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'agents Back Sensible Pricing'

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This article screams 'fear' - not sure what to make about the 'First True Property Price Bubble' comment though!

Crikey agent backs sensible pricing as we head towards first true property price bubble

May 26 2016

I read a fascinating report this morning from Haart estate agents which claims that they are seeing a big slump in buyer demand. According to the agent, buyer registrations had slumped by 46% across the UK in the last month and they claim we believe the nation has now neared the limit in terms of price rises.

Agents have always been accused of driving the market upwards, although I have never bought into this claim as if they were able to drive prices upwards, theyd be able to stop them falling, too and they clearly cant!

Read - Trading Up Property Checklist

But it is interesting that lessons perhaps have been learned from the rise in prices to 2007/8, followed by a slump as Haart are now suggesting in order to maintain healthy sales levels, sellers need to be much more realistic with their asking prices, especially if selling to people who require mortgages with stricter lending criteria.

If Haart are correct (and I think they are right for much of the UK), this leaves some home owners and investors with a big problem:

Huge numbers of properties across the UK are still selling for less than they were in 2007/8.

It will also mean that if prices start to slow now we will, for the first time ever in the UK, have experienced our first true property price bubble.

For example, several regions and towns have some way to go before they recover to 2007/8 heights and although these are average prices, there are some individual properties Ive picked out further below which are clearly not going to be selling at the price they were bought at for many years to come, unless there is a sudden property price boom in the area.

Regional data shows that five out of our nine regions in the UK are still experiencing property prices lower than they were eight years ago and, at currently growth rates, the North and Yorkshire and Humber are unlikely to recover for up to three years, whereas the Midlands may well recover in the next year or so.

When you look at things from a town/city perspective though, the picture looks even worse for some areas, with Liverpool and Bradford seriously struggling to recover much of the loss in property prices and currently seeing growth of around 3% a year, suggesting it could take another EIGHT YEARS before they recover.

And if Haart are right and property prices are slowing, then they may not recover for decades.

Some property prices are still 20- 50% below their 2007/8 levels...

More data tables at the source link:

http://www.propertychecklists.co.uk/articles/agents-pricing-property-price-bubble

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Some property prices are still 20- 50% below their 2007/8 levels...

Where?

Seriously, prices are not 20-50% below 2007/08 levels - they're 25 to 50%+ ABOVE 2007/08 levels, when you remove outliers like Northern Ireland and the North East.

No, prices are f1ck-off high because of 7 years of ZIRP since 2009.

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Again - might be a London thing - but Agents clearly drive up the market.

I've encountered several agents who encourage price hikes on property, and try to spin prices to be higher than they are. (even to the point where I had one agent try to convince me that scoring a 2 bedroom place for £550k was unrealistic, I told him bluntly this was not the case and I had viewed several half-decent places at that price, and he immediately agreed.. not sure if that is simply a case of not having many buyers and so keeping me sweet.. but was plainly ******** that the best you can do for £500k is a one bedroom spot, even in crazy London.. as lets be honest, a half-decent 2 bedroom place at £500 - £550k is already insanely overpriced!)

That and in the London market, there is a small tonne of places marketed at vastly inflated asking prices which are busy reducing down as they have been on the market for 3 to 6 months.. I am fairly certain agents have a hand in this, and selling vendors a bit of a pipedream when it comes to pricing.

Caveat, I have also meet some lovely agents who have been realistic and helpful. (even one from the dreaded Foxtons)

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Agents back anything that helps them make sales.

This might be the interesting thing going forward - as with properties not selling, Agents might start driving down the market in an effort to sell properties before their competition.

In March and April (pretty much stopped looking now, as would rather get on with some real work rather than playing this game) I certainly add a few interesting emails and discussions with agents that were encouraging me to pitch in at under the asking price, which was the polar opposite to January and February..

Blame it on Brexit.. for now..

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All EA's care about are selling the x houses a month they need to cover costs and survive...

That means at times they have to price high to convince sellers that they are the one to sell their house and at other times convince sellers to reduce prices to get buyers to buy them....

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All EA's care about are selling the x houses a month they need to cover costs and survive...

I imagine they are currently digesting March's rich pickings...

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This might be the interesting thing going forward - as with properties not selling, Agents might start driving down the market in an effort to sell properties before their competition.

