Estate agents need to adapt and survive
Despite a slowing market, and misleading headlines about house price crashes, I’m happy to report that people’s confidence doesn’t seem to be eroded by reports of a fall in property price growth. This is good news, because low confidence can drive down prices further.
Culturally, we do seem to be developing a more sensible approach to house prices, realising that growth isn’t always good and that a slowdown can be healthy for everyone, as long as it doesn’t lead to panic buying or selling.
While most of this month’s reports reflect the fall in growth, some do stand out. Rightmove reports a “jump” in price growth in the Midlands, but this turns out to be just 1.3% – more of a little hop, in my view.
However, they also agree that prices are under pressure, reporting that, despite strong sales, “74% of the sales made were below the original asking price”.
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Regionally, Nationwide reports that, when it comes to annual price change, the gap between the weakest and strongest regions is narrowing but, “While regional growth rates have begun to converge, there remain significant disparities in price levels.”
Nationwide reports: “The Outer South East was the strongest performing region in Q1 2017, with average prices up 6.4% year-on-year. The North continued to be the weakest performing region, with a slight decline in prices compared with Q1 2016.”
Outside of these areas, Hometrack makes a valid point that “While growth in Manchester has hit close to 9%, the supply/demand dynamics are not strong enough in regional cities outside southern England to support double digit rates of house price growth” and previously successful local economies such as Aberdeen remind us all of how local factors as opposed to what’s happening nationally tend to be the main driver of prices and volumes in this day and age - Aberdeen is registering falls of 5.9% year on year, according to Hometrack.
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Sales volumes expected to fall
The most unexpected headline comes from NAEA Propertymark, who say “The number of sales agreed rose to a 10-year high in February, to 11 per branch” for the first time since September 2007. Considering the huge quarter we had last year when landlords were trying to beat the stamp duty rise, this is quite surprising and is in contrast to most reports, which suggest overall volumes are down.
Hometrack have some insightful data on volumes, and suggest they will fall by up to 5% in “the highest value cities” during 2017 due to affordability constraints, with only the likes of Birmingham and Newcastle expected to buck the trend.
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According to the Land Registry, property prices in three out of our four countries are still lower than they were 10 years ago and the Nationwide data shows that three of the 10 regions still haven’t recovered to the price levels of 2007, so I find it remarkable that 10 years on from the credit crunch most media reports are concentrating on how ‘unaffordable’ property is, while in actual fact, the opposite is pretty much true.
When you also consider that mortgage rates are far lower than they were 10 years ago – with many at record rates – coupled with government support via the Help to Buy equity loan and ISAs, to some extent buyers have never seen such a good market outside the traditionally fast paced economies of London, Bristol, Cambridge and Oxford.
The future of estate agents
From an agent’s perspective, the local nature of prices and rents – coupled with stock issues putting pressure on agents – means those who understand their local economy and how supply and demand work in their area can really set themselves apart from the competition. In my view, the agents who will continue to succeed are the ones who advise people on property decisions.
It’s also vital that agents realise the need to encourage clients to take independent advice when it comes to property, checking they are on the right mortgage rate, and making sure, especially if they are a landlord, they are getting good financial advice on things like tax and inheritance.
The days of just selling or letting homes has gone; a local agent should be as important to people’s property decisions as a financial advisor is to people’s overall wealth – and one of the biggest opportunities for agents to establish themselves as lifelong consumer property advisors is by working to help first-time buyers onto the ladder.