Nationwide market update & are lenders playing politics?
Earlier this month in their regular report on asking prices the Rightmove ‘greed gauge’ recorded vendor expectations having risen 0.7% on the previous month and was 1.5% up on September last year. This morning (Wednesday) the Land Registry confirmed that despite estate agent optimism sale prices for the relatively few homes that had actually sold did not match this with average prices falling 0.3% on July and 2.6% lower than August last year. It seems that those selling see the glass as being half full. Those buying consider it to be half empty.
Average asking prices are 3% below their highs in 2008 whereas sale prices according to the Land Registry are now about 12% below their peak reached in England & Wales.
The volume of property sold in June in England & Wales was down 13% on last year with just 55,000 sold. In June 2007 there were 123,381!
Whilst the two samples are not identical the trends from both the Rightmove ‘asking price’ index and the Land Registry ‘sold’ index provide a good guide to the relative health of the housing market. Just as no two areas are the same, these surveys highlight that whilst sellers remain optimistic those who are buying will only do so at what they regard to be a conservative value. The result of this difference of opinion is that the market is seizing up with low sales volumes reflecting that very few buyers and sellers can agree on a mutually uncomfortable price.
Sellers are not listening to their agents. Only those cashing in (like those retiring) actually require a high absolute price for their property. For the vast majority who are trading up or down it’s all relative – it’s about the difference between what you sell for and what you pay. If your own property is worth less than you had hoped then you will find that the one your buying will be equally affected.
Low transaction volumes demonstrate just how few buyers and sellers can agree on prices. You have only a 30% chance of selling if you put your property on the market today and those who are serious must concentrate on ‘the 3 P’s’ – Price, presentation and promotion.
It’s much easier to work out a fair asking price these days thanks to the internet. Ask your agent about the price similar properties have sold for. Ignore asking prices as these are not a guide to value.
If you are serious about selling then promote your wonderful home. It may be uncomfortable but for a short period of time go all out to tell as many people as possible. Make sure you are using the internet where more than 80% of all home buyers start their search. Put up a For Sale board for a couple of weeks to catch those who may be impulse buyers.
Make sure your home looks good when people come to see it. You don’t want buyers discussing the ring around the bath when they leave, you want them to be planning how they would live in it!
This market is very challenging and will remain so well into 2012. Sellers need to wake up and realise that an optimistic guide price just makes you look greedy and unrealistic. Buyers are like butterflies on a winters day – rare and exceptionally difficult to pin down.
So now we have part 2.
With the debate on the merits of part 1 of the estate agent ‘mockumentary’ still smoldering the makers have just sprayed petrol on the embers with the release of the next ‘episode’ which has been launched today and it is likely to divide opinion once more. Part 2 includes some equally clever editing, the same prep-school humour and must surely beg the question if the performers are in fact just resting actors. It is, it has to be said, very, very well made!
In the last few days the national press has picked up on the story with splashes in The Mail on Sunday and The Sun and the YouTube counter has clicked up over 30,000 viewings. As suspected, south London agents Douglas & Gordon have owned up to being the architects of what they limply describe as being something “intended only for industry insiders” and they are quite clearly relishing the publicity they have achieved. Whilst the films obviously tickle the funny-bone many though are questioning the wisdom of producing such a film with predictions from some that it will backfire.
Douglas & Gordon have linked their brand to a film portraying a business that many members of the public can readily identify with. Whilst most accept it is a joke the bawdy humour, questionable behavior and suspect morals resonates with them. It’s funny frankly because that is how the public perceive agents.
Still the question that many are asking is how can this be good for the D&G brand? It’s clearly too expensive an exercise just to be something that was meant to cheer up the industry and yet it seems in advertising terms to be the equivalent of sponsoring the Titanic. Already i’ve heard the firm being referred to as ‘the new Foxtons’ and I didn’t get the impression it was meant as a compliment.
Lots of individual agents work hard (like D&G director Ed Mead, himself a Board member of The Property Ombudsman) striving to improve standards and the image of the profession. But when you irritate so many of your professional colleagues with a film that appears to support the public’s poor view of the industry the senior management at D&G who sanctioned this may regret their error. Many people will have forgiven them for the first film but the release of a second might be seen as a crass and foolish move.
There will no doubt be some kind of finale or closure in the next few days and the debate will continue long afterwards. If D&G have got it right then they can expect their business to prosper and the risk they have taken will have paid off. Some people however think that they have flushed a good name down the pan, done the wider agency community no favors and left their competitors with a wide open goal. Will people be left thinking that D&G poked fun at estate agency of will they be left thinking “Douglas & Gordon may think that this is how estate agents behave but we want someone who doesn’t.” If it’s the latter then D&G’s competitors will clean up.
Those with not enough to do (or as I prefer to describe myself and others like me “those with an interest in social media and the property market” have aching sides having watched the YouTube film “UnderOffer2011”, described as a ‘Mockumentary’ and set in an estate agent office somewhere in London. I spoke to about half a dozen Douglas & Gordon staff yesterday, not one denied that the YouTube video was at least a D&G approved production. A few more even emailed it to me but of course a formal link to the firm may just be in my imagination.