I always thought this, but then since 2008 sales volumes have been very low, yet EAs have been dementedly driving up prices for the last 8 years despite the simple equation of sales volumes X house prices / commission rate = revenue (therefore surely sales volumes is really important). NOPE. It would seem EAs would be happy having a super low sales volume so long as prices are high and revenue is LOWER than if sales volumes were high and prices lower. Don't ask me to explain it - but remember houses are not a typical market. EAs want people to borrow (likely they make commission on their recommended lender) so it makes sense to keep prices unaffordable. It's one f1cked up "market".

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Don't ask me to explain it - but remember houses are not a typical market. EAs want people to borrow (likely they make commission on their recommended lender) so it makes sense to keep prices unaffordable. It's one f1cked up "market".

Often speculated on here that many EAs are in the BTL game on the side. I don't have shred of evidence either way.

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I always thought this, but then since 2008 sales volumes have been very low, yet EAs have been dementedly driving up prices for the last 8 years despite the simple equation of sales volumes X house prices / commission rate = revenue (therefore surely sales volumes is really important). NOPE. It would seem EAs would be happy having a super low sales volume so long as prices are high and revenue is LOWER than if sales volumes were high and prices lower. Don't ask me to explain it - but remember houses are not a typical market. EAs want people to borrow (likely they make commission on their recommended lender) so it makes sense to keep prices unaffordable. It's one f1cked up "market".

They also make a killing off the growth in rentals...

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I always thought this, but then since 2008 sales volumes have been very low, yet EAs have been dementedly driving up prices for the last 8 years despite the simple equation of sales volumes X house prices / commission rate = revenue (therefore surely sales volumes is really important). NOPE. It would seem EAs would be happy having a super low sales volume so long as prices are high and revenue is LOWER than if sales volumes were high and prices lower. Don't ask me to explain it - but remember houses are not a typical market. EAs want people to borrow (likely they make commission on their recommended lender) so it makes sense to keep prices unaffordable. It's one f1cked up "market".

I think it's more about EA's getting the houses on their books rather than a competitors.

A seller may get three EA's to value their house and of course they are going to go for the one that reckons they can sell for the highest price - the EA has a interest in pricing the property higher than their competitors so they get the property on their books rather than their competitors. As volumes have fallen the EA's have to fight harder to get the properties and it seems that we are reaching the point where it starts to break down. Credit is no longer expanding to achieve the higher prices and so we see agents coming out making the statements we have seen over the past week, the money just ain't there any more. Yup, it's one f1cked up market.

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They also make a killing off the growth in rentals...

Stock levels and sales volumes are so low in my area I'm convinced the EA's must only be staying profitable thanks to lettings, I can't see how they can be making any money at all from residential sales commissions.

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Stock levels and sales volumes are so low in my area I'm convinced the EA's must only be staying profitable thanks to lettings, I can't see how they can be making any money at all from residential sales commissions.

One thing I've noticed since I first moved to London in 2005, Agent windows were always stocked with Properties for Purchase and Lettings was usually sandwiched off in a corner.

Whereas nowadays (now I'm looking on the other side of the equation), seems to be the opposite, Lettings takes precedence and Sales seems shoved over in the corner.

Very random anecdote and varies from Agent from Agent (and could always be a bit of confirmation bias :-(), but think I've glanced at enough agency windows to spot a trend in Lettings over Sales in recent years.

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Stock levels and sales volumes are so low in my area I'm convinced the EA's must only be staying profitable thanks to lettings, I can't see how they can be making any money at all from residential sales commissions.

I'm thinking similar - surprised when I walked into Jackson Grundy EAs and half the office is for lettings. I'm sure lettings used to be some small sideline of EAs - now it's front and centre. Read somewhere yesterday on HPC that only 400,000 owner-occupier property transactions have taken place since 2008 across the UK (tiny number when you think about it).

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I have recently (as in last month) sold a house so have had a lot back and forth with EAs of late. My observation (purely anecdotal of course) is this;

They're all now desperate for business and seem to think the best way forward is to pitch you some kite flying price they reckon they can get for your gaff then offer you a low commission to get the business.

Seems to me that the competitive element for them is on the commission side. Most of the market doesn't really want to be told they're going to have to drop their price straight off the bat. This EA tactic seems to be a good way to get some stock on the books; the price will drop eventually if it hangs around for long enough with the added benefit for the ea that it's easier to sell this reduction to the client. Most of them will even have a nominal minimum fee built in (to ensure the best service, naturally) to protect them against these drops.

