Empowerment or Control

• In the UK we are generally empowered to own land on a freehold or leasehold basis. It is even subject to registration in our name.
• Then there are significant controls on what we can then do with the land we own. We are normally empowered to continue using the land for its then approved current purpose.
• Planning laws are under review via the National Planning Policy Framework discussion. This is only going to prove that you can’t please all of the people much of the time.
• The government inspired Planning Portal gives some guidance if you can follow the link but it seems to contain more on appeals than permissions.

Environment Control and Policy

• On environmental issues, state involvement is ‘government’ while areas devoid of state involvement are said to be subject to ‘governance’. It could be argued there is too much of the former and conflict with the latter.
• The built environment is subject to a morass of ‘government’ such that lawyers are need to covey new property in even a relatively safe manner.
• The political votes on green issues seem to be local rather than national except when it comes to wind farms near houses or AONB.

Economic Policy and Housing

• Fiscal policy exerts control over the housing market.
• Taxation on capital both nationally & locally has had an unquantified impact. Fees for permissions have been a growth industry for local government whilst the loop holes in capital gains tax are too numerous to mention.
• Cost of finance and the economic health of the country are the most significant control features within the housing market.
• Supply and demand for social housing and the benefits system to support such housing can leave rents uncontrolled.

Intermediaries, Principals and Government in the Housing Market Link

Land Registry is a government department responsible for keeping and maintaining the Land Register of England and Wales. Scotland has an independent register

Headlines This week

• ‘Galliford Try defies gloom to post record housing sales.’
• ‘Barratt gets sales boost.’
• ‘House Builder Persimmon builds up profit forecasts ‘towards top end”.
• Cala Group claim increase in average selling price up to £290,000.

Why Did Builders Do Well in 2011

• The market may be sluggish but it has stabalised and builders have adjusted to the new norm.
• Margins on the houses sold have increased despite any price reductions that were necessary.
• The cost bases must have been aggressively reduced to achieve the margin improvement. This has been most significant with those whose land banks were bought at a low price.
• A move to more expensive up market properties and a dropping of low margin ‘starter homes’ has created a profitable mix.
• Some builders are now reaping a paper benefit of earlier write downs.
• Completed house sales increased at some companies and comparisons are all against poor results in earlier periods.

Will Builders Do Well in 2012

• Higher margin land is still being sold so there is hope for good financial results
• Some believe that the Government’s new housing strategy will have a positive impact on the industry.
• Improving operational efficiency can only be taken so far and an increase in volume is needed to spread fixed costs over more houses sold.
• With relative stability to boost confidence then further financial progress is likely. If there are big hiccups in the national economy then stormy waters will return for the sector.
• Cost of finance for the builders balance sheets and purchasors borrowing look set to remain low even if money supply remains tight.
• New equity may be brought into the industry to take advantage of some of the perceived bargains still available. This could lead to yet more consolidation in the house building area.

Builders to Watch

Persimmon Homes & Charles Church
Taylor Wimpey & George Wimpey, Laing Homes & Bryant Homes
Barratt Developments & David Wilson Homes
Bellway Homes
McCarthy & Stone
Bovis Homes
Berkeley Group
Redrow Group
Crest Nicholson
Keepmoat Homes
Fairview Homes
Miller Homes
Kier Group & Bellwinch, Twigden
Linden Homes & Galliford Try

1. Get The Price Right

Getting the price right is the most difficult aspect of selling a house. One strategy to try is to put the house on the market at the lower end of expectations. This will create interest and get people to view the house. Hopefully, this will attract bids, possibly more than the offer price. If the house is overvalued, you will struggle to get any interest and viewers; with less interest, you will get less offers and the offers you do get will probably be a big discount to asking price anyway. If you have a beautiful house, get people to come and be inspired by it.

2. Keep up to date on house price trends.

Unfortunately house prices are quite volatile. If house prices are falling, you have to be adaptable and reduce your asking price, otherwise your initial price will be outdated.

3. Create Best Impression.

First impressions do count. If you get people coming to view, spare no effort to give them the best first impression. This can include:

• Keep house tidy and free of clutter.
• Clean Windows to ensure maximum light.
• Make sure the house is well lit, consider daylight bulbs if selling in winter. Light has a powerful influence over people’s perceptions.
• Remove controversial posters / pictures. You may love to see Britney Spears semi naked, but, it will not impress an old conservative lady.

