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Paul Smith

July/August 2009

Does the 'W Effect' have to spell 'Woe'?

I AM enthusiastic to see the first signs of economic Spring and it brightens my day to hear the media using the term ‘green shoots’ more and more frequently. However, we have to be realistic and accept this could just be a short-term bounce.

Let’s suppose the market is in the middle of a ‘W’ trend-line, where we have come down the first slope and are on the way up, but waiting on the other side is another down.

We need to make sure the ‘W’ has the symmetry of a traditional typeface rather than something that has been drawn by Salvador Dali, whose surrealist images hang lopsidedly into the future.

I am no economist, but there does seem to be an inescapable logic in the argument we are in for a double-dip recession with sharply rising unemployment, falling tax revenues, public spending cutbacks and lower incomes, irrespective of which party is in Government.

All this could mean greater budget deficits and more downward pressure on the housing market for the next two or three years.

Anyone could be forgiven for feeling confused by the short-term picture.

Sales are up and there is more liquidity in the mortgage market, helped by new mortgage deals and shared ownership schemes.

The buy-to-let market is taking advantage of desperate developers and distressed sellers, with repossessions up by almost 25 per cent in the first quarter of this year compared to the previous quarter.

As estate agents, we need to keep encouraging people to put their property on the market to kick-start demand, while at the same time persuading sellers to have a realistic expectation about the price they seek.

The fact they can’t get a bubble-inflated price does not mean it is not a fair price.

We need to incentivise sellers and motivate buyers in ways we have never done before and hope the move towards renting instead of home ownership is not a nod in the direction of what happens in many other European countries where rental is the norm.

What we must not do is sit back and wait ‘to be done to’. Complacency has no room in a successful estate agency business.

If the ‘W Effect’ is set to become a reality, we need to do everything we can to make the second dip as short as possible.

But then, as we have come to realise, there are many factors over which we have no control and as much as we all hypothesise about trends within the industry, none of us can accurately predict what the future holds.

So what will follow HIPs?

START counting the months. The end of Home Information Packs could well be nigh. You only need to look at the local election results to see the writing is on the wall.

The drubbing of Labour, combined with Gordon Brown’s lack of support, means there will be a General Election sooner rather than later; it is quite possible the Tories will be shoe-horned into position, with the Shadow Housing Minister Grant Shapps pledging to scrap HIPs as his top priority.

So what will this mean for the industry, apart from yet more upheaval? Will the flags be flying with the end of the first-day marketing regulations which have slowed down the whole sales process? Will properties start flooding onto the market where sellers were previously reluctant? Is it likely that Domestic Energy Assessors will be able to undertake enough Energy Performance Certificates in a day in order to survive financially?

Will conveyancers speed up their processes and get more involved right at the start? How will local authorities continue to improve their search processes?

Perhaps this whole debacle was necessary to underline the flaws in our old system — and reinforce the need for change.

Isn’t this the opportunity we have all been waiting for, the chance for us to voice our ideas and design a home buying process for the future? Grant Shapps has tabled an Early Day Motion calling for HIPs to be first suspended and then abandoned. I, for one, will be calling on my local MP to support this motion. I urge others within the industry to do the same.

The MyChoice HomeBuy scheme is now 'no choice'

SINCE writing in my last column about the Government’s MyChoice HomeBuy scheme running out of cash, the scale of the problem has become more apparent with all funds now completely dried up.

To give an idea of the impact this has had, in one weekend alone our Spicer McColl branch in Wisbech had seven chains fall through, with 15 transactions affected.

Now multiply this by all the other estate agencies experiencing problems and it has been a catastrophic disaster at a time when we needed to keep the market moving for first-time buyers.

Was it the fault of those buyers who had excitedly put an offer in on their chosen properties before receiving a letter confirming they had been accepted on the shared ownership scheme — or were many of them much further down the line than had been appreciated?

We had cases on our books where people had a letter saying their funding HAD been approved. In other cases, sales had been delayed by up to 10 weeks while people waited for funding to come through.

The fact that the scheme ran out of cash so early in the financial year demonstrates there is a massive appetite among first-time buyers to get on the ladder — but the Government needs to make more money available to make this happen.

It is all very well saying that people can still apply for the shared ownership scheme to buy new property, which will no doubt please developers and take empty stock off their hands.

But how will this help the rest of the market if there are so few first-time buyers around to take their place at the bottom of a chain? The whole scheme now needs rethinking.