Author Archives: Peter Hendry

About Peter Hendry

The Hendry Solution is his new open market technique for equalising buy and sell prices within all markets. It was originally conceived to correct the anomalies plaguing the UK housing marketplace. The time to take corrective action is right now, although such action is also somewhat overdue. I would welcome sharing your thoughts on aspects of these new proposals using this blog site.

Captivating research into house price growth since the late 60’s

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No political party in power in the last 50 years has managed to curb excessive house price gains!!

See:
Which political party is best for house prices?
JUNE 6, 2017 credit: MARC SHOFFMAN
.

I would define excessive house-price gains as prices that exceed inflation by over 2%. Most years have seen house prices outstrip this benchmark.

As everyone knows, increases in house prices running in excess of average affordability are currently in the headlines as these are of concern both for those hoping to buy as well as those hoping to move house these days. The effect is to reduce the volume of house sales, resulting in a stagnation of sales volumes across all areas of the UK.

Here’s how to overcome this problem:
Instead of estate agents working on how many houses they can list and gain instructions to sell or let, they should work on how many buyers and renters they can register.

This would be the change that the housing market has been needing for the past few decades.

Estate agents should then work with their new clients to find the best and most suitable properties currently available for them as their primary clients.

They could also then advise and negotiate appropriate prices or rents for them as clients, and present all such offers to the vendors (or the landlords).

This way, more buyers and tenants could be united with the houses that best suit their purposes. This, in turn, would help the housing market to function faster and better.

Turnover of properties going on the market would increase and prices should be more equitably regulated dependent upon the true demand from buyers and tenants..

In other words; instead of each agent trying to get the most, for as many houses as they can get instructions for, buyers should be gathered as their new clients to more correctly ascertain what are the best offers currently obtainable, for each house or dwelling.

Doing things this way would get the housing market to start operating more like an auction, where buyers truly compete with one another to win the use and occupation of each property being marketed.

In auctions, the buyer effectively pays the consideration as the auctioneer takes his commission from the price paid. (He does also take a listing fee from the seller, which is reasonable).

For more on this new idea and how it could change the housing market in England and Wales very much for the better, please see my blog at:

Improve The Housing Market in England and Wales.
How to Improve the Housing Market in England and Wales.

Your thoughts or comments are welcomed.
Regards,
Peter Hendry, Consultant in Housing Valuation

Shelter declares affordable new homes too expensive

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Nearly eight out of 10 families across England are unable to afford newly built homes in their local area, a report by housing charity Shelter says.

This story was published in early March 2017 in most of the news media and shortly before the forthcoming Budget Speech.

The links to the BBC and ITV articles are as follows:
(they open in a new tab)

affordable houses too expensive: BBC Shelter story.

affordable houses too expensive: ITV Shelter story.

It finds rising rising house prices hitting all parts of the country, not just London and the south-east.
Apparently, ministers agree the present system for building more affordable houses is broken and still aim to make such housing genuinely affordable.

There are allegations that prices for land, plus the cost of construction, have risen to allow maximum profits to be taken by builders and at the same time housing supply is not being accelerated to meet predicted housing demand.

Many new-build houses are costing over £200,000 and more than half of the families in each region simply cannot afford to pay this.
In addition, second-hand houses for sale are generally cheaper in price.

Shelter says there is a crisis in the housing sector.

The article argues for more local authority involvement enabling the building of properly affordable houses as well as the possibility of involvement by voluntary organisations that may be encouraged to work to build such homes for the public good rather than for increased private profits.

The charity would like to see a “new civic housebuilding” system introduced to facilitate the building of new, affordable high quality houses, with greater powers for local authorities over land acquisition in their respective areas.

Under Shelter’s proposed initiative, landowners could choose to sell at reasonable prices, or invest their land as equity and own shares in a development, instead taking long-term returns and a share of the profit.

