Monthly Archives: March 2010

Misrepresented market values are not the vendor’s fault

Published / by Peter Hendry / Leave a Comment

Many people seem to be missing the fundamental point about the need for the reform of estate agency.

The reason why new methods of transacting house sales are needed in England and Wales is that estate agents have, for a long time, misrepresented market values by skewing current house prices, causing untold damage to the smooth operation of the property market.
Successive booms and busts in house prices are absolute testimony to this. There is no reason why house prices should need to fluctuate anything like so wildly, even when our economy itself is in crisis. The damage being done under the auspices of getting the so-called ‘best’ price instead of the market’s equilibrium price is now becoming increasingly clear.

If you examine the situation closely, you will see that houses, being a basic need of society, should tend to command a relatively stable price. This should depend primarily upon current wealth and not on borrowing capabilities. Relatively stable prices are achieved in many other equally prosperous countries. The sole reason this isn’t possible here is the over-exuberant activity of estate agents, who generally guess what prices to ask and then try and force unwitting buyers into paying these by borrowing ever increasing amounts of capital – with the aid of the lenders of course. Many agents even help by arranging for buyers to borrow the money by providing financial advisers in-house!
It is time a new, more professional and more reliable method was found for transacting house sales.

Vital market transaction-prices information for doing house valuations is now publicly available. It only remains for buyers to use this themselves if estate agents can’t (or won’t) do this properly. Both buyers and sellers should be able to do perfectly adequate valuations for themselves using such information.

If agents don’t, can’t or even simply won’t change their business model I think that the government ought to put in place changes to the way houses are marketed by estate agents.

The latest improvements in transparency within the housing market, as outlined in our front page proposal, would have a considerable stabilising affect on the whole British economy. This has very considerable merit, especially in the aftermath of the 2008 financial crash and the continuing unsettled economic situation.

In my view the graph of ‘throughput’ of completed sales over time should remain fairly smooth if the market is working efficiently. This is the acid test to be applied but stability of sales levels is not happening, and has not happened for several decades prior to the present moment.

My proposal for improving this is to improve the way housing in England and Wales should be marketed. It is based on changing from vendor-centric estate agencies to buyer-oriented ones as described in The Hendry Solution. This improvement would not cost much to implement and would bring massive benefits to all local marketplaces, whether in the owner-occupier or the rental sectors.

To read more about The Hendry Solution go to the following link:

Improve The Housing Market.
How to Improve the UK Housing Market.

Peter Hendry, Consultant in Housing Valuation