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Looking on the well respected Savills website both UK and abroad, it struck me that they along with many other Estate Agents who deal with the higher end property market, are still overvaluing property by as much as 20-30% in the more affluent areas of the UK and abroad. They have property on their books which is clearly not selling yet it’s clear that it’s overpriced.
To make matters worse and a complete contradiction to their pricing is the fact that Savills have also just made a statement saying the UK’s property market will fall 25% by December 09, the amount by which they’ve overpriced property.
Just as in Spain and other foreign markets, the top agents are pricing too high, as well as sellers not willing to reduce, resulting in a stagnating market.
There are few buyers around, and mortgages are hard to come by which makes the whole thing worse, agents should get real in this market.
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In what other business would the participants having seen their volumes fall by between 50 and 90%, keep trying to sell stock at 20 to 40% over what the ‘market/buyers’ believe it’s worth (without seriously restructuring their suppliers (the vendors) expectations of where the market is and where it’s heading!!! It’s simply a nonsensical business model!!!
I have oft stated that about 70 to 80% of the volume in the UK market is discretionary. That all but disappeared. Now with 15 properties to every prospective registered buyer (and most of those buyers aren’t serious or can’t get finance) UK Estate Agents are an endangered species!
The quicker the market finds a level sustainable by the new reality that is out there and fundamentals, the sooner volume will return.
Anything Nu-Labour do (with Tax Payers Money) to try to support the currently artificially high prices, is doomed not only to failure but also will actually put off the much needed correction and subsequent recovery.
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@angie wrote:
Looking on the well respected Savills website both UK and abroad…..
Just because some agents are regarded as one of the ‘top’ ones in their field doesn’t mean when it comes to lies they any are more reliable than the rest of them. Reputation and plush offices mean nothing I assure you, like everyone else they’re in the business for their commission, end of.
Savills were my agent in Marbella so am speaking from first-hand (bitter) experience.
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I agree Charlie, I really wouldn’t trust the supposed top agents in the UK and elsewhere, Savills are no different I’m sure. Foxtons (like to deal in high end prop.) who are in deep maird financially have also been exposed for overpricing and mis-selling in the UK.
Regarding Brown’s package for the UK housing slump, I’m not sure that ratepayers would be that keen for Councils to buy up property in danger of repossession, especially as these could fall further in the UK so wasting taxpayers money, not forgetting that most Councils are pretty Bankrupt too, a bit like Northern Rock debacle.
Move over Darling has really sent the Pound plummeting, some say he knows something we don’t, like a major US Bank or other is due to go bust! Makes buying Euro property and holidays even more expensive now.
UK property needs to to be priced at affordability based on earnings to value, the gap is far too wide, mortgages offered at 6 times earnings in many cases was plain daft.
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Ok so you are thinking of buying a house you consider amongst other things. a) That kind Mr. Alister Darling is going to give us a SDLT holiday that could save me 1% or as much as £1,750 and b) House price could continue to fall for the next 2-3 years possibly by as much as another 20%. or £35,000 on that same property. I bet you are so glad Mr Darling took such an inovative move to bolster the UK housing market.
Unfortunately I can see very little chance of this measure encouraging people to buy a property, just see that the goverment will lose much needed SDLT revenue from those people that would have bought anyway because of other commitments such as employment.
One thing is certain the country is without doubt heading into or allready in recession, I dont know when if ever the economy has gone from contaction to recovery missing recession, the only question is how deep and how long it will be due to the effects of the credit crunch which is still playing itself out.
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yep the estate agency game is going to the dogs. Most agents are trying to survive off 1 sale a week and in the UK most are laying off workers and some are starting to close. But there will be no sympathy for these wasters who have had this coming a long time.
At the high end of the market they will live off their fat for a while longer, believing that the top end of the market will be immune, or some other delusion.
When you consider they offer so little value, they oversold, hyped up prices, sold illegal builds, let them rot.
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Removing S.D. on property costing up to 175k stg is also going to have a negative effect on property say costing up to 200k stg, because purchasers are going to knock sellers down further to avoid S.D. altogether, so prices could fall further on the lower end, good news maybe for 1st time buyers!
They’ve now made virtually another S.D. threshold, they don’t think things through.
Interest rates stay the same today so doldrums will continue longer.
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Paul it could be argued that if the BOE reduce I/R at this time it may have the following negative effects, of increasing inflation, sucking buyers into a falling market and delaying the inevitable bottom that the market is on its way to finding (which it needs to do before it can stabalise and once again rise).
In any case the availability of mortgage money (at both wholsale and retail levels), the criteria to qualify to obtain it and its price, appear to have now totaly disengaged from cental bank base rates.
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Yes I agree about your I.R. theory Pablo, it could suck more unwary 1st timers into a falling market, I was just giving an update on I.Rs., I think the property doldrums will go on for a couple of years at least.
In fact on newsnight the other night, the presenter asked Darling more or less that question, by removing S.D. threshold up to 175k stg wasn’t he (Darling) encouraging people to jump on the property bandwagon at the worst possible time, they would almost certainly go into negative equity.