4. Bathrooms and Kitchens are very important

Bathrooms and kitchens are the best place to spend money and increase the value of the house. Get the best kitchen gadgets like attractive kettles and toasters. Make sure the bathroom is glittering and well polished.

5. Entrance should be Inviting

Make sure entrance / garden is tidy and well maintained

6. Repainting is worth the Effort.

Generally most welcoming colours are light pastel shades. Darker stronger colours create a love or hate effect. It is best to appeal to widest audience.

7. Spare Room Into Bedroom

If you have a spare room used as storage; it is worth converting it into a small bedroom to show off its potential. If it is full of clutter have this removed, even if you have to pay storage firms.

8. Try Unconventional Sales Channels

Ensure you let people know your property is on the market. Network with friends and acquaintances and encourage them to pass around the message.

9 Offer Incentives

Paying legal fees of the buyer or offering a contribution to costs may not attract a buyer but it may help close a sale when you do not want to cut the base price further. Similarly consider the stamp duty threshold and the value of many fittings included in the sale.

If an Estate Agent fails to comply with the law, they could be banned from working as an estate agent. Ignoring a ban could lead to prosecution and fines. However there is still no legal requirement for an Estate Agent to have any formal qualifications.

Soon the OFT is to issue new wider guidelines to estate agents that will probably require fuller and better ‘main characteristics’ of a property. Failing to mention some negatives when they have information available or misleading buyers could lead to fines and prison.

Personal Interests
If an agent has an existing personal interest they must declare this before they begin negotiations
If they plan to acquire an interest in your client’s property this is a declarable interest
Selling their own property to the client must also be declared in writing.
Agents must not ask for or receive a deposit for the sale of a property in which they have a personal interest.

Other Provisions in the Act
Deposits must be put in a special account called a ‘client account’, which is set up for this purpose at a bank. This may be a pre-contract deposit paid before the exchange of contracts in order to show a serious intention to buy or the contract deposit paid at the exchange of contracts.
Agents can pay money from a connected contract, such as money used to buy carpets or curtains, into a client account.
Agents cannot pay any other client money, such as rents, into this account.
If the interest on a deposit of over £500 amounts to more than £10, you must pay it to the client.

Keeping client accounts  the basic rules OFT   are:

‘* you must keep detailed records of all transactions relating to a client account
* you must give detailed receipts for all money you receive
* your accounts must be examined and reported on by a qualified auditor within six months of the end of your accounting year
* you must produce your latest auditor’s report, if asked to do so by an authorised person, such as a trading standards officer
* you must keep the accounts and records for six years after the end of the accounting period to which they relate
* if you take over the accounts and records from someone else, make sure that they are completed to the end of the transaction, and are kept for six years.’

Information to Clients
Agents must give potential clients information about fees and charges, services to potential buyers and details of their terms of business as soon as possible.
The Estate Agents Public Register provides details of estate agents who are currently prohibited from engaging in estate agency work or who have received a formal warning under the Estate Agents Act 1979.

The Property Ombudsman (TPO)

TPO is a membership organisation can make awards of compensation for financial loss and/or aggravation, distress and inconvenience, where I feel that is appropriate. The service is free of charge for the public. Many estate agents have agreed to follow the TPO Code of Practice for Residential Estate Agents, approved by the OFT under its Consumer Codes Approval Scheme. Estate agents signing up to this Code of Practice are required to provide additional consumer protection that goes beyond that required by the law. They can be recognised by the joint TPO/OFT approved code logos which they display. Registered agents, who do not voluntarily accept the Code of Practice obligations of the OEA Scheme, are not entitled to show the OFT approved code logo.

Parliament update on regulation pdf

Housing Market Comment on Estate Agents

• Buyers and sellers should remain alert for any problems when dealing with large property transactions.
• There is no substitute for looking after your own assets.
• The training, operation and regulation of Estate Agents is not as comprehensive as some professions such as bankers and look how bad they are!
• If you have problems complain!

iphone and ipad applications are helping drive extra business from estate agents keen to get more deals done. With their own app Rightmove knows where you are so you can view properties for sale or to rent in your exact location. You can also search for properties on the move wherever your day takes you. See how the marketing spiel works on the You Tube app ad.

