Henry Pryor Blog

Wednesday 14th December 2011

This week, the monthly charade that is the RICS’s ‘sentiment survey’ was published with the collective views of about 250 chartered surveyors and what their gut instincts say has happened to house prices in the past four weeks.

Then, inspecting the seaweed, they have a punt at what the future may bring. Not very scientific!

Contrary to the impression I give, I actually have considerable respect for the RICS, but I wish they would stop passing themselves off as estate agents.

Very few are. In fact, most are highly qualified individuals scattered across the world bringing high standards to the property profession. Most members would regard selling homes to be beneath them.

The latest RICS survey simply confirms that the balance of those few surveyors who don’t think that nothing is going to change is marginally negative.

Last month’s Halifax survey saw a modest fall in prices, the Nationwide inexplicably recorded a rise in prices, and the Roightmove index of asking prices saw a significant fall of over 3% in November.

Most people would be forgiven for thinking that house prices have dipped only a little, but that is only because of the London Effect skewing the rest of the market.

In fact, average prices outside the gated community of the M25 have dropped like Daybreak’s ratings, according to average sold prices from the Land Registry.

Across England and Wales, prices are typically 12% below their peak reached in January 2008. But even this headline masks more real pain.

Prices in Newcastle, home of Northern Rock, are 17% lower. Peterborough is 20% down. Average house prices in Hartlepool are 30% below their peaks reached when credit crunched.

Of course, there is good news for the residents of the Royal Borough of Kensington & Chelsea. Here, prices have actually risen by 16% since 2008.

There is, of course, also a huge gap between the average asking price (reported by Rightmove) and the average sale price (calculated by HM Land Registry). Sellers and their agents are becoming less and less realistic.

I suspect that the real story may be the fall in transactions. This affects more than just estate agents and the mortgage market. Plumbers, builders, removal companies, retailers in the High Street – all are losing out as less than half the number of homes sell this year than sold in 2006 and 2007.


Over Christmas and New Year we traditionally take stock of the housing market, reflect on what has happened in the past year and look at the tea leaves for 2012. If you ignore London, then it would be fair to say that the housing market is in a pretty perilous state.

With little change anticipated to lending criteria and most loans unaffordable to all but those who don’t need them, the outlook is bleak.

Government announcements last month to help the building industry by offering vulnerable first-time buyers help may please the shareholders of construction companies, but if you had taken up one of these ill-conceived offers and bought a home in most parts of the UK four years ago, you’d now be in negative equity. Worth a thought when you find a housing charity rattling a tin in the High Street in the next couple of weeks.

Happy Christmas and thank you for letting me abuse your inbox with my emails. A happy 2012 too!

(24) Comments

Added by PeeBee on 2011-12-21 15:54:25

Hello again, Rick D!

You will please remember that the quoted part of my post was in response to your saying "...you are fortunate in your industry that Right Move charge a flat pricing structure per branch...", and I was simply pointing out that this is simply not the case. Point 1 of your response is therefore a tad uncalled for although at least you acknowledge the validity of my argument - which is repeated in more acceptable terms in Point 3. You keep agreeing with me and we'll get along swimmingly, mate! ;o)

I completely agree with you on your second point, by the way. Such a damn cheek, innit, to attempt to trade profitably?

Or is it what I prefer to call it - knowing your worth to your customers... and actually charging it?

Here's an idea - maybe Agency listers should go on a RIGHTMOVE training course for increasing Fees - and not the route you suggest?

Now THAT would bring results - to that effect I have no doubt whatsoever...! ;o)
Added by Rick Deckard on 2011-12-21 14:58:23

"But here's the thing, Rick. Rightmove charge more year on year. So do the gas, electricity, water, Council Tax, stationers - even Tesco dare to put up the cost of tea, coffee, milk and sugar that all these Estate Agency offices function on.

So - if house prices stay static - or go down; and/or if less properties sell year-on-year, then Fees must increase - am I right? "


Just when I thought we were getting on..........


1) No sh** sherlock
2) How dare they run a profitble business model
3) Okay I concede - fee's must go up (yawn didnt I say that already ?)

Added by PeeBee on 2011-12-17 10:50:12

Rick D: Thank you for taking the time at very comprehensively respond to my rantlet.

Firstly, I did not state that you had "poor busines acumen". I said you "did not appear to have MUCH business acumen". Big difference. Little but good is better than lots of poor - would you not agree? I did not have much business acumen - but I built up and ran a very profitable part of a business.

