The primary justifications for sales and marketing reform in all housing markets across the UK

This is a brief, potted, history lesson explaining why house prices have risen so much in the past 10 – 15 years.

The cause of the failure of large numbers of buyers to be able to continue to afford to get onto the housing ladder is primarily on account of government banking and finance policy or fiscal policy.

More than 10 years have past since the 2008 financial crash and the effects of using quantitative easing (QE) are, at last, beginning to reveal themselves.

Virtually all capital assets have increased in value against sterling, whilst savings have simultaneously experienced a decrease in value – in real terms.  This situation, as everyone will now undoubtedly realise, does include significant price increases right across the housing markets.

The effect of this policy has resulted in a majority of millennials (i.e. people coming-of-age around the turn of the millennium) becoming unable to afford to buy houses.  Instead they will have to accept becoming long life tenants as being the only viable alternative to having to stay with their respective parents into middle age.

In my opinion, along with many others, this is sufficiently bad to warrant a complete re-think of the way monetary policy is managed both by government and equally as importantly, by the separate institution of The Bank of England.

Here is the brief reason for this conclusion:

10 years ago (2008), the government was faced with coming up with a rescue plan to deal with the global financial crisis which was seriously affecting Britain as well as the currency markets in America and other major nations’ currency markets too.  The required decisions were extremely time critical.

As a response, the government decided to authorise The Bank of England to issue digital money to purchase government bonds as loans for use to fund public borrowing by financial institutions.

The effect of this (which was of course well known at the time) would be to reduce the yields on such bonds owing to the increased demand for them.  The secondary effect (which would also have been well known at the time), was that we were going to have to accept permanently lower interest rates across all financial markets.

This would result in banks everywhere having access to more funds to lend but (and this is a big but), they would then need to lend more money in order to earn enough from the lower rates of interest able to be earned from it.

The scale of QE engaged upon following the crisis was huge and at unprecedented levels.  Indeed such a course of action had never been tried to such a massive extent previously, even though it was deemed essential and the only plausible course to take.

Knowing that this was about to happen in the USA our government decided, along with The Bank of England, to follow suit.

The effect was going to be that suddenly, practically everyone in employment would start to have more borrowing ability and hence more purchasing power.  This was intended to help the economy to recover and save it from diving into a full blown recession.

The policy however would have to adversely affect those with savings to the extent that the interest earned on all such savings would no longer keep pace with the rate of erosion of the value of their savings both by the risk of inflation as well as the severely reduced interest rates likely to be obtainable.

What the government was perhaps understandably somewhat coy about however was (knowing the only way to counteract the resultant inflationary pressures following the severe dose of QE which was about to be prescribed), they would have to simultaneously engage in a severe program of austerity cuts.  The last government did this with a determination that suggested their very skins depended upon it!

The unavoidable difficulty would naturally be that more substantial mortgages, available to those who could afford to borrow, would cause house prices themselves to increase very substantially.  In some places house prices have in fact actually increased by between 40 and 60% over the past five years alone because of these policies.

As wages were never going to be able to keep pace with such increases, those having to save for a deposit to buy a house were soon going to find themselves unable to save enough fast enough to keep up with expected house price increases.

The result of this, as we can now clearly see, is that many hopeful first-time buyers have had to defer and in many cases completely give up the aspiration of ever becoming home owners in their own right.  This has been and is a tragedy for all of them and it is now clear for everyone to see.

Owing to the resultant house price increases the direct effect of QE has been to cause a very significant slow-down in the numbers of houses being sold across all housing markets, certainly in England and Wales.  Whilst this is true it has not been very well documented, perhaps for fairly obvious reasons.

A further side-effect is that estate agency is suffering significantly, since they generally get paid after the sales they have actually arranged are completed.  Thus they are experiencing a similar fate to the other organisations more directly subject to the targeted austerity measures.

The true aftermath of the risky QE approach embarked upon is now becoming clear.  We are destined to be stuck with very low interest rates for years to come and our house prices, like a mirage appearing to stay just out of reach of the thirsty, will remain similarly out of reach, for a large number of future home-makers or home owners.  There seems to be no easy alternative – now that we have been led down this particular road for such a long distance and, to a large extent, in our ignorance.

There is however one way in which houses may be priced more competitively and market sales turnover thus restored.  It is what is advocated by The House Price Virtuoso Solution which is explained more fully in the link below.

Implementing this solution would greatly help both the present and future affordability of all houses by improving open market conditions.  This would allow the prices paid, to more closely match peoples’ ability to buy instead of having prices set based largely on the projected financial returns of house builders and developers – as generally happens at present.

The House Price Virtuoso Solution is a new and innovative way to make all housing markets across the land, behave more in accordance with what local people can actually afford, by placing less reliance on vendors’ asking prices as being the primary price mark. It was conceived by Peter Hendry, a surveyor with years of experience working in the front line of providing reliable property advice to intending purchasers by inspecting the houses they planned to purchase and reporting as to the condition of these directly to the buyer involved.

In the long run The House Price Virtuoso Solution, if implemented, would begin to restore confidence by enabling successful house purchasing across all areas, both within our towns and in the country.

I would therefore earnestly suggest that this proposal should receive full scrutiny and I would also encourage healthy debate in regard to it by all those with genuine knowledge in the housing sector.

To find out how such a significant market improvement could be achieved, please go to:

The House Price Virtuoso Solution: Full details of our proposals for properly reforming all housing markets in England and Wales.

Posted by: Peter Hendry, Housing Valuation Consultant

Supplementary reading:

My second article titled:
Further justification for changing the way houses are marketed within the U.K.

BBC article on QE

propertyindustryeye article about first-time buyers and the housing market

Further justification for changing the way houses are marketed within the U.K.

Justification 2:
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.

Justification 3:
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 Virtuoso 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.

Justification 4:
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!

Justification 5:
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 …
And:
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.
And:
Lack of valuation knowledge There’s a general lack of adequate valuation knowledge (and experience) possessed by most agents in the property sector currently …
And:
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.
And:
Exaggeration
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:

The House Price Virtuoso Solution: Full details of our proposals for properly reforming all housing markets in England and Wales.

Posted by: Peter Hendry, Housing Valuation Consultant