A Department for Communities and Local Government spokesman was interviewed about this and apparently agreed with Shelter that the housing market in this country is broken but also confirmed, among other things, that the industry is committed to delivering further increases in supply with more of the types and sizes of houses that can better match supply to demand.

It will be interesting to see what is offered to help with this in the forthcoming Spring 2017 Budget.

As a final comment, my own proposal is for a new way for housing in England and Wales to be marketed which is based on changing from vendor-centric estate agencies to buyer-oriented ones. The details are fully set out in ‘The Hendry Solution’. The change would not cost a great deal to implement and would bring massive benefits to every local housing marketplace, by helping to satisfy demand at more favourable prices. It would be achieved by making the process of buying and selling itself considerably more efficient and less costly, whilst still encouraging builders to construct the houses which are of course urgently needed.

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

Improve The Housing Market in England and Wales.
How to Improve the Housing Market in England and Wales.

Peter Hendry, Consultant in Housing Valuation

The housing market is desperate for economic reform to bring everything back into line with local affordability.

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It’s so obvious that the housing market is desperate for economic reform, to bring everything back into line with local affordability?

Please see:
The state of the UK housing market in five charts: The housing market is desperate for economic reform to bring everything back into line with local affordability.
An especially good article with graphs by Tom Ough – 2nd Sept 16.

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

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

Simply building more houses can’t solve the housing crisis

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Obviously we need to get more houses built, both for rent and to buy but developing this as a strategy for calming the housing market is not going to remedy the prices uplift which we have recently experienced. It cannot do that simply because building more can’t achieve anything for as long as the considerable time it would take to actually complete the building of the extra housing needed!

The market itself is in need of intervention and this does need the steady hand of an experienced government. One that can put effective policies into practice faster than the simple and well-thumbed ‘build more’ idea.

My solution is to overhaul the way in which houses are marketed, both for sale and to let by changing the way agents themselves operate.

A more market friendly method is needed so that house prices can be attuned more towards peoples ability to pay, with less of the speculative pricing by agents, whom currently act only for the vendor legally. It is this which needs urgent attention.

A more transparent housing market would not only take the froth out of asking prices but would have the added effect of calming rent levels too. For more information please go to the link below:

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

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

The best way to manage rising house price tendencies in the UK

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The best way to manage rising house prices tendencies in the UK

Are there no agents bothered about the current house price levels? No, probably not and I’m not surprised, as they are mainly interested in getting the best price possible on each individual sale and in earning themselves commission based largely on this!

The government idea of taxing rising house prices by way of Stamp Duty may well scoop extra funds for the treasury but it can’t deal with the underlying market difficulties which beset the UK housing market. The problem is that nowadays, being able to simultaneously sell and also buy a house to move into is fast becoming a distant dream for more and more of us. Taxing all the transactions more won’t help if lending limits are simultaneously relaxed!

The only way to deal with this problem effectively would be to bring in agents that could act for each client both in selling their existing house and buying their next. Only in this way can price parity start to be achieved once again. It must be done by agents starting to advise their clients on relative value differences.

The old notion of estate agents simply having to get the best price possible is really only a partial business service for their client. It is no longer adequate in this modern and data-centric world of ours as most people go on to buy somewhere else to live following the sale of their existing property.

Price disparities abound nowadays and these will need to be swiftly resolved in order to get the rate of completed transactions increasing and thus to build-up public confidence in current market pricing, once again.

Sole agents simply selling houses for owners was, of course, a turn of the century idea, commenced in the wake of the last world wars. It is now long overdue for revision.

For this reason increasing the supply of properties to buy, by building relatively few new houses (percentage-wise), cannot deal with the current problem within the marketplace itself. This is because it’s a price-setting problem.

There are far better ways of dealing with the house-price crisis.
For more on this problem and for full arguments for a need for a change to estate agency law instead of this, please read:
Earlier article published on this blog site

Posted by: Peter Hendry, Housing Valuation Consultant

The residential property market is in trouble!