"To answer your comment - "selling ten units costs 50% less in marketing terms than 20 units" - this is based purely on variable costs ie consumables (a bit of paper and stamps) and staff?. Therefore this is incorrect as we both know. In so much that these costs are negligable aren't they? They are less, granted, but I dont think they are 50% less. The rest of the infastructure is already there and paid for? Desks, phone system, IT, signage all fixed costs?"
Erm... no, in a nutshell. However, if any Agent wishes to back you up and say that it costs no more than a few stamps and brochures to list and sell a property, then I shall bow to their - and your - superior knowledge of the business and admit that I had it all very, VERY wrong when I ran my own offices and departments in the past.

"To be honest you are fortunate in your industry that Right Move charge a flat pricing structure per branch, rather than a per listing slot based allocation that increases the more stock you advertise."
But here's the thing, Rick. Rightmove charge more year on year. So do the gas, electricity, water, Council Tax, stationers - even Tesco dare to put up the cost of tea, coffee, milk and sugar that all these Estate Agency offices function on.

So - if house prices stay static - or go down; and/or if less properties sell year-on-year, then Fees must increase - am I right?

I look forward to our continued debate - but hope that we get some additional input from those who walk in the moccassins, as neither you or I are currently doing so...
Added by Puzzled of Tunbridge Wells on 2011-12-17 00:04:21

Peterborough down 20%? I wouldn't bother looking at a graph of Peterborough as there are too few sales to draw meaningful conclusions - particularly if you separate the market into property types (flats, terraces, semis, detached)

So, a look at Cambridgeshire on here:

http://www.home.co.uk/guides/house_prices_report.htm?county=cambs&all=1

I can't see how prices for any house type could be described as being 'down 20%'
Added by Rick Deckard on 2011-12-15 11:52:13

@PeeBee Apologies Mr PeeBee it wasn't my intention to put words into your mouth...no honestly it wansn't and to be fair I find your views/banter amusing enought to write on the site here.

It's a tough call for everyone at the moment. I for one have never experienced any market quite as distorted as this and trust me when I say that I am not aware of any industry that has had a good time of it over the last 3 (coming up 4 years).


In defence of what I posted please do not think I picked figures out of the air just to pick a fight. In my day I was a turnaround king and a great advocate of commercially viable fees. I believe the EA industry in the UK is one of the most hardworking, dynamic, innovative and forward thinking business sectors there is.

Please just accept this, as for me, as for others; it would be a very sad day to see EA come off the high street and that is a very stark reality faced by any retail bricks and mortar business.

In respect to increasing transaction levels my only motivating factor is this - too keep EA on the high street and keep the people involved in employment and to operate successful business's. Their are no hidden agendas, no conspiracy theories and no ulterior motives.

To answer your comment - "selling ten units costs 50% less in marketing terms than 20 units" - this is based purely on variable costs ie consumables (a bit of paper and stamps) and staff?. Therefore this is incorrect as we both know. In so much that these costs are negligable aren't they? They are less, granted, but I dont think they are 50% less. The rest of the infastructure is already there and paid for? Desks, phone system, IT, signage all fixed costs? The only significant variable costs are staff salaries and if they aren't hitting the numbers compared to your competitors you need to be asking why surely?

In respect to fee's In my experience in a rising market where the perception is that proeprty becomes easier to sell the fees reduce in line with the "cycle" time of going to market to completion and pipeline and stock turnover. I don't agree with it but it's always been like that. There will always be an EA that advertises "cheap" fee's to obtain an instruction or overvalue. So what it just means the vendor is more receptive to a price redcution and higehr fee second time around? Again I dont agree with it but it is how it works, I cannot shift the whole of the UK's general publics percetpion of wanting to try a higher price with a cheaper fee.

However in a depressed market where property is harder to sell therefore reducing turnover based on unit numbers then the fee is and should be higher. It is commercial sucide to take on low fee instructions in this market place (unless you can gurantee cashflow ie repos) If you are struggling to get higher fees then the I would suggest the best investment that you make is to get your valuers on a training course with one of the industies market leading trainers. You only need to raise your average poundage slightly to go from a loss making branch to a profit making one, it will pay for itself ten fold. (by the way I'm not one of them so its not a cheap plug)
You are correct in your figures of "you will need to increase by 80% in order to 'earn' the same commission." However as I said before you will also have more cross selling opportunities for mortages, conveyancing, obtain a better Sold board prescence leading to more instructions etc (but come on surely I am teaching you top suck eggs - you know all of this?)

Increased marketing costs are negligable. To be honest you are fortunate in your industry that Right Move charge a flat pricing structure per branch, rather than a per listing slot based allocation that increases the more stock you advertise. At least you can forcast your cost base more accurately than most other business that carry physical stock with significant variable advertising and marketing spend so I'm not convinced by that aspect of the argument presented.

