Estate Agents and Housing Market


Neil Simpson is a former Personal Finance Journalist of the Year and the author of the Buy-to-Let Investor column in Financial Mail on Sunday. He is a keen property investor and writes about buy-to-let online as well as for a variety of publications including Mail on Sunday Property and City AM.

Can estate agents really read the market?

Can estate agents call the top of the housing market? And even if they could – would they want to? Most of this week’s newspapers reckon that one agent in particular has got what it takes. The word is that Foxtons’ founder Jon Hunt believes property has hit its peak, which is why he has sold up to a private equity group for £390 million. The company, which hardly has the greatest of reputations following the BBC’s undercover investigation into its sales methods last year, has 22 sites in London and 18 in Surrey. The sale has been talked about for more than six months with a host of suitors trying to persuade Hunt to sign on the dotted line. So why sell today?

Pundits all say it’s because he reckons the boom days are over. Many add that far from just hitting a plateau, prices may well be in line for the long-talked-about correction. So should buy-to-let landlords follow Hunt’s lead and get out while we can?

I say no – for a whole host of different reasons.

First, you have to ask just how much credence you give to estate agents. All property investors need to have good relationships agents on their patches. They need to woo them to ensure they hear first about any good properties coming on to their books. They need to keep them on side so our offers get to sellers quickly and our sale instructions get promoted to the max. But that doesn’t mean we always think they know best about the wider market.

Secondly, I’d say Hunt’s big sale this week says as much about share prices as it does property values. He’s sold to a group of asset-hungry investors, people who in the past few months alone have seen the FTSE do very nicely thank you. It’s just as likely that the decision to offload Foxtons has as much to do with the temporary top of the stock market as it does of the property market.

Finally, as all property investors know, there are two sides in every transaction. You can’t simply think that Hunt’s sale marks the top of the market without at least considering that the private equity group’s purchase of Foxtons suggests that a lot of very sober-eyed investors think it has a long way to go.

As usual the only really worrying thing about the story is the sense of unease all this latest talk about market corrections will bring. It doesn’t help that it comes amidst so many other stories about how Home Information Packs may hit the market before and after their introduction on June 1.

Interestingly enough estate agents will be the first people to get a real feel for what effect Hips will really have. If the doomsayers are right and they will trigger a glut of oversupply this May as people rush to sell before their introduction then estate agents will already know about it. But as we reach the final fortnight before their supposed introduction it seems as if panic has been averted. Some commentators even think that instead of price falls because of an excess of sellers before the deadline, we may actually see prices rise because of a shortage of sellers just afterwards as the packs prove hard to find.

My view on all this? It’s the old newspaper headline Small earthquake, nobody hurt. Jon Hunt can collect his £350 million plus share from Foxtons, Home Information Packs can generate a whole lot of heat and noise. But the property market should just edge on regardless.

The real worry this week should actually be about interest rates – with a new survey of economists suggesting that we may face far more rises than originally thought. Many people had expected that today’s base rate of 5.5 per cent would be as high as the Bank of England may need to go. Suddenly a worrying number of big banks are pencilling in at least two more 0.25 per cent rises. The idea that by 2008 rates may be edging back down also seems to be losing ground. Several experts are now suggesting that when we hit our latest peak we will sit there for at least 12 months and possibly 18.

Buy-to-let investors and first-time buyers will all have to do our sums carefully to see how well we can cope in this expensive new climate. If you are making a modest monthly profit now it’s certainly worth putting it aside rather than spending it if at all possible. The good news about rising interest rates is that it finally pays to save. There some good internet-based savings accounts that will keep even higher rate taxpayers ahead of inflation. And tax-free cash mini Isas are good home for up to £3,000 of rainy day money. Whatever the implications of the Foxtons sale and the Hip introduction this cash may soon prove to be very useful.