The House Price Crisis, The Present Dilemma Over Estate Agents, and The Politics Governing Planning

The result of the general election is the best opportunity to remedy the ongoing house price crisis. It is all about affordability, affordability, affordability for those buying or renting housing to live in, as it forms a major part of the cost of living crisis.

Of course a significant amount of new housing needs to be built to compensate for the growing population but doing that is not going to reduce house prices by much and maybe not by anything at all. The reason for this is explained in our online post headed “The notion that we can build our way out of The Housing Affordability Crisis is utter nonsense

The following explains the precise reasons why the present house price crisis is manifestly not as a result of the insufficient numbers of new houses being constructed – contrary to widespread belief! Also without additional community infrastructure, substantial new housing will simply worsen the infrastructure shortfall.

It is becoming clear that whilst most political parties today support the idea of house prices increasing over time it appears that currently, no political parties are prepared to canvass on or sanction a reduction of house prices in their manifestos, even though the increase in house prices to the heady levels we are currently experiencing is as a direct result of the policies which previous governments have been pursuing.

My working experience includes over 30 years as a Chartered Surveyor with a property valuation qualification and during that time I observed the house price trends, both privately and professionally. Having done this I find these price trends strongly suggest that the relentless increase in house prices of past decades is more to do with the way estate agents have been legally allowed to operate against the natural economic market trends for some decades now.

If one considers, even for a short while, why it is that the general public maintain such a low opinion of estate agents, the answer to this quickly becomes plain.

It is that estate agents have  been and still are, in reality, treading on the toes of those trying to get clear advice for knowing the correct market price of each residential property they are concerned with, whether it’s being bought, or sold.

This is because estate agents are trying to advise their contractual clients, the sellers, as to the best price they may be able to achieve, yet at the same time they are trying to help the buyers by basically doing precisely the same, namely advising them all about the prices they (the sole agent) have in their minds’ eye for the property which they are wishing to sell at the time! This is providing a distorted view of true or current market values, which is how market prices are continually being distorted.

In other words, what is actually happening is that estate agents basically guess at a price that a particular property might sell for in the market and, they tend to guess high so as to try not to bring themselves into disrepute; an uncomfortable situation for any organisation to find themselves in at any one time let alone all the time.

In  addition, as they are mostly paid on a percentage of the price attained, they usually try and get as much as they can from each prospective buyer, even if there are sometimes no genuine or actual ‘other’ offers being submitted! It is simply too tempting for them to do this and bolster their fee; however best intentioned they may well aim to be.

This shows that estate agents, as advisers, cannot reliably assist either the seller, or the buyer with accurate market value analysis, because of the situation in which they find themselves, with their primary responsibility favouring the vendor.

The only solution to overcome the resultant adverse market position which the house-owning and renting public find themselves grappling with, is to campaign for a change to the way residential estate agents operate, by making them primarily responsible to professionally advise each buyer, (or each renter if the house is for rent), as to the price any particular property can attract in current open market conditions. 

To do this estate agents would have  to be made essentially to contract with each buyer (or each renter), and no longer have any business contracts dealing with potential selling, or letting clients at all.

This simple change would bring untold and immense improvement by restoring open market conditions for residential property being bought or sold on the market as well as being rented or let. 

Not to change this now would simply allow the present regime to continue unabated. The tragedy, i.e. that of accelerating house prices, if allowing such a thing to happen, should now be plain for all to see. This is what we are experiencing, the present and extreme house price crisis. Available finance to buy at such historically high prices is another significant factor which is helping to stabilise house prices at the levels being negotiated by all the selling agents.

Extremely high house prices like these are factually connected with three of the other top 5 issues for voters. This elevates the housing crisis to become one of the top priorities now requiring a swift solution.

No political party taking part in the upcoming general election has, in its party manifesto, a realistic proposal to deal with house price levels which are now in a very substantial crisis, when taking into account the relatively low average yearly earnings benchmark, certainly regarding wages within England and Wales.

It is accepted that changing the way houses are currently marketed will receive staunch objection by those in the present estate agency sector. Instead of attempting to agree to disagree however, it is intended that such important matters as these should be the subject of constructive dialogue in order to arrive at an acceptable improvement solution. This organisation would intend to take part in any such discussions.

The other equally important change necessary to peg house prices back to reasonably affordable levels is to make changes to the town and country planning rules such that local town and parish councils should decide all residential planning applications within their designated areas without a right of appeal. This would bring much needed housing to the exact locations within the towns and parishes where extra housing is most needed, especially for local working families. This aspect is fully covered on the other posts within this web site.

If people want an improvement to the house-price-affordability crisis, and of course they should, it would be best to vote for a political party that not only understands the dilemma which everyone is in (namely that average house prices are now well in excess of 15 times yearly average earnings), but that the party selected, should be one able to properly understand the housing markets’ economic landscape and resolve to develop and use necessary wisdom with the powers they would have, once they are elected to govern our country from Westminster.

It is important to understand that house prices are variable but should broadly relate to average yearly earning levels locally, taking into account other things such as current interest rates and acceptable mortgage term lengths. However, this can only happen once the housing markets are operating as they should, i.e. operating as arms length markets in accordance with, free market economic fundamentals.

Anyone may add their own comments to this blog if they wish to, whether in support, or otherwise and are warmly invited to do so.

For more on this please follow the link below:

The house price affordability crisis

Posted by: Peter Hendry, Housing Valuation Consultant

Author of:– The House Price Solution, otherwise known as The Hendry Solution.

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