Therefore I do not accept I have poor business acumen having "always" operated a profitable business over the last 25 years.

Anyone please feel free to comment on the above, but please read it twice before knee jerk reacting to it.

Added by PeeBee on 2011-12-14 22:22:30

rant. Thanks.

Was so 'involved' in composing my reply to Mr Deckard that I didn't realise you beat me to the post (no pun intended...).

Unfortunately, I doubt that he will believe what you have said about me.

I am just very, very grateful that you acknowledge and appreciate where I am coming from and do what I do - regardless of the fact that we are on opposing sides so as to speak.

You, Sir, are a Gentleman.
Added by PeeBee on 2011-12-14 22:12:35

Rick D: "You must be the only EA (or ex EA come corporate regional director with a BTL empire in free fall) that doesn't "get" why house prices falling (which they clearly are) might just be a good thing for estate agents"

Oh, dear. You know NOTHING about me. Nothing other than the few facts you have read on here that I have volunteered and that I do not dance to the HPC tune. SO... you fill in the blanks with sh!t and wrap it up in Christmas paper so that it looks the way you would like it to.

Okay - I will go repeat myself for hopefully the last time on this subject:

I do not - repeat, NOT, have a BTL portfolio. For 'portfolio', read 'ONE PROPERTY OR MORE'.

I own ONE house - not a sprawling suburban mansionette - which I live in with Mrs PeeBee. I have two sons - who both rent because THEY CANNOT AFFORD TO BUY.

I have MORE reason than most to 'want' prices to fall. Firstly, my sons will then be able to house themselves instead of paying rent; secondly, I could them move to said mansionette; thirdly - I could become that BTL vulture you believe I already am. Might as well - many others already are on the bandwagon and it seems from what you say that you too wish to belong to the club.

There. With that out of the way - hopefully - let's get back to your post.

I have a far deeper understanding of why lower prices would 'benefit' Estate Agents than you will ever acknowledge or admit to me having, Rick. Or, more to the point, why they WOULDN'T.

FIRSTLY - cheaper house prices may well lead to increased demand as you suggest - but will not automatically result in more transactions, which cannot flow without availability of funds as we are experiencing now with no signs of a let-up. SO - all that will happen is potential buyers will be MORE p!$$ed off and frustrated than they currently are with their situation. Except CASH buyers, of course - who simply buy to let or to flip for profit and bugger up the market for the FTBs like rant.

SECONDLY - selling ten units costs 50% less in marketing terms than 20 units - fact. Reduce the Fee levels in the way you describe (incidentally, WHY should the Fee %age reduce in the way you show? You do not appear to have much business acumen, Mr Deckard...) and the amount of sales agreed will need to increase by 80% in order to 'earn' the same commission. The additional costs incurred will the reduce the profitability of this work - requiring additional sales - upping marketing costs yet again - requiring additional sales... you get the drift, I trust?

WHO wants to inflate a baloon (...or balloon, to be gramatically correct...)? Not me, for certain.

But I don't have to accept that the air needs to be let out in one big whoosh, either.

And what you seem to forget or simply chose to ignore is that it is the responsibility of Estate Agents to protect the interests of the people who employ them - the vendors of property.

I'm done. You won't think twice about a single word of this five minutes after you read it.

It doesn't suit your agenda.
Added by rantnrave on 2011-12-14 21:41:45

Rick - I'm all for a HPC, for sure (for those who hadn't guessed).

There are plenty of EAs and ex-EAs out there in denial about prices falling or that this would be of benefit to them and / or their profession.

Would I lump PeeBee into that category? Most definitely not. Amongst the many worthwhile exchanges I've had with him, he has frequently stated that his passion for the property market is to help others find a home, not to facilitate speculation.

Does he understand the challenges FTBs face today? Undoubtedly. Ask him he feels about his two sons having to rent.

There are regulars on this site that wont accept it's harder today to get on the housing ladder than ever before. Some will even rub that into your face and label HPCers a loser. Pee Bee isn't one of those - he'll give polite HPCers the time of day and has my respect for that.
Added by Rick Deckard on 2011-12-14 18:20:58

@PeeBee

You must be the only EA (or ex EA come corporate regional director with a BTL empire in free fall) that doesn't "get" why house prices falling (which they clearly are) might just be a good thing for estate agents.

Cheaper house prices will lead to more demand from pent up FTB's - Investors and I guess really any other buyer who wants to buy.

Cheaper house prices = more transactions
Let's face up to the facts here what would you rather have

10 completions at £175,000 at 1.75 %
or
20 completions at £125,000 at 1.5% (more cross selling opportunities as well?)