Rightmove in Figures

• Profits in six months of 2011 were £28,700,000.
• Sales in the same period £47m up from last years £39m
• Mobile searches now equal 14% of the total rightmove searches.
• Created in 2000 it has property agents like Countrywide plc, Royal & Sun Alliance, Holiday Lettings Limited & Connells as shareholders in addition to a listing on the LSE

 
Property Blackspots

A survey of 14,125 potential property buyers, undertaken by Rightmove concludes seven out of the eleven UK regions are now “first-time buyer blackspots” . ‘Demand from new entrants trying to get on the property ladder slumps in the face of rising living costs and financial uncertainty, according to a new report.’ Guardian large article

The ,

Owners These are pure investors, whose chosen investment is property from which they wish to make an income from rentals or a gain on capital sale. Typically they rent out or lease the property to someone else. They do not consume in an economic sense.
Owner/Residents These people are both owners as well as residents or ‘tenants’. They buy to live in or utilise the property as a business.
Renters These people are pure consumers. They may have short or long term horizons which impact on their emotional investment in the property.
Developers Speculate on land for building which results in new products for the market. They may stimulate demand or exploit existing demand. Builders and constructors are a tool of the developers.
Renovators Are suppliers of refurbished buildings to the market. They repurpose or revitalise properties that can no longer satisfy the market.
Facilitators or Intermediaries Include  lawyers, agents and others that facilitate the purchase and sale of property.
Financiers Banks, building societies and other lenders are key players in the property markets

Economics of Property in a Recession

• The demand side of the market, owners and renters, are frustrated by the lack of supply of fundable property.
• Demand is pent-up and will need to be satisfied by new product in terms of finance and property offerings.
• Unusually despite significant demand the price of property continues to stagnate. This will only be reversed when there are financial resources available to consumers.
• Supply has been modified to meet current resources. There is more property sharing, less mobility and economic prudence is prevailing.
• New supply of property can be inspired by government intervention. Various routes and options are available.
• Developers and constructors need finance as property lead times consume cash prior to sale.

For more reading see Intermediaries, Principals and Government in the Housing Market

“the irony is that there is no shortage of people wanting to move, but without mortgages they just can’t do it.”

The government are hoping that banks and building societies will relax their lending criteria and help to kickstart the housing market. However, so far, it appears that banks have been reluctant to increase lending, despite a £50bn scheme by the Bank of England.

The problem for estate agents is not falling prices (although this does lead to lower commissions) but the declining number of transactions. Some people point out that estate agents were one of the groups who benefited from the long term housing boom in the UK. Rising house prices gave them a bigger commission. Some even blame estate agents for encouraging the housing boom. However, estate agents do not really have the power to influence house prices, they merely reflect local housing conditions.

Estate Agents closed a record number of branches in the past few months as evidence of the housing slow down increases. Since the start of the year there has been an estimated 4,000 job losses in the estate agent industry. There has also been a 26% fall in the number of houses changing hands since the start of the year.

The italicised comment at the head of this article highlights the industry issues in 2008. Several years on and the comments are still valid today. There has been a further development or an increase in the take up of other technologies to help estate agents cope. Who fails to look at Google Street view when considering a purchase. Crime statistics and postcode data is now more readily available to inform the choice of buyers. Consolidation in the industry is forced by financial pressure and technical change exacerbated by the continuing low activity and pricing levels.

Read Estate Agents get the Mary Portas Treatment

• The real Pros are those with current experience and no vested interest (also known as Hens Teeth)
• You are the best Pro because your vested interest is for your own health, wealth and happiness. You will be a better pro by reading and learning more about the mortgage market before signing for a deal.
• Professions like bankers and financial advisers are ‘trained’ but I believe the training slant is on protecting their company not getting the best deal for clients. A paid advisor should be focused on your needs and be insured.
• Cull information from all Pros you come across and compare your alternative options

What are The Key Secrets

• They are not true secrets but your objective is a safe, good value & appropriate mortgage deal .
• There are over 100 mortgage products/deals for first time buyers alone so the market is complex and large.
• Be clear what you need and resist being sold something you do not want or do not need.
• I like the ‘Kiss principle’ of Keep it simple so don’t go for a product you don’t understand.
• Mortgages are a long term proposition not a short term tactical purchase. Make sure any flexibility you buy is likely to be needed.
• Moving on to a new house is common with an average mortgage of 7 -8 years. You can roll over some deals or start anew.