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If Kate Faulkner advises “The residential property market is in trouble!”, it genuinely must be in trouble!

I’m saying the primary reason why it’s in trouble is not entirely to do with:

1. Insufficient numbers of houses existing in the overall pool of built properties in the whole country.
OR
2. A general lack of money-raising ability amongst individuals wanting to start owning or just moving to larger properties.

Instead it IS to do with the way that sales of houses and purchases are being transacted – and the price-levels being raised by the existing worn-out methods of marketing.

If these methods were updated and improved, things would be far less stressful out there – for everyone.

What we urgently need right now, even more than someone magically building tens of thousands of new homes, (which by the way is impossible in the short term – even for Nick Knowles) is … we need a big upgrade in the way houses are marketed.

If this was achieved, and it could be in a very short timescale, the relief and help available to everyone needing roofs over their heads would be simply astonishing.

If our elected government can see this they could change the performance of the whole UK housing market for the better in the short term and this would be a guaranteed way of their ensuring that they’ll get re-elected at the next General Election (and probably several elections to come)!

For more information on the best and only way to deal with the current housing market problems (including helping countless numbers of households achieve better housing), please refer to the previously written “Hendry Solution”.

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

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

Why have UK house prices risen now and become way out of line with the rest of the economy?

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If you don’t know, this would indicate that you, along with quite a few estate agents genuinely do not see that there is a need for improvement in the way houses are marketed and sold in this country.

There are 3 basic reasons for this happening.

1. Too many houses which go onto the market currently fail to sell at all.
This results in an increased shortage of available properties to buy, which also tends to move prices further in an upwards direction.

I estimate the current rate of failure on agent-instructed sales is approaching 50% currently, but there appears to be no reliable data on this for some peculiar reason. I wonder why?

2. The difference between the price one pays when buying and what is obtained when selling is greater than it ought to be, the result of which is fewer actual sale completions than might otherwise be attainable; when one thinks about this.

In theory, there should be little or no difference between buying and selling prices at any one time – except for tax and stamp duty plus area or locational differences and accommodation size and quality differences. Of course, the fees and the other ancillary costs of moving do need to be accepted as being payable.

3. The price differentials caused by 2 above, i.e. by estate agents’ general over enthusiasm to get more houses onto their books all the time, is what causes the problem described in 1 above. This is what is called a negative feedback loop. That is, it has a negative or opposite affect on the operation of the market.

Until this is satisfactorily corrected, the housing market will continue to operate in its present inefficient and imperfect way.

This must actually harm the national economy – especially when the country is trying to get out of the previous deep recession – and that is still the true situation in the UK.

IF, instead of agents continually competing with each other to increase their own individual share of the number of houses coming onto the market at any one time, agents were to actually work in harmony with each other to help those wanting to move house, the likelihood of individual house buyers simultaneously completing when buying and selling would be very greatly increased. This would have an equally substantial effect on the whole nation’s economy.

This is the primary reason why a fundamental CHANGE in the way houses are marketed in the UK is desperately needed.

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

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

There is a problem with the estate agent instruction-gathering machinery

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The main point to raise is that calming the housing market is not just a question of doing accountancy tweaks.
It’s how the market is managed that needs the tweak.

There’s a problem with the estate agent instruction-gathering machinery.

The thing is, agents are all too willing to scoop up new instructions in competition with each other, irrespective of whether the client wishes to ask too high a price for the property being sold in the prevailing market, taking account of relevant locational considerations. This is a continuously inflationary approach which has been built into the housing market for decades but need serious revision.

The problem is, there’s a cost for having too many over-priced houses on an agent’s books and this has to be spread across all the other vendor clients. That’s because of the no sale – no fee method of charging which is used. In addition, the cost of maintaining this extra sales data on the various portals does add up and is cumulative. This fundamental problem is not dealt with by tweaking the accountancy of the housing market.

