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Memorandum from the National Association of Estate Agents (NAEA), a division of the National Federation of Property Professionals (NFOPP) (CRED 51)
Introduction
1. A buoyant housing market is essential for the overall British economy. While it is extremely difficult to predict short-term movements in the housing market at present, there is a threat of a long-lasting downturn in the housing market. The knock-on effects from any possible recession in the rest of the economy - which the housing market slump is contributing to - will help push up the likelihood of repossessions, adding further to market worries. In response to the current financial crisis the Government has taken decisive action but should and can do more to help stimulate the housing market in the short term.
2. While further measures could take the form of immediate interest rate cuts, as many commentators have suggested, the Government should also consider a suite of measures aimed at boosting the housing market in these times. In times of increased economic uncertainty there needs to be a more delicate analysis of the impact of interventions such as HIPs on consumer choices in the housing market. By the same token, the Government should also consider how a stamp duty holiday would act as a stimulus to first time buyers. The Government needs to take a more holistic approach and address the needs of the entire market; as ultimately this will help to get the market moving again.
Background
3. This memorandum comes from the National Association
of Estate Agents (NAEA), a division on the National Federation of Property
Professionals (NFOPP). The NFOPP has a combined membership of
just under 14,000 practitioners. It is
made up of different member organisations, including the NAEA and the Association
of Residential Letting Agents (ARLA), who are the
4. NAEA welcomes the opportunity to provide comment to the Committee on these issues, and focuses its comments on the final of these areas of investigation. In particular, we highlight from our October poll of estate agents their immediate views of the effectiveness of the Government response and their views on the need for further action. We also append a report commissioned by the NAEA, on behalf of the NFOPP, by Professor Michael Ball The Modern UK Housing Market: Origins and Prospects ("The Ball Report", published November 2008). The report covers a wide variety of issues related to the housing market - how the UK housing market evolved; housing supply; the growth of housing wealth and borrowing; expansion of the private rented sector; origins of the current situation; and long-term housing market prospects. NFOPP would be happy to discuss the findings of this major new study in more detail with the Committee.
The housing crisis and the credit crunch: views of estate agents
"The second most important part of the economy (after banks) is the housing market. The Government need to create a situation to encourage transactions to take place - as they create values, to which lending can be secured, a flow of funds to other parts of the economy will then follow." (respondent to NAEA October members' survey)
5. The NAEA asked the opinions of members on the effect of the recent package of financial measures. The October poll produced 1070 responses from estate agents across the country.
6. This up-to-the-minute snap-shot of the
housing market, so recently after the Government's intervention, gives a unique
insight into the views of property professionals. Their responses suggest that despite the
injection of cash into banks, other interventions, such as a swift interest
rate cut next month, are still needed to help bolster movement throughout
the economy. Members were asked a series
of questions relating to the recent Government bank bail-out. The results
clearly demonstrate agents' strong feelings on how more should be
done for consumers and businesses, including a sharp interest rate cut.
7. The general consensus amongst estate agents surveyed is that it is too soon to tell whether this will have a dramatic improvement on market conditions. Overall members believe that provided the government's package on financial measures provides stability, which early signs suggest that it has, then this will be a positive sign for the housing market. Unsolicited comments from members point to the need to combined short-term interventions, with long term stability.
"The bank bail-out has had limited effect as yet but has safeguarded the cornerstone of the economy." "Confidence is all important, the bail-out is a positive step, doing nothing is not an option." "I believe the bank bail-out had to be done, but it will take at least six months to see any improvements." "...it will need time to 'bed-in." "I
feel the bail-out may help but only if banks start to lend again and relax
their criteria." 8. In this context, we highlight our interpretation that members are currently unconfident about whether the market would respond to these stimuli alone. Asked when they would expect to see property prices beginning to rise again in their area:
3% responded with '0-6 months', 18% said '7-12 months', 35% stated '13-18 months' and 44% answered '18 months and over'
Again, this suggests that current measures have instilled confidence that while the initial crisis has been seen off, estate agents feel that the market will need further stimuli to improve the present position. When the NAEA asked members whether they believed that the Government should put into place further relief efforts to help stabilise the property market. In response 88% agreed that there should be, while only 12% said they did not think this was the right approach.
Measures to improve confidence in the marketplace
9. The Ball Report analyses the current housing crisis and its development. It notes that "the whole of the housing market needs kick-starting. Emphasis should not be limited to specific slices of it. To this end it puts the need for: Substantial cuts in interest rates, which would improve affordability and stem repossessions; Strong new measures to increase the volume of mortgage lending substantially; temporary government guarantees for the top slice of mortgages both for first-time buyers and others and further, more extensive, temporary action on stamp duty."
10. The Ball Report goes on to observe that
previous upturns in the
11. From this evidence NAEA argues that, inter alia, a significant reduction in interest rates next month or in coming months would help bolster consumer confidence. We know that a positive housing market is essential for the overall economy. Reducing the rate will help send a clear signal to the market, encourage lenders to reduce their rates and allow the fluidity of mortgages to be loosened, giving the market and the thousands of potential buyers the positive impetus they need.
12. Other measures which the Government could consider relate to existing policy decisions. NFOPP, in common with other organisations in this sector, have criticised the introduction of Home Improvement Packs (HIPS), particularly at the time of tightening housing conditions.
13. Under HIP proposals, all properties being
marketed for sale will require a HIP. A
significant percentage of sales which ultimately complete, start with a seller taking
stock of their options. We fear that the
lack of ability to do this linked with a concern as to the cost of the HIP if a
property is withdrawn, will reduce the supply of houses available, cause the
market to retract and lead to additional house price inflation. Both these
factors could adversely affect the housing market. Furthermore, we are concerned that in this
climate sellers will not be allowed to put their property on the market until
certain elements of the HIP are completed, or until 14 days have passed. This
will delay the process of finding a buyer and disadvantage the consumer,
denying them their right to market their property when they wish to do so. The NAEA has expressed its eagerness to work
with the Government in helping them achieve their policy objectives of
improving the house buying and selling process in
14. We have also consistently argued for a stamp duty holiday policy to spur the housing market. NFOPP believe that the September stamp duty announcement represented a positive push in the right direction but was ultimately not enough to make a difference to the entire market. The Government needs to do more to address the problems in the market if anything is to change and improvements are to be made. The NAEA continues to urge the Government to offer first-time buyers a stamp duty holiday.
15. Activity in the market is currently low, with
potential buyers and sellers wary of further price falls and evidence of
builders postponing new developments.
Taken together this suite of measures could add a needed stimulus to the
November 2008 |