Learn More

• • 106 Mortgage Secrets aims to protect you from the sharp practices but first you have to know a bit about how sharp they may be.
  • Learn how and why the right financing decisions can add significant value to your long–term net worth.
  • Build the confidence and the knowledge to increase your borrowing power at the lowest rates.
  • Assess if and why you need mortgage insurance.
  • Understand seller financing, arrears management and mortgage foreclosures.
  • Avoid getting taken in by the fine print and added fees
  • Steer clear of scams and unprincipled loan arrangers



 

’106 Mortgage Secrets All Borrowers Must Learn: But Lenders Don’t Tell’ by Gary W. Eldred is strongly USA focused the lessons we should all learn from the last decade are brought out from a study of this book.



‘Decoding the New Mortgage Market: Insider Secrets for Getting the Best Loan Without Getting Ripped Off ‘ David Reed
is a recent publication that hasn’t been across my desk but when considered against the investment you are making in the housing market the £15 would be well spent

‘Almost every lie you ever get told in this industry stems from banks and mortgage brokers seeking to maximize this profit center in your loan.’ from the Mortgage Insider

Current ‘rosy’ headlines and quarterly announcements from house builders include: ‘Persimmon  boost sales’  ‘Taylor Wimpey site visits rise’.

However a bit of deconstruction illuminates a different background.

Persimmon

• A 12% increase in sales in the first 15 weeks of 2011 is set against an appalling set of results in 2010 (an easy target to beat by 12% one would think).
• The chief executive claims ‘to be content with flat volumes and is focusing on improving margins’.
• Mortgage lending is still at a third of the levels reached in 2007.
• Credit facilities may be easing but the impact is not felt in the market yet.
• Selling more upmarket and thus expensive houses, may boost to turnover but bis a short term fix for the markets ills.

Taylor Wimpey

• Taylor Wimpey’s chief executive says the UK housing market is ‘resilient’. Well you could have fooled me over the last 3 years!
• In an April 2011 shareholder update he also says the market will be ‘relatively flat’. To compensate for this down beat assessment ‘the number of operational sites has gone up (less than 5%) and there are encouraging trends in visitor levels, sales and cancellation rates.’  Well CEO’s have to say something but this seems weak.
• Repeated information about the ‘forced’ sale of the US business and the shift in forecast margins failed to impress.

Housing Market.org’s Current View of House Builders.

• Take stock market and shareholder information with a pinch of salt. They are more about the market for shares than the market for housing.
• Many builders are ‘moving towards’ building larger more pricey family homes. Who will buy them if they can’t sell their existing property. How quickly will this niche be over saturated by the lemmings.
• For all the pressure group and lobbying activity, money supply and confidence  is still in short supply.
• New government interventions in planning, rent control and fiscal policy are still to take full effect.
• Margin protection means good deals are harder to find in the new build sector. The bargains lay elsewhere for the moment.

Larger Estate Agencies 2010-2011

1. Countrywide plc with many brands including Manns, Bairstowe Eaves, Propertywide, Hetheringtons, and Hamptons.
2. Connells
3.LSL Property Services plc brands include Reeds Rains, Your Move and the recently purchased Halifax Estate Agency business. They have a strong Surveyor business
4.Spicerhaart brands include Mortgages Direct, Spicer McColl, Darlows and Felicity J. Lord.
5. Arun Estates with 110 branches in the South East
6.Savills 80 branches.
7. Hamptons International
8. Chesterton Humberts
9.  Andrews Estate Agents with a growing online offering
10. Knight Frank
11. Strutt & Parker

Read Beonbrand The Mary Portas Effect

After The Lord Mayor’s (Portas) Show 9.2.11

• Mary Portas stuck to her theme of customer service last night. The hapless estate agents stuck to their (scripted?)  role of incompetents turned converts.
• Secret filming highlighted a lazy approach to presenting a property and a corporate arrogance from the owners son.
• Asking Estate agents to become trustworthy, knowledgeable and honest was Ms Portas’s predetermined thrust.
• Pressuring for a quick sale, as estate agents were supposed to do,  seems to be self defeating for   the current UK market but in London and Islington in particular this may have some effect.
• The vendors on show were unimpressed with the customer service.
• The potential buyers were totally unimpressed by the ‘industry’s fallacious jargon’.
• No one was impressed by the plea that estate agents do 6-9 weeks work behind the scenes.
• Little note was made of the comment about the internet and the quote ‘We don’t need you’.
• In the end the team did ‘sell based on knowledge’ and the printed particulars included an occasional wart.