Despite being round the block quite a few times in the property world, it was only in 2008 that the importance of ‘confidence’ slapped me in the face.
That was the year everyone lost confidence.
People didn’t go to restaurants, buy cars, attend gigs and – as we know – they didn’t move house because they weren’t confident their job prospects were solid enough to act as foundations for short- and long-term debt.
That was the time banks lost confidence in each other and stopped intra-bank lending or, in some cases, just lied to paper over the cracks.
Estate agents lost confidence too, closing down new homes divisions (because developers had lost confidence a few months earlier) and letting staff go (showing that those staff had been right not to go to those restaurants or buy those new cars because of a lack of confidence over their own future).
And so it went on until we got a recession.
That was then. Now we have another confidence problem – there’s too much of it and it’s coming out of our ears. To prove the point, I present a story that was lost in the noise and sadness of this week’s headlines.
It was written on the BBC News website by the ever-readable Rory Cellan Jones and concerned a British start-up called Powa. I’ve put the link at the bottom of this blog but for the moment please take my word when I say it’s all about confidence – too much of it.
In summary it tells of a start-up creating an online purchasing-gateway which allowed users to buy products rapidly on their mobile devices. It used a number of marketing and sales techniques which all sound familiar to people who have kept up with some of the biggest stories in estate agency in the past couple of years.
Firstly, Powa used extensive public relations to ‘big up’ the product and the backing it was allegedly getting from manufacturers keen to sell via its software, and so on. One of the biggest objectives of the PR, suggests Cellan Jones, was to emphasise the potential value of the company ahead of a stock market flotation.
Secondly, Powa used the ‘letters of intent’ technique to build an image of widespread investment in the product.
An interesting quote from Rory’s piece is this: “None of those companies had signed contracts, merely ‘letters of intent’ which did not commit them to anything. One senior figure in the company told me that young inexperienced sales staff were rewarded with a £2,000 bonus every time one of these letters was signed ‘so they weren't particularly concerned about the quality of the deal’.”
Thirdly, there’s the valuation Powa’s hierarchy claimed. In this case, it was described as being worth $2.7 billion (yes – really - $2.7 billion) although it had not actually sold any product.
Now I’m not doubting the validity of valuations, letters of intent or public relations hype for companies operating in the residential property industry – and there have been plenty of all three of those things in recent years.
But the parallels between this story and our industry seem very strong. So the point I’m making is this: Powa has gone under and the Rory Cellan Jones story concludes with one of the staff allegedly accusing the company’s leader of being “a narcissistic idiot.”
In other words, this was another problem with confidence – not a lack of it, but far too much of it.
When we hear stories about our industry littered with letters of intent, extraordinary valuations and PR hype it’s probably wise that all of us (journalists included) recall this story.
The next example may not end this way – but on the other hand, it just might.
PS – I’ve been fortunate enough to win the Gold award for Property Blogger of the Year at the 2016 LSL Property Press Awards, on the strength of the blogs you read here and which I later use on my own website, www.propertynewshound.com.
So this is a big warm ‘thanks’ to you, dear readers, and to the team at Estate Agent Today and Letting Agent Today who provide me with a great opportunity to blog to an informed and influential audience.
*Editor of Estate Agent Today and Letting Agent Today, Graham can be found tweeting all things property @PropertyJourn