That said, one EA pitched me a massively kite flying price which I laughed at, quoted speculatively to an acquaintance who got wind we were thinking of selling and asked to view privately and was surprised to find they met the asking price straight away so what do I know eh?

Disclaimer; property is in a very desirable area with fantastic amenities, a great local school and a genuine community spirit. Suspect the opposite is true of many over priced properties which fail to shift.

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One thing I've noticed since I first moved to London in 2005, Agent windows were always stocked with Properties for Purchase and Lettings was usually sandwiched off in a corner.

Whereas nowadays (now I'm looking on the other side of the equation), seems to be the opposite, Lettings takes precedence and Sales seems shoved over in the corner.

Very random anecdote and varies from Agent from Agent (and could always be a bit of confirmation bias :-(), but think I've glanced at enough agency windows to spot a trend in Lettings over Sales in recent years.

That was even more noticeable in the 1980s. I remember walking into an EA office in Wokingham and innocently asking if they had anything I could rent. The sharp-suited one actually broke into astonished laughter and looked at me as though I was something on his shoe before explaining patronisingly that they didn't do lettings. I slunk out feeling that I had been put well in my place, although in fact he did me a favour because I did instead buy my first place which HPI'd into orbit.

Needless to say I have ever since avoided any kind of contact with that particular EA (whose name rhymes with Fartin Hole).

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I have recently (as in last month) sold a house so have had a lot back and forth with EAs of late. My observation (purely anecdotal of course) is this;

They're all now desperate for business and seem to think the best way forward is to pitch you some kite flying price they reckon they can get for your gaff then offer you a low commission to get the business.

Seems to me that the competitive element for them is on the commission side. Most of the market doesn't really want to be told they're going to have to drop their price straight off the bat. This EA tactic seems to be a good way to get some stock on the books; the price will drop eventually if it hangs around for long enough with the added benefit for the ea that it's easier to sell this reduction to the client. Most of them will even have a nominal minimum fee built in (to ensure the best service, naturally) to protect them against these drops.

That said, one EA pitched me a massively kite flying price which I laughed at, quoted speculatively to an acquaintance who got wind we were thinking of selling and asked to view privately and was surprised to find they met the asking price straight away so what do I know eh?

Disclaimer; property is in a very desirable area with fantastic amenities, a great local school and a genuine community spirit. Suspect the opposite is true of many over priced properties which fail to shift.

Part of me actually feels a bit sorry for the EAs (only a bit mind!) - to get the instruction they have to recommend a high asking price because every seller wants the best price possible, yet to get the sale they need a low asking price creating a real problem of expectation management. In many cases winning the instruction will make getting the sale difficult unless they can get the vendor to lower their expectations.

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I know a couple of EAs in a personal capacity as I've said before on here. They are both actually quite tolerable when not talking shop. They both admit the game is up, the only ones who don't are their bosses.

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That was even more noticeable in the 1980s. I remember walking into an EA office in Wokingham and innocently asking if they had anything I could rent. The sharp-suited one actually broke into astonished laughter and looked at me as though I was something on his shoe before explaining patronisingly that they didn't do lettings. I slunk out feeling that I had been put well in my place, although in fact he did me a favour because I did instead buy my first place which HPI'd into orbit.

Needless to say I have ever since avoided any kind of contact with that particular EA (whose name rhymes with Fartin Hole).

To be honest, I almost never went with Estate Agents for renting.

Always found it quite easy to link up with landlords directly via Gumtree or something similar.

My current place was found that way and so everything is direct - the place is eye-wateringly expensive by my standards, but probably not by wider London standards, is very nice and the owner seems like a good bloke who owns the place outright and so is unlikely to slap the rent up.

When we've been chatting, he and his family have had some bad experiences with estate agents and so are far happier going direct.

But I imagine for agents, Lettings is where all the money is at if Owner Occupier transaction levels are as low as some of the figures seem to suggest.

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Stock levels and sales volumes are so low in my area I'm convinced the EA's must only be staying profitable thanks to lettings, I can't see how they can be making any money at all from residential sales commissions.

Same in my bit of BH15

Edited by juvenal

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EA are afterall themselves in the best place to capture homes for themselves at best value......they have double vested interest to keep houses on the upwards trajectory.. ;)

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