There are a lot of distressed Developers in the UK now who will soon do very good deals, I’ve heard of one knocking as much as 90% off a property in Swindon to someone.
Like greedy Spanish Developers, the UK’s are having sand kicked into their fat faces now which is good for everyone.
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Paul
I agree with everthing you say in your post.
Katy
I like the Land Registry (L/R) stats there’s ‘no bull’ as they represent ‘completed/closed’ prices as opposed to EA/Vendors aspirational headline asking prices or agreed but unexchanged/unclosed price. However they are no more ‘correct’ than The Nationwide or Halifax house price stats.
The issue I have with the L/R stats is that they are approx 5 months behind the market For example the May 2008 figures represent prices agreed back in Feb/March 08. In a ‘normal’ market the time from an estate agent agreeing an offer between vendor and purchaser, and the sale completing/closing is about 8 weeks. However in this market with chains continually breaking that’s moved out to more like 12 to 14 weeks.
So we’re now in Aug and the May L/R stats will be recording many deals agreed back in Feb, a full five or six months ago. With the speed at which UK property prices stopped going up and their current rate of decline, five month old data is of little use for forecasting where we’re heading. The L/R figures will eventually reflect what’s happening on the ground.
The real trick is to read the earlier indicator data rather than recorded history. There is plenty of it out there and it all points to UK property prices continuing on what is a very rapid and steep correction.
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Another thing about some prices don’t appear to be falling in certain areas is that many vendors just cannot accept the notion of their main asset actually losing money so they will not reduce their price, meaning that they often sit on the market for ages without a sale, this is partly due to them, but also to their agent who overvalued in the 1st place to get the instruction hoping to get the client to reduce some weeks later.
As Pablo Silver says, the Land Registry Stats are way behind the game, but prices are certainly falling fast and by large percentages in some areas, and now London is also experiencing falls. In parts of Devon, people who bought new 3 years ago are now having to reduce below their original purchase price, include incentives like stamp duty paid etc, just to get a sale, and many who bought in last 3 years have seen any profit already wiped out. Even in Kent and Sussex, purchasers are trying offers 30% below asking prices according to a leading agent there.
Developers are reducing by large discounts, they are in trouble.
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With the credit crunch set to last for a couple more years (until all the smoke and mirror asset valuations and related bad debt) is purged out of the global system……
http://news.bbc.co.uk/1/hi/business/7601461.stm
http://www.theaustralian.news.com.au/story/0,25197,24301269-643,00.html
I can see average UK property prices (nominal) falling much further than the last crash (1989 to 93)….
The velocity of the falls this time is staggering, nearly -13% in a year, when last time it took 3 years to get to circa -15%!!
I think the global property market became so frothy and disconnected from sound fundamentals, by the wall of cheap, easily available debt pumped into it, that -15% is just the froth off the froth!
My prediction for the UK is -25% nominal falls over 3 years. That with inflation will be a real falls of circa 35 to 40%. With inflation and unemployment set to rise as we head into a general economic slump, the repercussions and change in sentiment about property as a one way bet, will impact a generation . I still see alot of denial especially in people between early 30’s and mid 40’s who have taken on huge debts to speculate that UK and Spanish property would only keep on rising!
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In yesterday’s S. Times, the UK estate agent Foxtons who have been exposed for Mis-selling, fraudulently erecting For Sale Boards outside properties they were not involved with, and Overpricing in the past, have now announced that this is the best time to buy UK property, sucking people into a falling market.
Even their competitors like Savills are predicting falls of 25% by Dec. next year, with economists predicting larger falls.
Foxtons are not to be trusted, they are commission driven, and have also been involved with selling Spanish property in a falling market.
They are also in severe financial straits themselves.
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Leading agent say’s UK prices need to fall 25% by dec 2008 (I assume he he does not mean on top of the 12.7% they’ve already gone down?)
http://www.estateagencynews.co.uk/goodman_articles/mgood0908.asp
Agents need volume not unafordable prices!
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Pablo, some agents and the Nationwide are saying the market has fallen by 10-12% already and will fall a further 15% next year. Interestingly agents and mortgage lenders are conservative because they don’t want to talk the market down. However, economists are saying it will fall a further 15-20% from now making a 30%+ fall in total. Who would I rather believe? The economists who tell it as it is.
ITV News last night is conducting a survey over next few months saying that most sellers are ‘in denial’ over the crash, and when told what their properties were really worth now, they all seemed shocked, eg one lady thought her house was worth 280k but it was worth 235k and this was repeated around the country.
It’s also predicted to drag on until 2012 before prices even begin to rise marginally.
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Everyone, lets take a precise look at how average uk property prices have gone up and down over the last 30 years. The website below has put the data into a graph
http://www.housepricecrash.co.uk/
if you look at the graph at the top of the page you can see that the UK market will probably drop another 40% from current levels over a period of say 2-3 years. If previous property slumps are a guide, then you will have a period of 6-7 years where the market remains slumped. Then the market takes off slowly on another ‘boom to bust ‘ cycle.
Although I do no necessarily advocate this solution, the government may need to think about taxing all profit (but allowing for inflationary growth) on the sale of a house. This could smooth the market which would be in the long term interests of those in the industry
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