How was June for you?

With the publication of the latest figures for June from the Land Registry, we can now see how June compared to previous years.

• At just 94,000, the number of new properties coming onto the market was down by 45% on June last year.
• The number of sales was also down across the UK but the decline is slowing. This has kept the total number of individual properties on the market 30% below June last year as casual sellers stay away although both asking prices are up above their long term average.
• Sale prices however are below their six year average however suggesting an imbalance between asking price and sold price.
• The number of days of unsold inventory is below the average of 310 and is 21% down on last year at just 290. This is an important figure which illustrates the number of days of stock available considering the current volumes of sales per day. This level gives some hope to those looking for the market to stabilise although it does not suggest that prices have stopped falling

Using Big Brother to reassess your council tax

Council tax valuations on the 23.2 million domestic properties in England and Wales that are used to calculate the tax that each household pays each year are currently based upon the price a property would have fetched if it had been sold on 1st April 1991. The Valuation Office is now compiling information that will enable it to update these values and is using technology to help. A swimming pool or a moat, a sea view or a home cinema all add value to a property and by using existing technology, the Valuation Office can see more than ever before.

The Valuation Office web site confirms the 16 individual attributes that they use for each property including something called the Value Significant Code (VSC) which details any special features, good or bad, that might effect the value. Globrix, one of the better property web sites currently lists 3827 homes for sale with swimming pools, 1333 with tennis courts, 2843 with rural views and 28 with wind turbines. 57 have moats although it isn’t clear who pays to clean them!

The Government are already using Google Earth and satellites to check what farmers are growing, water companies and local authorities check if your lawn looks greener than it should during a hose pipe ban and a greenhouse or even a wind turbine can be seen from the air. Things that might effect the value of your property can now be recorded without anyone having to visit and in theory the new development of houses built five years ago, the new road or the sewage works that might pull the value down should be equally visible.

By far the most helpful data available to the Valuation Office however are the old estate agents details that were used if you either did sell or just tried to sell your home during the last nine years.

Rightmove, the biggest of the property portals with archives of over 10m properties, sold the data they collected from estate agent adverts for a reported £10m in June 2005. The original 3 year contract has been extended to the end of this year according to Hansard reports. The contract would allow tax bureaucrats access to the information used when your house was marketed. Estate agents, who see none of this revenue, produce pictures of the properties including the views, floor plans and in some instances even virtual tours.

When added to the records that the Government already collects via HMRC or The Land Registry on individual sale prices, the new database of the nations housing stock should be very accurate indeed. Whilst the original revaluation exercise was subsequently cancelled, the total cost of the exercise could exceed £30m once the additional costs of the project such as the software purchased via Capgemini in 2005 are taken into account.

In 1991 the average property was worth just £64,000 according to the Halifax. This number has grown despite the recent market turmoil to £155,000. If all homes are to be re-assessed after the next election then tax inspectors will have access to huge amounts of electronic data to draw upon which will allow them to recalculate the value of your home and as a result the tax you pay without even having to knock on your door.

The impact of foreign buyers

Earlier this week the busy press office at RyanAir had me scratching my once head again. Was their media-shy chief executive saying that the airline was pulling 600 flights (37%) a week from Stansted this winter and about a third from Edinburgh the result of falling demand, was it a stunt to try and reduce the £10 airport tax in the UK or the landing charges that they are billed for using the tarmac and the regional airports they fly to? Part of me thought “he’s a clever man that Mr O’Leary so I’m sure it’s not as simple as it seems ” and then I considered the impact on house prices if the second home owners who had fueled the surge in demand in otherwise unfashionable addresses couldn’t catch a flight for a fiver.

It’s down to the remarkable service that the likes of RyanAir and EasyJet have set up that people considered buying (or “investing” as they rather naively described it) in places like Pula in Croatia or Lodz in Poland. I’m not sure what the draw of a recent war zone is for the average ‘Place in the Sun’ viewer but thousands of Brits seem to have been drawn like moths to a flame.

It’s possible that RyanAir might consider pulling out of some of their routes altogether. For the residents of Stansted campaigning for fewer flights this is not going to be a great disappointment (or bad news for the value of their homes!) but if you bought a house hoping to use the daily flight to Bergerac in France or Peruga in Italy for example then you might be pretty jumpy.

The airline have been uncharacteristically shy when it comes to confirming the specifics of which airports may get the chop but the impact on local house prices of the rich Brit has been significant in many of the provincial centres that they fly to. Without them the supply of owner-occupiers dries up as will the stream of holiday makers coming to help pay the mortgage. House prices could fall by as much as 35%.

