Q. Will the property market remain strong this year, or do you foresee a drop in prices?
On the whole, I think the market will remain pretty robust. It is driven by the same dynamics that have driven it over the past two years ‘ supply and demand. We are still seeing high levels of demand and this is accompanied by people borrowing funds at what are still extremely competitive rates and are likely to remain so, even allowing for any bank base increase before the end of the year. When you have these ingredients ‘ high consumer confidence coupled with borrowing that is at all-time record lows ‘ it fuels demand. The main problem is that supply is not keeping up with demand, which puts pressure on prices. There will be regional variation. London and the South East will see slower price growth simply because the last 18 months have seen the highest growth in these areas, so affordability factors have to come into play. We will see a ripple effect ‘ high prices cause barriers at the bottom end of the market, so people are forced to buy further away from their place of employment.
Q. Are members still seeing an influx of business from buy-to-let investment ‘ is it likely to continue?
Very much so, even though in some areas we are seeing an over-supply of property compared to demand. It is more difficult to get the same rental levels that have been achieved ‘ landlords need to be realistic about their expectations and plan how to meet rental voids through another income. But it is an area that people need to investigate. Very often when people buy a property to rent, they buy to suit their own criteria, rather than that of the prospective tenant ‘ people need to explore what people are demanding. However, the market is still very strong and there is no reason why this should change. People are getting better returns through the property market than through a bank and in some cases, people are using buy-to-let investment as part of their pension.
Q. Both Alliance & Leicester and NatWest recently announced they would not lend high LTVs in some postcode areas. Was this a sensible move?
I was glad to see that a number of prominent lenders spoke out against these policies ‘ it is not sensible that lenders should start creating hard and fast policies that put up artificial barriers due to concerns over the market over-heating. At the end of the day, lenders should be more circumspect about the levels of income multiples they allow rather than the percentage loan of the property. Everyone would agree that the problem seen in the early 1990s was not actually negative equity ‘ it was the inability of people to meet the high levels of repayment due to the interest rate rises ‘ not high LTVs.
Q. What are your views on the Seller’s Pack initiative and when is it likely to be implemented?
According to the Minister of Housing, the Seller’s Pack remains a Government initiative and a Government commitment to be introduced at the earliest possible opportunity. The NAEA commissioned a report in the late 1980s on how to improve the home-buying and selling process. Part of that report’s recommendations was that there should be greater disclosure of the Homes Bill and greater disclosure by sellers. In essence, the NAEA has always supported the Seller’s Pack, even though a large number of members feel uncomfortable about the proposals as they do not recognise the opportunity that Seller’s Packs bring. They should bring the control behind buying and selling houses back into the hands of estate agents.
When you look abroad and see the levels of seller and buyer disclosure needed, it is difficult to argue that greater transparency will not do more to help reduce the high number of fall-through sales we see in this country compared with elsewhere. I think the earliest the Government will be able to get any legislation through is after the next session of Parliament, after the Queen’s Speech in November. But it could be 2005 before it becomes a reality.
Q. Connells recently dropped Halifax from its lender panel in a move reportedly linked to a dispute over commission. What are your views on estate agents that use lender panels as a means of sourcing mortgage products?
It is important that consumers get choice. Any firm offering mortgage advice has to look at how they can offer that level of choice. Everyone is in this business to make money, but it beholds no one to fall out over what are purely internal financial arrangements. Everyone has to consider what the customer wants and by denying access to information you have to be careful not to cut off your nose to spite your face.
Q. What proportion of NAEA members have link-ups with IFAs and how do estate agents choose which firms to initiate referral relationships with?
A large number of members have relationships with IFAs, especially small, independent firms. Bigger firms usually have dedicated specialists to source mortgages. Clearly smaller firms realise their strength is in the homebuying and selling process, not having to provide financial services ‘ so having link-ups with IFAs is extremely important. It is important there is synergy between buying a property and arranging a mortgage ‘ they go hand in hand. Agents will therefore choose their partners carefully so they can be sure the service they deliver is not harmed by an over-sell on the financial services side.