In Sense and Sensibility poor Marianne, dumped by the wicked Wiloughby in favour of an heiress, remarks miserably that one should judge people not by what they say but by what they do. It is a comment that is as relevant to estate agents as it is to errant lovers.
It would be nice if when you wanted to know what was going on in the property market you could just ask an agent and expect him to tell you the truth. But you can’t – it is not in the interest of those whose future is geared to the property market to tell you the truth about it when it isn’t doing well. You can, however, judge what the agent might actually be thinking by looking at what he is up to when he isn’t staring blankly out of the window hoping a punter might turn up.
The managing director of a smallish business broker based in Bath contacted me this week. In the last three weeks he has been contacted by 17 independent estate agents based solely in the UK and another 4 specialising in overseas investment property all looking to dispose of their businesses in a hurry. It is not, as the firm’s MD pointed out, a “ringing endorsement of the property market.”
On the other hand, while selling up last year would have been a better move for the average agent, selling up now is still a good one. Estate agents don’t necessarily need house prices to keep rising to keep making good profits but they do need people to keep buying and selling houses: whether they sell a house for £500,000 or £550,000 is neither here nor there to the average agent (it makes a difference of £1000 to their take if you assume a commission rate of 2%) but whether they sell one of them or two of them is (that makes a difference of £10,000).
Right now transactions are in free fall (note that mortgage approvals are at a three year low) and likely to stay that way given the fact that the subprime mortgage market, which was financing much of the UK’s bubble, has pretty much shut up shop and that uncertainity has put a lid on the prime market.
At least an estate agent trying to sell now can point to the good profits it made in 2006 and 2007 in its efforts to get a reasonable price for its businesses. Any that leaves it until 2009 will only be able to point to the miserable losses it made in 2008.
First published in The Evening Standard 15/1/08
Merryn is quoted in an article on the super rich and their children published in The Guardian today. You can read the full article here: https://www.guardian.co.uk/money/2008/jan/17/inheritancetax.usa