To be honest, the glimpse of what looked very like a branded Golf, the recognisable blue and white umbrella and the iconic D&G note pad not to mention the fact that at least one member of the fictitious staff seems to have an identical twin listed as working in the firms Hammersmith office on the the D&G web site all point to this being a classic attempt at ‘viral marketing’. The production of a video that is included in an email which the recipient thinks amusing enough to forward to his contacts. Like a chain letter it multiples and within a very short space of time the film (and the underlying message) is being viewed by thousands. An Aussie agent produced one that was very effective a few months ago.
I should declare that I think the film was incredibly funny. Like all good jokes, it was all the funnier because there is an element of truth in it. I know a lot of estate agency offices (mainly in London) which are just like the one depicted in the film. I thought that the director of the video (from Real Property Tours I believe) had probably not had to distill too many hours of film to come up with the finished product and the results were a great advert for them (Real Property Tours at least).
The reason for releasing a viral marketing campaign is that it is an incredibly cheap and efficient way to get your message, brand or product out to a huge number of people. The more people who email the film, Tweet or blog about it the better (I’m happy to be doing my bit!). I expect that there will be one or two more funny episodes with a final ‘reveal’ which will no doubt try to suggest that somehow Douglas & Gordon are not like the agent depicted in the film. The job of bringing the brand to the attention of the industry and perhaps to potential clients will have been done.
But there is a fine balance required to make a successful viral product. Good taste is often the first casualty since humour is always something of a question of taste. Bernard Manning wasn’t everyone’s favorite comic. Jim Davidson admits he often steps over the line. The blizzard of jokes that follow a national tragedy are often very funny but not something that one feels should necessarily be repeated. I’m sorry, I laughed at the “Trapped minors, a job for Gary Glitter” line that did the rounds hours after the Welsh mine disaster earlier in the month but I stopped short of repeating it myself.
So it is with the ‘Under Offer’ film. One famously stuffy property boar sniffed when he saw the film claiming (as always!) “I’d seen it some time ago and to be honest I didn’t think the menstrual cycle reference was very funny”. Now the fact that this particular man didn’t laugh is, for me almost the definition of something that must be funny but the serious point is that some people will think that this was a film made in a D&G office, not on a set and not with a load of actors. Rampton Basley, the south London agent whose for sale board is seen being hacked down thinks the film is hilarious and Joel Baseley himself is an ex-D&G employee but there are some who think that the management have made a colossal error. Since we don’t yet know that it is D&G and they seem reluctant to take the credit it must be possible that this is some kind of spoiler put out by a competitor. And that’s the problem. It is so close to the bone that for some it could just be a piss-take. It could quite easily be a film made by an ex-employee to highlight what they might see as the insensitive, misogynous and bigoted values held by a firm who fail to live up to their own boasts of high moral and ethical standards.
By the time we have seen the next episode, the final reveal and have confirmation of who really is behind it we will be better able to judge whether this is a great piece of marketing or a colossal mis-judgement – a ‘Ratner’ moment. Personally it feels like the former and regardless, the fact that it is a trending topic both on and off line suggests that it has achieved what presumably the makers set out to and has got at least some people talking.
When people scream for more homes to be built, encourage Grant Shapps and the Government to do something about ‘the lost generation’ and blame the banks for refusing to lend what they are really asking for is housing to become more ‘affordable’ and often what they actually mean is ‘cheaper’.
Calls in recent days for more houses to be built have come many different groups including house builders whose business is the construction and sale of new homes. This may be welcomed by the 1million estimated to be on council housing waiting lists, 2m of the 3m who currently rent in the Uk but might prefer to own and perhaps a further 1m who are still living at home with mum & dad but I speculate that the owners (and mortgagees) of the nations 24m housing stock might be less keen to see house prices fall as a result.
There is a delicious tension between those who have and those who have not. Those who have acknowledged that something ought to be done but like the Green Belt ‘Nimbys’ don’t want it to be done at their expense. We now have a second generation of people who have found that owning property not only provides them with somewhere to live but also gives them a pension, the chance to better themselves with precious little skill or effort and a way to provide for their family in a way that their day job could never. The silent home-owning majority is unlikely to welcome anything that jeopardises the cash cow that property has been for the past 30 years in an effort to help the minority who many see as wanting to have what they feel as home owners they have earned.
The only alternative to more cheaper homes is to relax lending criteria and to return to the days of 2007 and Northern Rock. 100% mortgages, ‘liar loans’ and the inevitable ‘bubble’ that follows. Even the most enthusiastic builder must see the error of this plan but I heard the head of house builder Bovis on the BBC earlier this week calling for someone to take over the help they have been giving buyers with funding their deposits! He wants higher loan to values and wants someone else to take the gamble that history tells us doesn’t pay off!
As to the health of the market through the remained of 2011, I think that outside the ‘gated community’ of the M25 (and parts of the South East) sale prices will continue to fall – perhaps by 5% in some places, volumes will remain at historic lows and asking prices will fall back as sellers finally get the message that asking too much just makes you look foolish. Inside London, Tory ideas being aired at their party conference to introduce Capital Gains Tax on property sales to try and milk foreign owners of luxury homes in central London will hold back prices even in this oasis with the only real winners being the accountants charged with coming up with tax avoidance schemes.
The housing crisis is unlikely to be solved by the present generation without sharing the pain with those who feel that they have already paid for the privilege of home ownership and I suspect that there is more chance of Col. Gadaffi winning a Nobel Peace Prize!