It has been noted in recent media coverage that it’s the successful sellers, the ones who price their properties realistically, that are subsidising the cost of all the unsuccessful sellers, whose properties are overpriced and languish on the market for weeks at a time! Also a significant number of these vendors eventually give up altogether causing even further financial loss to the agents, as well as feeling they have had a poor service from them!

Agents should ask themselves, how many vendors would be happy to keep their property on the online portals for weeks on end if they were the ones whom had to pay for the cost up front, whilst knowingly trying to achieve an unrealistic price for their property as compared with everyone else.

What’s even worse is the practice amongst estate agents of competing with each other by chasing each prospective buyer to the extent of hounding them to make a decision to buy what ‘their particular client’ is selling before it is too late. This is basic arm-twisting and is patently bad practice, especially when the house in question either stays on the market or comes back to the market rather quickly afterwards.

Though agents appear to be trying to help the buyer, really they are trying to effect a sale on behalf of the vendor. This is the biggest turn-off for buyers as it effectively destroys any trust between buyers and estate agents and is therefore seriously counter-productive. This whole model of how best to serve buyers, whilst acting on behalf of sellers needs urgent and fundamental revision.

The Bank of England FPC’s latest proposals to re-unite the two-pace housing market are unlikely to achieve that objective.

Forgetting interest rate rises and MMR restrictions for a moment, the situation described above clearly points to the need for a complete revamp in estate agents’ core practices? If that happened we would all begin to see a new, better and more vibrant housing market in this country.

The definitive way for estate agents to achieve such a game-changing move is fully explained in my earlier article I am a retired estate agent with many years experience in the property sector.

The government of the day doesn’t seem to be doing anything much about these important issues unfortunately.

The views of firms or individual estate agents themselves are sought for moderation and online discussion on this web site.

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

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

Proposal for dealing with the present house-price crisis

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Many of us are glad that Mr Carney, The Governor of The BoE, has raised his concern that the price rises, both in London and more recently spreading across the UK, appear to be out-of-sync with our economic recovery.

Sales bottlenecks combined with frustrated vendors resulting from the new mortgage application processing delays, illustrate one thing and one thing only.  The housing market, or specifically the price levels being quoted in the market are assuming sufficient availability of increased mortgage borrowing.

But, what is actually needed is borrowing which is more strictly measured to make sure that those actually needing mortgage finance are given the priority they deserve and that there is a limit to the amount of money available to be borrowed of course for macro-economic reasons.

The market itself is, and always was, mature enough to cope perfectly well with such restrictions but as many will probably understand our housing market does have problems that need to be resolved concerning the way houses are marketed currently.

Here are four of the most important financial fundamentals that need to be understood before anyone can home-in on the real problem.

1. (This is of paramount importance). In the 70’s most people borrowed up to three times their earnings.  Now, it’s five times average earnings or more. This may be the latest trend but one should ask, “Is this, necessarily, a sustainable way to lend?”

In 2005, bank data shows that fewer than 5 per cent of mortgages in the UK were granted using more than 4.5 times income (and even in London it was only 6%).

By comparison today, using the Help-to-Buy schemes, those who can afford to do so can now borrow very large multiples of their current earnings (up to £600,000 each transaction) by raising mortgages – at staggeringly low rates of interest in market terms, owing to the cost of the nation’s structural debt holding down interest rates!  By doing this they are leveraging their individual levels of wealth severalfold, whilst at the same time causing house prices themselves to escalate!  This is a dangerous anomaly in the marketplace and it is abundantly clear that it needs to be much more carefully managed.

In the 70’s the top multiplier of 3.5 times a single income or 2.75 times a joint income used to be the norm.
The serious question is, can our government rise to the challenge of bringing this fundamental back in order to mirror what used to be considered normal?

2. Secondly, back in the 70’s, loan-to value ratios were thought to be too high if they topped 80%.  What’s changed in finance? We were not wrong back then.

