinkled brow.

‘My grandchildren will never be able to afford to buy if this nonsense continues.’ Presses the owner, as his wife turns towards the mantelpiece and points to the photos and says. ‘That’s them there. Would you like to see?’ Not really isn’t an option, so I spend five minutes cooing over some kids in school uniforms who look exactly like a hundred other kids in school uniforms, although the oldest girl will be hot in a few years….

‘Do you know what we paid for this house?’ Asks the husband when we are back to property prices. I already know they’ve been in situ forty years and brought up three children. The kids’ bedrooms haven’t been decorated for decades to prove it - I hadn’t seen a Duran Duran poster in a while. Of course I’ve done this before and I know it was probably about £38,000 but curiously they like you to go higher.

‘Oh I don’t know, about £60,000?’ I say innocently. They both smile knowingly.

‘£35,000 son, £35,000. Who’d have thought it? And now it’s worth what, £650,000?’ Oops, I was thinking £595,00 so he wasn’t wanting that much honesty.

‘Of course we don’t really need the money now.’ Says the wife. ‘But we’d hate this house to be bulldozed completely. It’s a family home you see. I’d like someone like us to have it and bring up children here. Make a tree house, like our kids used to.’

The reality is not many young families could afford their Enid Blyton dream and I reckon their own children wouldn’t want them to flog their inheritance off on the cheap, just so five could go mad in a quarter acre garden.

‘If they could turn back the clock,’ begins the man, as I think please don’t ask me to guess your age now, they always want you to play that game. But he’s on a different tack. ‘They should half all the prices and get some sense of normality back. We’ve got more than enough equity and our grandkids might have a chance of getting on the ladder.’ I’ve not seen any sign of a router, but this old boy should silver surf and join my fans at House Price Crash. They’d love him – or at least his house at half the going rate. Although, the truth is it usually takes a death to get these people to leave their memories, at any price.

Time will tell.

http://agentsdiary.blogspot.com/2012/03/time-was-wednesday.html

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And a positive mention for this website too!

http://agentsdiary.blogspot.com/2012/03/time-was-wednesday.html

Awesome. I can read this to my kids instead of dinner tonight. Thanks a bunch to the EA and the guy who wants over market value for his house and no doubt claims fuel allowance.

Me, I've kinda had my fill of rhetoric (and shit). It won't change. Leave if you can.

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Interesting, but kind of depressing.

If the fella is that bothered, why not just gift the house to his grandkids? Oh, that's right - he _does_ want the money, afterall.

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OK, so it's gone up 20x in 40 years. How much has a pint of beer gone up? Much the same I would have thought.

Just a pity houses aren't measured in pints o fbeer then. How much has disposable income gone up?

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OK, so it's gone up 20x in 40 years. How much has a pint of beer gone up? Much the same I would have thought.

I bought a complete wreck (with a protected tenant in upstairs) in Finsbury Park for £1200 in 1971. It was on the market recently for £700,000. I did it up and moved to somewhere bigger, as the first child was on the way, but even so….

I also believe that you are right, and that beer has increased [or the Pound declined in value] since then by a factor of 20.

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OK, so it's gone up 20x in 40 years. How much has a pint of beer gone up? Much the same I would have thought.

This isn't a good point to make.

Housing is a multiple of yearly income whereas beer is very cheap relative to yearly income.

So avg income say £25K for a roundish number.

Let's double beer right now. £5 a pint. More expensive if you are an alcoholic, sure, but you can still buy it if you want. Within the reach of avg income albeit not great.

House that was avg is £200K also doubles to £400K. Said house is now utterly beyond the reach of the avg income. But all we did was multiply them both by 2 - where's the harm?

Edited by bmf

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I read that thinking the seller has to go with the EA's valuation and will be pissed off if it's high

They don't do they?

Hey, old fart - stick it on the market for £35k then you *****.

And the EA needs to ******ing well get a new job if he hates it so much, the ****.

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I read that thinking the seller has to go with the EA's valuation and will be pissed off if it's high

They don't do they?

Hey, old fart - stick it on the market for £35k then you *****.

The seller recognises that cheaper houses would help his grandkids, even if it meant that their inheritance was lower due to him getting less for his house (a simple bit of maths that seems beyond large swathes of the population). If selling his house for £35k would magically reduce the cost of all housing, then he might. But it won't. All it would do is mean that his grandkids would have even less. So, not being an idiot, why would he do that?

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The seller recognises that cheaper houses would help his grandkids, even if it meant that their inheritance was lower due to him getting less for his house (a simple bit of maths that seems beyond large swathes of the population). If selling his house for £35k would magically reduce the cost of all housing, then he might. But it won't. All it would do is mean that his grandkids would have even less. So, not being an idiot, why would he do that?

Hence my comment that he needs to gift it to his grandkids.

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Interesting he mentions that they want to sell it before it gets bulldozed. Perhaps it is nearing the end of it's useful life and is starting to crack and crumble. I do hope this happens to a lot of these smug boomer types snorting on about worth and not seeing the true value of things as they should be.

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Anti-boomer brigade out as usual. Let's recap.

