I’m often told that buying a new house is a stressful experience. But in London, it’s downright terrifying. Prices are shooting up at unprecedented rates, with a 10 percent jump recorded in just one month, and supply is so low that dozens of people end up bidding on every property. All the while, real estate agents are rubbing their hands with glee as the commission they make on each house soars at the same rate as the value of houses.
I’ve spend six months at the coal face of the London housing market with nothing to show for it. So when I met a group of men that want to help pop this blasted bubble using nothing but numbers, I wanted to hug them. Richard Rawlings is one of Britain’s most respected property market commentators. Along with his colleague Tim Hammond, he’s started up a service called House Price Analytics, which uses data to show prospective property buyers the truth about the price of houses. And guess what: the estate agents are lying to us.
“We want to make the housing market more transparent,” said Rawlings when we meet in a suitably overpriced cafe. “With our software, estate agents have nowhere to hide. We want to counteract the spin and some of the fear you’re seeing in this bubble, to show you the reality about what’s happening out there.”
Using data visualization software designed by a firm called Roambi, HPA presents all the data sources available on the housing market in a readable, digestible manner on apps available for iOS and Android. With a neat, attractive interface, the apps allow buyers to analyze trends in specific areas, right down to individual postcodes. Best of all, HPA is free for members of the public. There’s nothing essentially new about the data, most of which is publicly available. It’s just never been presented in this manner before.
The key takeaway from their findings is that most of the press reports on the housing market in London are wrong, because they are based on the “asking price” of a property, rather than the actual price it sold for. To get the figures which feed the hysterical headlines, journalists and researchers take figures from websites like Rightmove, which is an advertising sites on which estate agents attempt to get the most money they possibly can for a property. The difference between this asking price figure and the actual sale price is often as 10 percent or higher, meaning the stories often overestimate the size of the bubble. Worse, the figures they rely on includes data from prime central London, a collection of enormously expensive areas which have become the playground of the international super rich.
The high-end properties have enormous data-skewing potential simply due to their overheated price, Rawlings pointed out. Many of them are also listed with several agents, who each put their own advert on Rightmove. This means that if you take an average of the housing market using the asking price of these properties, the data becomes hopelessly skewed. So although the headlines scream housing bubble – and we all believe them – the market is actually calmer than meets the eye.
“This bubble is not a bubble,” Rawlings added. “We’re seeing multi-million pound properties in Prime Central London listed several times, which is distorting everything else. This produces market figures which are skewed towards the top end. Property portals then put out news stories which scare buyers. But these are based on asking prices, not actual sale prices.”
To get the real sale prices, a house buyer would have to look on the Land Registry, which keeps records of all sale prices. This 150 year old organization has leaped into the modern age, replacing the written deeds which prove ownership of a property with electronic records. But they are slow when it comes to recording the price at which a property sold, with the figure only available several months after the sale. The HPA app is great for analyzing specific postcodes, to see the trends in an area, but due to Land Registry limitations, it can’t show you what the house you’re bidding on actually sold for in good time. Without this information, it’s difficult to make a sensible decision about how much to bid on the next property that catches your eye, meaning you are more likely to bid an inflated price.
It is my assertion that releasing the exact sale price of a house immediately could help pop the housing bubble and here’s why. When estate agents sell a house, they are dealing with bids from many, many people. They often choose buyers who have already sold their house and are “chain free” or cash buyers. They don’t tell you this though. What they say is that the house went for tens of thousands of pounds more than the asking price, so that next time you bid bigger.
By the time the real price of the house you missed out on is published on the Land Registry, it’s too late. You’ve bidded above the odds on another property. This happens across the market, driving prices skywards. I know this practice is happening, because sources in two of London’s premier estate agents, which I’m not going to name, have confirmed it. They tell me that agents routinely lie about the prices of sold properties, to encourage intemperate bidding among their customers.
I think that estate agents should be forced to announce the price at which a property sold on the very day that sale is agreed. If developers like HPA had access to this kind of information, they could truly empower buyers and help them make informed decisions. Perhaps the market would achieve a bit of sanity and maybe us buyers could achieve a bit of sanity too.
Source: Forbes Business