Over in Singapore,  Liew Mun Leong, the young but now retired president of CapitaLand recently said. “In Singapore, the size of any mortgage is limited to below 60% of the current value of the property.”  This helps to ensure that there isn’t a house-price bubble.
Whilst prices still increase, they do not ‘mushroom’ in the way we are currently seeing in the UK!!
Maybe we have a lesson to be leaned from Singapore, for a change.

3. The third factor that helps to stabilise house prices in other countries is the more extensive use of long-term fixed interest rate mortgages.  Using these for a majority of home loans has been found to help smooth out price spikes, by smoothing out the cost of borrowing.  A debate should be tabled as to whether most home loans ought to be made with mortgages using long-term fixed interest rate loans instead. This could, of course be dangerously inflationary however.

4. The fourth and more recently worrying factor is the idea that mortgage lenders are now extending loan terms beyond 30 years, in order to lessen the monthly financial cost to borrowers and in doing so, increasing mortgage debt beyond the normal working life-cycle of a human.  This can only be described as lender-centric, high risk money-marketing as it must stoke up house prices even where forced sales are the probably outcome. The effect for some borrowers will probably be that will loose their homes at some point and also that even their offspring would never be able to fully pay off the debt!

One has to ask the question, is all this money-lending geared to mop up the quantitative easing which the government has had to sanction, owing the 2008 but still enduring serious financial crisis?

In the UK today and as a result of relaxation in the financial restrictions in foreign currency allowing rich foreign investors to buy into London and buy houses that used to be affordable but have now become UNaffordable, except by those who don’t actually need to borrow large multiples of their annual earnings but still do.  How can this possibly be sensible from the viewpoint of the those needing homes in the main cities?

We need new and functional measures to keep house prices in-sync with the main economy. In the absence of these I have now formulated such measures.

One thing our British island economy historically does well in, is spawning new and innovative ideas for becoming more efficient and competitive. In this we can still punch above our weight when difficulties need to be overcome.  The latest idea, as well as empowering The BOE to fully manage the above four fundamentals, is to change the way the housing market is serviced by estate agents.

In a nutshell the proposed urgently needed fix is not a monetary adjustment or an accountant-led fix at all.  The fix I am advocating is a housing market ‘imperfection’ fix.

Instead of the government being ‘forced’ into having to raise interest rates in a desperate attempt to quell the latest bubble, this fix is lateral-thinking in terms of addressing the house-price rise crisis both in the short and longer term.

The fix is to improve the way the housing market itself functions, because there are far too many imperfections in the way it works currently. The very first task, however, is to correctly identify the most significant imperfection involved.

If each imperfection was systematically removed this would serve to attenuate the prices within the marketplace.  This, in conjunction with the above four points, would overcome the current crisis; at least while the housebuilding industry was able to get back up onto its feet and the construction of new housing in sufficient numbers was well under way.

Doing this would also have the effect of helping to make land prices stay more affordable as the cost of land is, (and always was), directly geared to the capital value of residential property itself.

Here are the proposals:
The proposals are that estate agents should work primarily for buyers but also deal with selling the houses which their buying clients want to move out of.

To implement them, would require a change in thinking amongst present-day estate agents and so I call on them to scrutinise, discuss and hopefully agree these proposals in full in order to improve the way the market currently works.

If no such action is taken that would mean the continuance of the status quo with continuing price spikes, more aborted sales and continuing stress in the marketplace – including per se, lower net earnings by estate agents themselves.

Full details of my proposals and how they could be implemented may be read on the link below:

Improve The Housing Market.

My proposal for the way housing in England and Wales should be marketed is based on changing from vendor-centric estate agencies to buyer-oriented ones. It is called The Hendry Solution. It would not cost very much at all to implement and would bring massive benefits to all local marketplaces.

It is how to improve the UK housing market.

Peter Hendry, Consultant in Housing Valuation