When RyanAir were rumoured to be pulling out of flights to Valencia last year the local market froze. The airline brought three quarters of a million passengers to the airport each year. As it turned out, a solution was found but not before estate agents in the City had lost several pounds.

In 2003 the European Commission ruled that RyanAir could not receive what were referred to as ‘subsidies’ from airports like Charleroi in Belgium. The rising local housing market was throttled before a solution was found.

Falling house prices are not a just British thing, values have been falling almost everywhere in Europe. In some of the less robust markets where a froth has been created by foreign buyers, locals and speculators have been cashing in on the bonus that the budget airlines brought. Like a rushed pint of Guinness, undue haste results in too much froth and as an Irish airline will be only too aware, there’s nothing worse than a big head.

When selling is the least of your worries

Around 700,000 people will confirm that trying to sell your house is pretty tough at the moment. Most people trying to sell their home have been confused by which agent to choose, what price to quote, what they can buy if they have to take so much less than theyʼd hoped? In May 2006 136,000 homes sold in the UK of which 12,781 were in London. In May this year there were just 62,000 in the whole country and only 3,000 of those were in London. At these levels things really can only get better.

But dealing with the stress of selling is actually not the biggest problem for around a fifth of all sellers this year. Because there are so few people actually putting their properties onto the market, a very significant proportion are made up of those who are only selling because they have to. These are the so-called ʻforcedʼ sellers, people who have little choice because they are in debt, getting divorced or because of the death of a partner or relation. These “three Dʼs” put extra pressure on everyone involved often because the
sale is reluctant and the result of a much more emotional event.

In recent weeks two old girl friends have found their worlds turned upside down. Each has decided, long after we all thought they should, to call time on their “sham of a marriage” and both now find themselves wandering through the emotional wasteland that often follows such massive decisions. Their lives have been shredded – first as they owned up to themselves that things werenʼt right, then as they fought to save the second most important thing in their lives (after their kids) and finally the ghastly period of having to
own up to their family and friends. The “Iʼm surprised you put up with him for so long” and the “maybe you expected too much” comments, the predatory advances of their girlfriends husbands, the look of pity – all the emotions, many often only in their minds, all screw with their grip on life. In both cases, each had to book summer holidays, hire and fire nannies and be responsible for the weekly shop but it is 15 years since either had to look after their financial security and that of their children. On their own now they have
to deal with solicitors, contractors and letting agents as they find somewhere smaller to live and with an estate agent who wants to sell the house that they never really wanted to part with in the first place.

The same tensions appear when a parent dies or if youʼve lost your job. The house you grew up in or that youʼve raised your family in has to be sold and a new chapter begun. There seem to be very few guide books on “the pitfalls of selling for beginners” and even fewer crash courses on “learning to deal with tradesmen and professionals for dummies”. Along with the grief, and often anger, there has to be room to think about the disposal of a significant financial asset. Bad enough to find your husband has been letting you down for years without also having to learn how to deal with an agent. Who is going to help find two
new homes from the proceeds of the sale of one – and do it in 2009 when the property market is on itʼs knees?

The most important thing to remember if you find yourself struggling with how to separate the practical elements of an emotionally turbulent event is that actually most people want to help. The chances of someone actually taking advantage of your situation is statistically remote but the best way to protect yourself is to get some good professional advisors. A lawyer will need to be paid by the hour but a proactive estate agent is paid only on results. Be clear with your advisors and come clean. Tell them everything and they can then explain your options and advise on a course of action. Itʼs up to you to decide if you want to follow the advice but friends can recommend trusty advisors, many through first hand
experience.

Remember, whilst many forced sellers are only in this position as a result of being let down by someone else, trust is something that can be rebuilt and, like riding a bicycle, learning to balance is something that almost everyone can do if they try hard enough. The world may seem a very dark and unhappy place just at the moment but unnatural though it may seem, placing your trust in professional advice is often the first step in finding the way out. With the practical elements of life sorted you can then get on with your life –
finding a new and funnier partner, a more rewarding job or in building the sort of home that your parents gave you – remember, the one that you never thought could ever be replaced.

Sales, fees and prices all down!

We’ve heard talk of ‘green shoots’ and of the return in some quarters of gazumping but however hard they try the optimists seem to be loosing the PR battle. Consumers and the media refuse to buy the story that the housing market is on the turn.

Whilst there are signs in some quarters that life may not be getting any worse, the only justification that things may be getting better is because frankly they can’t get any worse. Once you get down to selling 1 house a week, it’s no wonder that estate agents are all humming the tune “Things can only get better”!

