Housing minister Grant Shapps wants to unlock the door that has slammed shut on first-time buyers.
He said it was “crazy” to see unaffordable house prices as normal and called for a new era of long-term house price stability.
At least, we think that’s what he said, as it was difficult for him to get a word in edgeways on Today, when Evan Davis conducted what is apparently still known as an interview, even though it’s long ceased to be a two-way process on that programme.
But few people would oppose Shapps’s view that it’s wrong for house prices to rise threefold in a single decade, as they did between 1997 and 2007.
According to Shapps, people should start looking at property as a home, not an investment: “The main thing everyone requires for their subsistence is a roof over their head, and when that basic human need becomes too expensive for average citizens to afford, something is out of kilter.
“I think the answer is house price stability.”
He suggested (though it was hard to know with Evan Davis shouting over all the answers) that such stability might involve pay going up 4% annually but house prices rising only 2%.
Successive governments of different colours have had no answer to boom-bust cycles.
That’s probably because they don’t have a clue about the housing market and how estate agency works. (Remember a previous housing minister, Labour as it happens, who was absolutely flummoxed to be told that agents only got their fee when the place was sold?)
Various governments have played around with the edges of the housing market. They’ve introduced HIPs, backed away from regulating agents, and toyed with the idea of making gazumping illegal, although they’ve never seemed as keen on stamping out gazundering.
Shapps seems to think that putting an end to boom and bust is not in the Government’s power. Instead, he thinks some levers could be applied to stabilise the housing market.
But what? It is hard to think how the New Homes Bonus will do the trick. Or that lenders will suddenly start forking out 100% loans to first-timers.
Shapps would, however, do well to look at the ‘mind the gap’ problem between asking prices and actual sales prices.
Currently, there’s a whopping £70,000 discrepancy between the average asking price on Rightmove and what the Land Registry, Halifax and Nationwide are all saying.
One of the most interesting (if at times, slightly off-key) debate on EAT last year was in response to a suggestion that if an agent couldn’t sell a property at the price they’d valued it at, then the agent would have to purchase said property.
We’re not suggesting that this proposal be taken seriously.
But over-pricing is a problem that agents themselves recognise, and it certainly isn’t in the interests of house price stability. It also isn’t in the interests of agents themselves, let alone the house-moving public.
It’s basically become a habit. A bad habit.
The question is how to break it. Your ideas, as always, are very welcome. Please post below.
Comments
If the UK has problems with overpricing, perhaps you could look at the examples below, by two Portuguese agents (note: check out the details of the property and price).
1) http://casa.sapo.pt/Quinta-T9-Sintra-Sintra-e9d61a22-80c6-42bb-87b1-230de5cc6925.html
2) http://casa.sapo.pt/Turismo-Rural-Sintra-Sintra-589cbfff-b54a-47e2-b549-143466334a4d.html
The difficulty in obtaining finance is obviously the key issue at the moment and will remain so until one lender breaks and runs and starts to increase market share forcing others to compete. The ongoing problem in market stability and price fluctuations will always be down to the issue of supply and demand. In our small, overpopulated, divided, complex country it's not likely to be an issue resolved in the near future. The government could smooth planning issues to increase the supply of new large scale developments but the land is never going to be cheap and where it is affordable its unlikely to be in areas where demand is highest. As for overpricing - no sale no fee! no pay bills! - it's up to vendor's to make sure they don't tie themselves up to ridiculously long sole ageny periods so if the the golden offer doesnt turn up they can change agents. How can an agent - or a surveyor for that matter price a property to suit the whole market? it's can only ever be based on historical fact and a presumption of future trend. Does a house in the catchment area of a good school have the same value to a household with children to one that doesn't, or the proximity to public transport if you don't use it? There is of course a pure cash element to property ownership and also a hefty emotive side too - sometimes it's just "right" and therefore worth more. Dinner conversation abroad must be so boring where stability in the housing market and the weather is the norm!
Chris,
Would you accept that a good agent and good marketing can gain a higher price for a house?
Would a surveyor value a house on a crap agent selling it or a good one?
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"instruct the independent surveyor to value it."- ha! most surveyors can't value for toffee!!! In my experience greedy vendors go with the agents who overprice, usually the new kids who are on commission for getting instructions. This practice should be banned. They know who they are, usually corporates who also pontificate on the state of the market.
Chris-That suggestion is very similar to Scotland and the Valuation is in the Single Survey- (Version of HIP of course), they are wildly over priced in most instances, how many sensible folk would ask a surveyor to value any property if they had a choice!!!???
Why not make it law that a surveyor has to value a property before the house can go onto the market! They issue a valuation certificate, which can be used by the agent to back up the asking price! If the surveyors last word is god anyway and the only people the banks will listen to, why not get them in at the start and let them fix the asking price!
These surveyors would be indipendant from all estate agents and no commission should be obtained by estate agents in the way that HIPS were! They could also do the EPC's while they are at it.
The price for a valuation should be something like £50 across the country and a property could not be re-valued by another surveyor for 4-more months! That way, if a greedy vendor didn't like the valuation he/ she just had to lump it for another 4-months and hope that the next valuation would offer them a better price.
