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Simon Rubinsohn Blog

10 November 2010



It is that time of the month again and I can sense the blood rushing to Ros’s head as the latest RICS Housing Market Survey lands in her inbox.

“Not more of this net balance business,” she fumes, “but at least I will have, as usual, a little bit of fun with it”.

Well, Ros, you have been kind enough to give us the opportunity to explain a little about why we do the survey in this format, and that can be found elsewhere on your site.

But let me also say a few words, if your goodwill extends this far, about the interpretation I would place on the latest set of figures and what they imply for residential property going into 2011.

First, most agents replying to our survey tell us that prices have slipped, albeit only modestly (less than 2%), over the past three months.
 
A large minority of respondents believe that prices have not changed during this period, while a small number are actually reporting price increases.

So, let us be clear: this is a market of individual houses, each with their own special characteristics, not a single housing market. Headline numbers are, in truth, just averages of a whole lot of numbers which, for many people working in the property industry, will be meaningless.

Second, our members have seen a small reduction in buyer interest in recent months, which is not all that surprising given the endless reports about a so-called ‘double-dip’ recession and related job losses.

This drop in interest has been most visible in the north of the country but is less obvious in London, which sort of fits in with what we know about the likely geographic impact of public spending cuts.

I can almost sense Ros breathing down my neck at this point.

“But what does any of this mean for the industry in 2011?” she exclaims.

Well, one thing is for sure. Mortgage finance is set to remain in short supply, which means that activity levels will remain subdued.

That worries me more than anything else. The Government’s economic plans are based on job mobility as the state contracts and the private sector takes up the slack. But for this to work effectively, people need to be able to move, which requires a well-functioning housing market. Whether this is possible without more mortgage money becoming available is questionable.

As for prices, that is the million dollar question.

For good or ill, and there are many first-time buyers who would love lower entry prices, I am not sure we are going to see very much movement one way or another.
The post-HIPs announcement jump in new stock coming to the market is already fading, which is likely to result in a better balance between demand and supply, even if our new buyer inquiries data continues to ease.

Now, Ros, where are those pills?

Comments

  • icon

    Henry



    Thanks for the feedback, I thought it important to respond to the issues you raised. The first relates to the survey sample. It is just that – a sample – generally of between 250 and 300 respondents representing up to 500 offices. This may appear insignificant to you but it actually compares well with many other well regarded surveys including the closely watched suite of reports produced by CIPS.



    The second issue concerns the value placed on the results. It is true that the monthly survey does bring in ‘acres of coverage’ but that would not be possible if the survey did not have something to say. Not only is it a ‘market moving’ indicator but the Bank of England request an early sighting of the results each month. Investors are not stupid and neither are the policymakers at Threadneedle Street. Over many years the survey has shown itself to be a useful lead indicator of house price indices and transaction activity (and I am very happy to run you through anytime you wish). It may be hard to explain how the feedback from a relatively small number of estate agents can provide such market intelligence but that is indeed the case which is why there is such interest in the results. Finally, of course, some estate agents may feel that the results do not chime with their own experiences. These are averages of lots of responses and will reflect that simple fact.



    In addition, in accordance with RICS Royal Charter and our responsibility to act in the public interest we have always published the response sample and been completely transparent with the data collated.



    I would be very happy to spend some time talking you through the reasons we do things in net balance format, as well as explaining the leadership properties the results have, if that would help



    Simon

    • 15 November 2010 10:22 AM
  • icon

    Well done Simon for being brave enough to come into the lion(ess') den! Not somewhere for the feint-hearted but thank you for contributing!

    RiCS has the justifiable and hard earned respect of many in the residential property arena but I believe that you insist of doing both yourselves and the profession you claim to represent a dis-service by continuing with the current monthly survey you produce.

    The monthly report that RiCS puts out is a very successful PR tool and I can understand why no one is keen to tinker with it when it serves you so well. You get acres of coverage which has enormous value but I am told that it does not reflect what the majority of estate agents are experiencing and often is quoted back by clients and by buyers as ‘an authoritative source. It inevitably tries to speak to more than one constituency (buyers, sellers, Government, lenders, agents et al) but it is the methodology that is it’s biggest weakness.

    It is based on a pitiful sample of just 245 people which is dwaft by the sample sizes of all the other indices (Halifax, Nationwide, Rightmove, Land Registry) and it really is time for RiCS either to own up to exactly how many residential estate agents are members of your organisation or for Great George Street to stop claiming that you speak for the business. Your press office refuses to answer this question which leaves me to think that perhaps my own estimate of there being 1,500 Chartered Surveyors doing residential estate agency work may in fact be optimistic.

    By choosing to express your very few members sentiments as a ‘proportion of those who had a positive (or negative) view’ and persisting with a survey of sentiment does the majority of the market you do not represent no favours and in my view, does little to enhance the enviable professional reputation that Chartered Surveyors enjoy. Estate agents already have an up hill struggle when it comes to public perception. It isn’t helped when a respectable, authoritative body like RiCS comes out with a view on house prices based upon ‘gut feeling’.

    • 11 November 2010 11:50 AM
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