He said he would like house prices to halve, he is concerned that his grandchildren should have the opportunity to grow in a house like his. If he GAVE it to them, they'd have to sell it, presumably he has about 4 grandkids, and I can't imagine they'd drop the price a penny. Anyway, where is he going to live? he's trying to downsize to help them out, by the sound of it. He makes a guess at his house's value, and is over: so what, it's a guess. That's why the agent is there.

He doesn't want to see the place bulldozed and a load of rabbit hutches put up, they want it to stay as a family home - he specifically states that. Fat chance. Around here (Cambridge) any place like this gets snatched up by developers - nobody else can afford them - who promptly flatten the place bar one corner (so it's not a new build), and erect as many McMansions as they can stuff onto the garden. I know of one 2 bed bungalow bought for £215K now being sold at £500K, a similar one next door for even more. A decent 60's detached house in reasonable order near me, bought for £340K, the developers hope to achieve £1.2 million from the two buildings on the site (one new). THAT's what this old boy is on about.

Ed: I wrote terraced, meant detached!

Edited by corevalue

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OK, so it's gone up 20x in 40 years. How much has a pint of beer gone up? Much the same I would have thought.

I see you are rationalising asset price inflation with the price of something that is not an asset. We have a methodological issue, I think I can help.

Let's check that 20x since 1973 is reasonable by comparing it to the movement in the price of a hand-held calculator over the same time - a premium asset in 1973, at $495 (nomimal). Back in the day, 63 new pence would buy you a dollar, so the HP35 is yours for a song! £250.

Now, I'd be gutted if my asset only appreciated at the rate of inflation, £250 in 1973 nominal would inflate to about £2,500 by 2010, (rounding down to the nearest £500).

Just imagine my horror when I go into the local WHSmith and they are selling a superior asset at £17. :o

I get out my calculator to work out the implied return on my asset - but it hasn't been working since 1985, so I have to buy a new calculator to find out how much it's worth, (fortunately they're cheap).

Let's see. If the price I pay today is P_today and the price I paid in 1973 is P_1973 and my asset appreciated with a rate of return r, (where 1% is 0.01), then compounded over 2010-1972 = 37 years, I should find that P_today = P_1973 * (1+r)^37

After a little algebra I find that my rate of "return" is a disappointing -7%, (to the nearest whole number).

Losing 7% a year sounds bad. Obviously, I'm gutted - till I think about applying my new valuation method to housing...

The 1973 nominal average house price was an eye-watering £10,000, (to the nearest £1,000). That's a crushing 4.5x average 1973 earnings. Times were tough.

Compounded back at -7% for 37 years, and there's good news! There must have been a mistake at the estate agents, (all of them), because an average house should only cost me only £682. I can call up my mate Barry, we'll sell his 1999 Ford Fiesta (only 83,000 on the clock and almost a full year of MOT), I'll give him my new Merc so he's not short some wheels, and we'll use the proceeds from the sale of the Fiesta to buy a house. Game on! And they'll still be money enough leftover to buy me 15 calculators, a packet of crisps and, you guessed it, a pint of beer.

Honestly, what's the point of gathering all those statistics? It's easier just to value stuff by comparing it with whatever other stuff comes to mind.

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Honestly, what's the point of gathering all those statistics? It's easier just to value stuff by comparing it with whatever other stuff comes to mind.

Beer is probably cheaper in a supermarket these days than it used to be, if you take tax out the equation. You can't talk about beer from a pub because the property/ rental price of the establishment is reflected in the price of the beer therefore the price is being pushed up by the same factor pushing up house prices.

So not only is his example stupid, but very wrong.

To play devils advocate I could even say beer making kits are much easier and cheaper to obtain than they used to be then you can make your own pint for 10p.

Most stuff is cheaper these days especially food. Hence why the government have made property so expensive as the last thing they want is the proles to have a good quality of life and a way out the rat race.

Edited by Saberu

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Beer is probably cheaper in a supermarket these days than it used to be, if you take tax out the equation. You can't talk about beer from a pub because the property/ rental price of the establishment is reflected in the price of the beer therefore the price is being pushed up by the same factor pushing up house prices.

I have to level with you, I'm looking for a property crash as a way to bring down the price of beer.

What really struck we about the suggestion was you can see how how superficially comforting it is. Over leveraged homeowner wakes up sweating, nightmares of bailiffs, gets up, googles "Beer price in 1972", gets answer 13p, gets out calculator - 310p /13p = 24, brain switches off, goes back to sleep.

Fortunately our society spends millions, sorry billions, supporting a financial sector who would never make a error of reasoning like this and mistake an asset price bubble for a meaningful price signal.

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I had finished reading the blog entry in the opening post before realising this was 2012...!! Oh dear...just as well UKGOV implemented rational and fair policies to control HPI...

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On ‎12‎/‎02‎/‎2019 at 18:34, PaulParanoia said:

Sad to hear that the guy who writes this blog has passed away.  At least that's what the last post says anyway.

Off into the Sunset

Yes - RIP.  Always an amusing and thought provoking blog to see the housing market from the "other side"

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