I also think that square footage or meterage needs to be a legal requirement on all sales material, again set by the surveyor. I am sick and tired of vendors trying to say why they should have a higher price because their house has a bigger master bedroom than the other one down the street! Listen love, you overall house size is smaller and just because your master bedroom is 6" wider does not mean it is worth £10k more!!!
If agents could just get on and market properties and surveyors could be responsible for setting the values, we wouldn't have to take the flack for over or under valueing property. We could also then be judged on our services & fees and not on what we would be willing to list the property for and it would stop the idiot agent from topping the value to win the instruction, locking the vendors into long agency agreements and then working on getting the price down months later!
In regard to this particular artichle, there is no solution at the moment
The banks are the key to the recovery and have now got into a very comfortable position of wide margins and low risk on new loans - why would they change unless they were forced to
Sellers will not be able to reduce to the levels to get the market flowing normally
Therefore we will have to wait for property armageddon or for wage inflation
The asking price / sale price argument is a complete red herring - one is a sample of sold houses - the other is a sample of what's for sale not whether they are in the price range that is actaully selling
How would it look if everyone with a half million pund house suddenly put them on the market - the gap would widen further
Happy New Year to everyone
As time goes on the sensible vendor is becoming more and more wise as to the value of their house - most are now researching their price before calling the agent.
Un-motivated or un-educated vendors are going with the top price, usually given by the un-motivated and un-educated agent who believes boards are a sign of success - not sales!!!
2011 will see a real true change in the way sellers and agents behave, we are three years into this property recession with no sign of it ending.
My guess is that experienced sensible agents will prevail, wide boys (either sellers or agents) will fail, and given another five years the mortgage market will be back to the long term norm, but by then agency will look entirely different and the business of valuing houses will be out of agents hands.
CGT would be an excellent idea as there is no good reason for not applying it to main homes - except the lost votes...
Would be really good for agents, wouldn't it? To use your available CG allowance before it expires (7 years, is it?) , homeowners would need to sell and buy periodically.
the notion that the vendor is responsible for over pricing is preposterous what are they paying the agent for exactly surely the agent has a responsibility to inform the vendor of the correct price because if they accept an instruction for an overpriced property then they must be responsible, they can always say no to the instruction based on the fact the property is overpriced and if they do not do this then they are 100% to blame and are truly weak business people no wonder they are loathed.
EAT is quite right about 'Today'
However, if over time wages rise and material costs rise then new building costs will rise which will pull up the prices of second-hand homes. Over time property will always increase in value. Th e only reason that increases got out of hand between '97 and '07 was the stupid lending policies of greedy banks and builing societies.
In the end the market will decide - without interference by government.
Managing Vendor expectation is the challenge all Agents face.
Vendors are fixated on the "profit" they can make on sale and with no Captial Gains Tax payable currently on the sale of a main or sole home there is no disincentive. Of course no MP would hang his career hat on such a punitive peg and even suggest introducing CGT on main home sales but the huge "profits" homeowners can make from the housing market are self-explanatory - sell your home, make a profit. Perhaps CGT could be payable if homeowners buy and sell within short periods of time to deter speculative "main home" buying and selling.
Homeowners do see their home as a way of creating income and in this society, income is taxed. Why should homes be treated differently?
We have such a short supply of land and housing that demand will always exceed supply and push prices up. If Grant Shapps focused on getting the Government controlled banks to fund developers at 75% of the development cost instead of their current miserly 56%, if they'll lend at all, he'd be increasing the housing supply which would help to prevent prices rising. His wishes, without some sort of action are a bit like King Canute's vain attempt to stop the tide rising in Bosham in the 11th Century. Our leaders never seem to appreciate their limitations, do they?
I wouldn't vote Burf for PM, but essentially he/she is correct.
Ultimately homeowners are responsible for over-valuing not estate agents. Its often a case of "OK, we'll try it at that price", knowing it won't sell and that the price can be reduced after a few months.
Idea: Once the vendor chooses the selling agent the instructed agent will then instruct the independent surveyor to value it. Make it mandatory for a surveyor to value the property at a fixed cost of £150. That way there isn’t a ‘who can value it the highest’ competition between agents.
PS sorry for all the spelling mistakes just made me angry so typed it too quick please dont let this stop you from voting me in!!!
Oh dear poor Grant now thinks he can change what is culturally embedded into our national psyche. He has to come to terms with the fact that owning a home is either a good idea or a bad idea. No different to stocks and shares really. To imagine that one one create a situation where house prices are stable is living in cloud cuckoo land. As a previous Conservative once said "it's the market stupid". Young Grant should realise that a thriving housing market would kick start our economy and work towards taking action where house building is profitable. And by the way that doesn't mean shabby self-builds.
Dear me talk about relighting a fire!!
I tell you what we Estate Agents will agree to buy any house that doesnt sell at the price we valued it if the media agrees to stand in front of a firing squad everytime they try to turn something posative into something negative!! Fair Deal???
And before you lay the boot in let me assure you I am 100% against over valuing but feel the home owner has more to do with it than the incompetant Estate Agent who is only listing it at that price so they can get there month instrucuions bonus! Maybe they should also join the media in the firing line!!
VOTE Burf for PM!!!