Not being funny even some 16 year old would get this on Young Apprentice -

PeeBee no wonder people think Estate Agents are a dying breed?

The ONLY reason you want to inflate the baloon that is well an truly burst is simply to make yourself feel good about some overgeared housing stock you're sat on.

Added by rantnrave on 2011-12-14 16:51:38

As they say in Korea, dogs are not just for Christmas. Hopefully there'll be some left for Boxing Day too.
Added by PeeBee on 2011-12-14 16:21:54

"...over on HPC, your articles Henry are held in high esteem for pointing out things which others in the property world don't or sometimes wont see."

Funny, that. Who would have thought...?

I wonder if the late Bernard Matthews and HIS views would have been equally as welcome on the turkeys-are-for-life-not-just-christmas-dotcom website?

;o)
Added by rantnrave on 2011-12-14 15:49:47

I'll get flamed for this, but over on HPC, your articles Henry are held in high esteem for pointing out things which others in the property world don't or sometimes wont see. Some *might* take that as a compliment. It's meant as one...
Added by PeeBee on 2011-12-14 15:45:09

Rick D: I find it not unsurporising that you lean toward agreement with Mr Pryor rather than me. After all, Mr Pryor is often quoted in dispatches as being a "pwoperdee expert" whereas little old PeeBee just argues the toss with a few HPC diehards on this site and is never going to get any column inches or TV exposure...

Well - not as long as he calls himself "PeeBee", for certain... ;o)

ANYWAYS... let's get onto these Lincolnshire sausages you nearly stuffed up your tailpipe a year ago.

You say that they are ALL still on the market a year on... and at "33% less" (...your maths is sh!te by the way - I make it 24.93% - but I'll let you call it 25% for added impact... ;o) )than a year earlier.

So - let me get this straight - NOT ONE has sold? ALL of them have 'dropped' by a quarter (or a third using your cock-eyed arithmetic...)?

Mate - you have an eye for cr@p property, if you ask me...

Now - would you care to enlighten me as to what, in your opinion, is the difference(s) between a "buy to let landlord" and an "investor"?

You state "what a mug I would of been providing social housing with a negative growth albatross." Does that make you the former... or the latter... of the two above-mentioned categories of vulture waiting for the right moment to throw their cash at properties to rent out or flip for profit - and thereby make buying EVEN HARDER for FTBs like rant?

Just wondering... ;o)
Added by Henry Pryor on 2011-12-14 15:24:46

My stats come from HM Land Reg and are available with graphs on my blog. Www.HenryPryor.com/blog. Do please take a moment to visit and check the falls for PeterBro, for Hartlepool and elsewhere.

I'm not trying to get some stats to back up my argument, I'm drawing a conclusion for the evidence. I have a modest scientific background and try to bring objective views based on the evidence. Please all feel free to argue something different - and do please feel free to keep the compliments coming! :O)

You may also want to follow my Twitter account and continue the debate there. @HenryPryor
Added by rantnrave on 2011-12-14 15:05:09

Pee Bee - I used a few statistics to make a general point (which I first posted a few days ago and no-one else commented on).. I don't recall ever saying it was more than that, or anything but 'back of the envelope / back of the beermat'. If I had tried to pass it off as being on a par with a professional valuation, then heap all the merde de taureau you can my way)

I have been struck off Christmas card lists for much worse, but rarely less...
Added by Rick Deckard on 2011-12-14 14:48:43

@PeeBee

If I had bought in Lincolnshire 12 months ago at what looked like bargain £59,950 prices we would now be at least £15,000 as they are now at £45,000 (33% drop I make that) out of pocket on every property that I have shortlisted.

I can see the stats on RMV, Mouseprice, Zoopla as can everyother buyer etc etc The great thing with the 'net is it's so much more transparent without the need for puffing and making up prices simply to over inflate the bubble.

In respect to Mr Pryor I don't see how any of his stats can be deemed as misleading? He simply states the truth and facts in my opinion unlike other people.

Thank goodness I didn't and sat tight on my money, what a mug I would of been providing social housing with a negative growth albatross. No wonder its only buy to let landlords and not investors that are still dabbling in this over inflated bubble.

PS you sound like really you harbour a secret fantasy to be BUYERS AGENT just think of how all of your industry knowledge and insight could assist those buyers now (if only you had listened to your own advice ;)
Added by PeeBee on 2011-12-14 14:47:55

rant: Do you mean that you... erm...

Made an informed decision?
Took a stab?
Guesstimated?

...or applied a completely non-relevant set of 'averages' as they gave a figure which suited your purpose?

