The One Piece Of Data That Could Pop London's Housing Bubble

Feb 28 2014, 1:34pm CST | by

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

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Soyuz rocket carrying two Galileo satellites lifts off
Brussels, Aug 22 (IANS) A Soyuz rocket carrying two Galileo satellites, the fifth and sixth of Europe's Galileo global satellite navigation system, lifted off from the spaceport in French Guiana Friday, the European Space Agency (ESA) has announced.
 
 
Fresh cases of Ebola recorded in Nigeria: Official
Abuja, Aug 22 (IANS) Fresh cases of the Ebola virus disease have been recorded in Nigeria, where the highly contagious disease has already claimed five lives, Minister of Health Onyebuchi Chukwu said Friday.
 
 
Fuel cell technology gets a boost
Washington, Aug 22 (IANS) In an impetus for fuel cell technology to build "smart" cars, scientists at Stanford University have developed a low-cost, emissions-free device that uses an ordinary AAA battery to produce hydrogen by water electrolysis.
 
 
3D-printed technology to make drug delivery better
Washington, Aug 22 (IANS) The US researchers have developed an innovative method for using affordable, consumer-grade 3D printers and materials to fabricate custom medical implants that can contain antibacterial and chemotherapeutic compounds for targeted drug delivery.
 
 
 

Latest from the Network

Looking forward to working with Modi government: Singapore PM
Singapore, Aug 22 (IANS) Singapore Prime Minister Lee Hsien Loong Friday said his country hopes to work with India in areas of infrastructure and education, and expressed his desire to meet his Indian counterpart...
Read more on Politics Balla
 
India beat Middlesex by 95 runs
London, Aug 22 (IANS) India returned to winning ways albeit in a warm-up cricket match, registering a comfortable 95-run win over Middlesex at Lord's here Friday. India were dismantled 3-1 in the Test series,...
Read more on Sport Balla
 
Pakistan: Tensions ease as PTI agrees to resume talks (Roundup)
Islamabad, Aug 22 (IANS) Tensions in the Pakistani political landscape eased Friday with the Imran Khan-led Pakistan Tehreek-i-Insaf (PTI) party agreeing to return to the negotiating table as the Senate or the upper...
Read more on Politics Balla
 
Ukrainian rebels kill four soldiers
Kiev, Aug 22 (IANS) At least four security personnel have been killed and 23 wounded in clashes with rebels in eastern Ukraine, authorities said Friday. Four Ukrainian servicemen were killed Thursday overnight in...
Read more on Politics Balla
 
Miley Cyrus concert banned in Dominican Republic
Santo Domingo, Aug 22 (IANS/EFE) The Dominican Republic government has banned a concert where US pop star Miley Cyrus was scheduled to perform in the nation's capital Sep 13. In a notice sent to the SD Concerts and...
Read more on Celebrity Balla
 
George Clooney's ex Elisabetta Canalis engaged
George Clooney's ex Elisabetta Canalis has got engaged. The 35-year-old beauty is set to tie the knot with Brian Perri in Italy next month, as is George and his new fiancée Amal Alamuddin, after the orthopedic surgeon...
Read more on Celebrity Balla
 
Mariah Carey's jealously to blame for split?
Mariah Carey's jealousy is reportedly partly to blame for her and Nick Cannon's split. The 44-year-old singer is said to have trust issues with her spouse - with whom she has four-year-old twins Moroccan and Monroe -...
Read more on Celebrity Balla
 
Jessica Alba is 'fearless' after motherhood
Jessica Alba has become ''fearless'' since motherhood. The 33-year-old actress admits her whole perspective of her career has changed since welcoming her daughter Honor, six, and Haven, three, into the world with her...
Read more on Celebrity Balla
 
Daniel Radcliffe wants fans to forget Harry Potter
Daniel Radcliffe wants his fans to forget about 'Harry Potter'. The 25-year-old actor is currently starring in romantic comedy 'What If', and despite its success, the actor is resigned to the fact the comparisons to his...
Read more on Celebrity Balla
 
Hamas executes 18 alleged collaborators with Israel
Gaza, Aug 22 (IANS/EFE) Palestinian militias Friday executed 18 people accused of collaborating with Israel, 48 hours after three top military leaders of the Islamic Palestinian movement Hamas were killed in an Israeli...
Read more on Politics Balla