Before much is said about the reasons for the pricing problems perhaps the most important thing to be known and understood, is the fundamental reason why house price rises have been happening recently, despite our general economic trends falling.
Firstly, it is essential to know what distinguishes house sales and purchases from almost all other sales and purchases. It is that houses are capital assets and not chattels. This means that the values of all such assets vary in the market place, dependent upon the current demand for such assets.
In other words, such assets have an ‘intrinsic value’ which can both increase and decrease, depending upon current market conditions whereas things that are not within the class of capital asset, generally only depreciate in value as they age.
For this reason in particular, all those owning houses should treat them as such and not merely regard them as being something which can be marketed by the seller without taking the all-important ‘buyer’ considerations into account.
It is of fundamental importance that houses should be regarded as having special characteristics in terms of their true current market values. If not, they cannot be bought and sold with price reliability in the marketplace.
The current way this is done does not have due regard to this aspect and the result is general chaos, with price disparities constantly rippling across the whole of the housing marketplace – generating unnecessary uncertainty.
The frequent delays and transaction failures which happen as a result, are testimony to this and they show that there is a need to substantially revise the way that things are done in these markets.
The way to resolve this situation correctly, is to alter the existing methods used to market these assets and instead treat them as capital assets in a similar way in which shares are traded on the stock market. I mean by this that buyers are and must be integral in deciding the prices-levels at which such assets ultimately change hands.
The House Price Solution gives the detail of how this may be achieved without excessive cost or delay and I hope you find these new proposals to be both interesting and worthy of consideration.
In essence, what is required is to reform the methods by which estate agents operate in the housing market and this reform is now long overdue.
The necessary fix cannot simply be about building more houses to try and balance supply and demand, as claimed by many whom I have discussed this with. Instead it must be about making the housing market itself function far more efficiently. This may well (but perhaps understandably), be something which estate agents themselves are currently reluctant to seriously consider.
Nevertheless, this is what is needed, even more than starting to get additional housing units built as soon as possible.
There IS a better and quicker way, besides that of building many more houses which, by any degree of estimation, would have to take nearer ten years than just one if indeed such a proposal should even be capable of any degree of swift implementation somehow? More about that later!
As stated, the housing market is broken, with prices being forced up beyond most people’s ability to pay. This is not however solely about supply and demand, as I am keen to explain here.
It is also about money finding its way into the housing market illicitly, without sufficiently rigorous financial checks being made. It’s essentially about selling agents (the estate agents) having become oblivious to this as well as a number of other issues – since their primary remit is simply to try and get the highest price possible for each property which they manage and sell on behalf of a vendor client.
Yes, estate agents will happily try and maintain that house prices are decided simply by supply and demand but this loose statement does not bear any serious scrutiny. A rudimentary knowledge of economic theory will undoubtedly confirm that.
Consider for a moment:
Dodgy money (or the money that requires laundering) which has caused significant house price inflation recently …
Over-borrowing The rules for ascertaining who should be permitted to borrow, for what reason and exactly how much should be tightened – especially whilst such large sums are able to be borrowed so cheaply.
Lack of valuation knowledge There’s a general lack of adequate valuation knowledge (and experience) possessed by most agents in the property sector currently …
Bias towards vendor negotiations
There is a worrying lack of transparency concerning the way in which estate agents operate nowadays, especially as far as buyers are concerned.
Changes need to be brought in by government as agents themselves would clearly prefer not to do so whilst primarily supporting their clients, the vendors.
Meaning that lies, deceit and broadcasting misinformation are nowadays pretty rife amongst competing agents, whom are forced to utilise such tactics in their quest to each gain more instructions to sell or let.
It simply cannot be denied that each of these highly unacceptable behaviours are playing too great a part in deciding current-day house prices in England and Wales and that such matters have clearly not been adequately addressed so far by any responsible organisation including our government. To find out how such a significant market improvement could be achieved, please go to:
How to Improve all local housing markets across England and Wales
Posted by: Peter Hendry, Housing Valuation Consultant
Author of:– The House Price Solution (otherwise known as The Hendry Solution).
What do you think about this idea for drastically improving the operation of all housing markets potentially across the whole of Britain?
Constructive comments are very much welcomed.