I await with anticipation what the OWNER of the properties has to say about your 'valuation'.
Added by rantnrave on 2011-12-14 14:30:09

See reply elsewhere Pee Bee. As said there 'back of an envelope' calculation (NOT 'confident') and nowhere near as comprehensive as someone with your experience could come up with, especially if on the ground and set free to roam...
Added by PeeBee on 2011-12-14 14:18:53

"Knocking the concept of the 'average' isn't going to move any of these discussions forward (question to self - do any of these discussions move forward?). Yes, some houses in Peterborough have probably sold for more than they did at a theoretical 2007 peak. Some will have equally sold for 40% less than they were valued at in 2007."

Hmmm... So, rant, please explain to me why - or HOW - you can confidently 'value' three properties in said location like this: "... you were boasting that the BTLs you bought in 2006 are not yet in negative equity. I calculate that the value of those three properties you mentioned declined by a total of £2,500 in October."??
Added by rantnrave on 2011-12-14 12:48:50

Pee Bee - Looks like Henry's taking his figures from the Land Reg. A quick glances at the latest release (from October) tells me that the figures he quotes are all reliable.

Hartlepool prices are indeed shown there to be running at over 20% down this year, so I can well imagine they are 30% off a peak of four years ago.

Knocking the concept of the 'average' isn't going to move any of these discussions forward (question to self - do any of these discussions move forward?). Yes, some houses in Peterborough have probably sold for more than they did at a theoretical 2007 peak. Some will have equally sold for 40% less than they were valued at in 2007.

Since we can't examine them one by one, then the average is taken into consideration. It's like the England football team - they're far from perfect, but they're the best we've got for the job in hand.
Added by PeeBee on 2011-12-14 10:40:06

Mr Pryor: "The latest RICS survey simply confirms that the balance of those few surveyors who don’t think that nothing is going to change is marginally negative."
Let us hope that it SIMPLY confirms it in SIMPLER terms than the above, then...

If you DONT think that NOTHING is going to change, then you DO believe that SOMETHING is going to change - is that fair to say?

Here's the thing. You are a BUYERS AGENT. I respect that. There is undoubtedly a market there, as some buyers obviously need someone like you. I have no doubt that your clients are happy with your services and consider it to be money well spent. I imagine that you are both hated and loved, in varying degrees, by the Estate Agents you deal with. And I hope you continue to be successful at what you do.

HOWEVER... now that the niceties are out of the way, I want to concentrate on the first sentence. You are a Buyers Agent. A gamekeeper turned poacher, for want of a better phrase. In your previous life, you would have shot at the foxes... now you hunt with them. And, as any fox, you are cunning and determined to reach your aim. Your monthly blog offerings drip feed the negatives in very well-prepared, easy to digest (and therefore remember) chunks, and ignore the positives that are there to be seen if you are looking for them.
These tasty morsels are very clever - they actually appear to be fodder to make Agents lives easier, as they can then regurgitate them to vendors in the hope that they 'see sense' and drop tyhe price of their properties... thus adding momentum to the downward spiral you and others are promoting. Neat. I take my hat off to you - as there are far more who quote YOUR comments than of those who speak out in the opposing corner.

You say "Prices in Newcastle, home of Northern Rock, are 17% lower."
Are they? No - I mean it... ARE THEY? REALLY?

Show me, please.

"Peterborough is 20% down."
When was the last time you visited Peterborough; did some detailed research into past and present property prices, in order to make this statement?

We have two resident Peterborough Agents on this site, walking in the moccassins on a daily basis. How about it guys - have you seen instances of ONE-FIFTH reductions from what someone paid for an 'average' house in your neck of the woods to what they have recently sold it for?

"Average house prices in Hartlepool are 30% below their peaks reached when credit crunched."
Ahhh - THERE it is at last. The dreaded 'a' word. AVERAGE. One word which covers so many bases so thinly.

May I respectfully offer an alternative statement for your future blog offerings - as I would suggest that it is more factually correct and leaves less to the imagination. I'll even let you leave the 'a' word in for impact:

'The AVERAGE recorded selling price of SOME homes is 'x' percent less than the AVERAGE recorded selling price of SOME OTHER homes which were sold several years ago.'

And we want to give people all the FACTS in order that they can make an informed decision.

Don't we?
Added by Fred on 2011-12-14 09:36:36

This must be the most sane analysis to date; beyond the M25 there is another country -" Ah just wish them headline writers would venture out and talk to us natives!"
Added by Rick Deckard on 2011-12-14 09:16:09

@PeeBee ......the stage is all yours (cant wait) o.O
Added by Rick Deckard on 2011-12-14 09:16:08

@PeeBee ......the stage is all yours (cant wait) o.O

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