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Sales Trends - Latest report from www.arlets.com

Dated: 21st February 2006

Boom or Bust, again?

Arlets.com are please to announce that the UK property market is in fact going forward with an upbeat report that property sales are still very active.

However there is concern for 2007 as "Home Information Packs" become law (June 2007).

This could result in a two-way market, either you are selling and will pay higher fees to sell, or you hold back till you have to sell.

What does this mean?

Less property for sale on the market results in an increase in demand thus resulting in higher property prices!

The reason for fewer properties to market is because the market usually has around 30% speculative sellers. These are home owners who fancy a change or capitalise on their assets, a typical example would be a young couple who bought their first home, modernised it and brought it back to market at a much higher price with a view to repeating this strategy. This is a fairly common speculative seller, however if the couple in question then see that before they go to market they need a home information pack prior to selling then they may wait for while as the cost of these packs (Hip's) will be in the region of £800. This is quite a lot of money for anyone to consider just selling a property speculatively.

It is anticipated that many estate agents will absorb this upfront cost to enable vendors to come to market without having to find the money themselves, however this cost cannot be taken completely out of the equation therefore we would expect an increase in agency commission to justify the initial costs.

The estate agency business is already very competitive with some agents offering fees of less than 1%, this kind of market approach would be unsustainable and therefore we can expect either a reduction of estate agents trading or an increase all round on Estate Agency fees.

So either way we are OK, the market is pretty much the same but for higher moving costs and as a bonus higher resale values!

Well, no!

As we mentioned earlier this is a potential two way market or to be precise a two direction market. So the other side needs to be explored and evaluated too.

We are now June 2007, the law states any property for sale in England or Wales is only available with a Home information Pack already in place. The cost of the pack may be £800 (with VAT or plus VAT). The UK economy works well as an asset rich society but as we are all burdened with debts we are also often, cash poor. So the Estate Agent will bear the initial cost of going to market, but what happens if the house doesn't sell?

The agent then asks for the initial costs of £800 back (particularly relevant if you decide to switch agents!), or the agent transfers the debt to the newly instructed agent and receives the outstanding payment from the next agent. (Worse is if the new agent doesn't accept the HIP provided by the last agent and asks for a new HIP!!).

Either way we are now faced with complexities that, until this problem is sorted out, can only add fuel to the fire of uncertainty. Therefore an alternative solution is to sit back and wait for all the potential minefields to be stepped on by someone else, take a longer view and stay put. This is in fact a very sensible view to take, but with it comes a new problem. Nothing is for sale, no one wants to buy and no one wants to sell, unless the deal is too good to miss. Hang on! Are we now only dealing in cash rich buyers who can afford to buy and sell at will? Or sellers that have to sell due to a distressed vendor situation?

Distressed sales:

A) Death

B) Divorce

C) Bankruptcy

These will make up around 50% of all sales, but because they exist in the first place they also inspire the other 50% to act, but at what price?

We are now facing a downward spiral, where the buyer will deal if the price is right, the vendor must sell at almost any cost (and hang the Hip's cost, we haven't the time to wait).

If you were around in 1989 to 1992 you know where we are at here, a housing market smashed to pieces, properties sold for way less than previous values and an indifferent buyers market.

However we also had other outside influences not prevalent today, for example upwardly spiralling interest rates and a severe downturn in the global economy. These factures kept the house prices subdued for quite a while.

But we do have new threats.

Escalating fuel costs, Middle East disquiet like we have never seen before and global warming events with unseen results thus far. Ultimately we just don't know what's around the corner and this alone can be enough to suppress markets in property and shares over the next 5 years.

So when are you moving house and why?

 

www.arlets.com is a trading platform for letting and selling property in the UK and holiday homes abroad. The website is still under construction however the active partners in the site already have close links to the property market and are reporting their findings prior to launch.

 

If your specialist market is seeing either an improvement or downturn in fortunes, tell us and we will post your report on the TRENDS pages (www.saleswork.co.uk/trends). We will include your website/company name and your name on your report.

 

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