House prices are officially down 25% from the peak according to the Halifax. The number of homes recorded so far as having being sold in May is just over 14,000. Down from 63,000 in May last year and 106,000 in 2007. These 14,000 will increase but experience tells me they are unlikely to more than double suggesting we are on track to see the number of sales in the peak selling month down over 70% from May 2007. Fees that estate agents charge are lower than ever as the supply of new property plumbs new depths and competition for the 118,000 homes that came on the market in May meant that agents had to cut their throats to get the business that in May 2007 was over 100% larger at 250,000.

Fee levels are down, house prices upon which these fees are based are down and the number of homes actually selling is so small you need the Hubble telescope to see them. Not much fun being an agent then. Unless of course you are an architect I guess. New commissions are down by 75% I’m told and painful though it must be to have studied hard to qualify as a professional, some graduate architects are actually considering going into estate agency just to keep some connection with property.

A small part of what I do is to advise people on their search and purchase of a new home. You might think that advice from a buying agent is what every sane person ought to consider in a world dominated by selling agents (not brokers!) however there seems to be no end the number of people who feel that representing themselves is the sensible course of action. Most professionals can’t value a property in this market to within 10% so quite how the layman is supposed to do it beats me. It’s no wonder the surveyors who come round to sign off on the deal that has been done before the bank will advance the funds seem all too often to mark the value down. At least one half of the team who struck the price has no qualifications to know what is fair and reasonable and often the buyer has even fewer!

Last week we exchanged contracts on a pretty little house in Chelsea. Originally put on the market hoping for £1.6m the guide price and reality has tumbled and when at last contracts were exchanged the price was just over £1m. My concern is that my clients may still have paid too much but at least they are in the house they see as being their home for the next five years on terms that were affordable. They made the best of the current market.

Whilst we often talk of house prices from the sellers perspective where increases are good and falls bad, the current trading conditions are good news for just as many people as usual – they just happen to be the buyers who rarely have a collective voice in the way that estate agents and mortgage lenders do.

In a bull market any fool can sell a house and there were many agents who proved the point. Now the market is slightly tougher to endure than season 11 of Big Brother and some buyers look like they are starting to appreciate the merits of evening the odds and hiring their own advisors. You wouldn’t pull your own tooth and few do their own divorce so why would you head off on your spend all of the money the bank will lend you without asking someone what “Caveat Emptor” means?

Foxtons vv OFT – The verdict!

The Court of Appeal has handed down judgement on the appeal made by the OFT into the case that the OFT originally lost against Foxtons over the terms of their contracts with landlords – specifically on renewal fees when a tenant stayed on. The OFT had claimed that the terms were unfair and that consumers were disadvantaged as a result. More background can be found here.

Although kicking estate agents is fast becoming a national sport and one has to admit that Foxtons are ‘on the naughty step’ as far as the judge is concerned the OFT has not won their main argument that renewal fees are wrong in principle.

Whilst there is much that can be improved, the lettings industry is more highly regulated than their colleagues in sales and although not perfect, advances in recent years have gone a long way towards bringing the service received by the vast majority of landlords up to the level they should expect. The market for lettings and sales advice is extremely competitive and consumers have a wide choice of fees, terms and expenses. There is little barrier to entry and this ensures that both the sales and lettings industries are some of the most competitive in the world.

The decision of the High Court today is something of a Curate’s egg – good in parts but overall appears to be a victory for common sense. Quite rightly it ensures that agents appreciate that their terms and conditions must be clear to all and all agents will need to go back to their own lawyers to double check that theirs are. The judgement has upheld the view that agents should not be able to charge landlords a fee if the tenant goes on to buy the property but it also recognises that consumers are grown ups, should be treated as adults and accept that they are responsible for what they sign up to. In the 34 page judgement heard before Mr Justice Mann, the judge states on several occasions that “I am not ruling against renewal commissions per se. I am not even ruling on renewal commissions at a particular level. I am ruling on the manner in which Foxtons seeks to charge them”.

Like most lettings agents in London who have carried on this practice, Foxtons have already amended their Terms of Business and will no doubt continue to do so as the implications of this judgment become clear. Unpopular though it might be, in my view it does not seem that in this case either the agents or their clients have been disadvantaged and perhaps with hindsight, the decision of the OFT to put the cost of this expensive appeal on the already stretched public purse might have been ill-conceived. Perhaps it’s time that public servants remembered that they themselves must provide a fair and realistic service and pull back from the idea that we the public are unable to think for ourselves.