In the Bard’s tale of murder and intrigue in the quest for the Scottish throne, the three witches famous – and invariably misquoted- chant in their own version of ‘Ready, Steady, Cook’ could be a metaphor for the current state of estate agency in the United Kingdom. I would not suggest that root of hemlock or gall of goat are ingredients in the property market stew but nearly every other ingredient has this week been chucked into the mix. I cannot remember the last time that the property markets – at all levels – featured so heavily in the musings of the Fourth Estate. ‘You and Yours’ (Tuesday lunchtime on Radio 4) focussed entirely on the property market and in keeping with the genteel listening audience expected from the home of The Archers did not descend into the typical hysteria of other radio ‘phone-ins. It actually covered a number of very valid points with a cross section of people offering comment and opinion. The most prevalent was the “meddling” of the coalition government with the introduction in 2012 of Funding For Lending and the first stage of Help To Buy earlier this year. The world of the estate agent was further covered in the Jeremy Vine Show yesterday lunchtime whose coverage was generated by the release of figures from the Office Of National Statistics (ONS) reporting an estate agent boom. Apparently the number of employees in the estate agency sector has increased to 562,000 in the second financial quarter of 2013; the largest number since records began in 1978. If the figures are to be taken at face value this means that my occupation has seen an increase of 77,000 (from 485,000) since June 2012. Really?
The news of estate agents breeding like rabbits was not met with joy in all quarters. The ‘Estate Agent Oldies’ that featured on Simon Mayo’s Drivetime kicked off with Fleetwood Mac’s, “Little Lies”. Harsh. But there is an element of if not outright dishonesty, illusiveness and fallacious use of information. Firstly as this blog has alluded to before, what is happening in London and the South East is not representative of the rest of the country. The ONS figures do not detail where the estate agent boom is most prevalent. My money would be on London and the surrounding area. Not surprising but not nationally representative. Yes, the market is getting better but it is a steady improvement. Secondly, the Government schemes, though welcomed by many, distort market forces. They are effectively tampering in an open market allowing many people to acquire an asset that they wouldn’t normally be able to afford and one that they may find in years to come is worth less than its original purchase price. In trying to counter the looming threat of another housing bubble The Royal Institution of Chartered Surveyors (RICS) have called for radical new rules to be introduced. These include banning banks from lending more than 80% of a property’s value and a mortgage being based upon a maximum of 5% increase per annum in the property’s value. Seeing the latter through as an example; a house bought 5 years ago for £100k, is now worth £160k but a mortgage raised on it can only be based on a value of £125k.
Quite rightly nobody wants to see the housing market overheat and Britain to be again crippled with debt, but artificial suppressors are just as dangerous as artificial stimuli.