What is a normal market? It is a question that seems to be rarely asked, certainly rarely discussed in the press. So many people choose to pass comment on the state of affairs but what do the statements mean? How useful are these ‘soundbites’ without a point of reference to compare them against?
The following are the questions I ask myself when analysing the market, they are the ones you should ask and have answers to if you want to understand what normal is.
1. How easy is it to buy and sell?
2. How well does the process work?
3. What number defines normal?
In January 1985 as a fresh faced trainee I was told the following three important things:
‘On average it takes three months to find a buyer for a home.’
‘It takes three months for solicitors to handle the sales process and exchange contracts.’
‘Completion takes place twenty eight days later’.
Crudely you can say that in 1985 the estimate was around twenty eight weeks to move home from start to finish. How have things improved since then?
1. How easy is it to buy and sell?
Ease revolves around availability of homes for buyers and access to funding. (It also involves point two below, How well does the process work?).
Availability is a combination of the number of homes on the market, the number of new homes being listed and the number of homes both under offer and going under offer. During the crazy weeks of 2021, in extreme cases up to eighty percent of homes in some areas were under offer. Typically counties around the country were seeing upwards of sixty percent of homes under offer when, in my mind, a normal market would more likely be seeing figures of around forty percent of homes under offer.
In January of 2022 Zoopla suggested that the average home was going ‘under offer’ within twenty nine days. They added ‘The time it takes between listing your property to accepting an offer on it depends on how hot or cold the market is where you live.’
As you can imagine, the market varies around the country but also by type of home and time of year.
Twenty nine days is a ‘hot market’, not what I would see as a healthy market but interestingly it ties in with advice I have given to people for years:
‘By the end of your first four weeks of marketing one of three things will be true. At best you will be under offer with a sale proceeding. The second option is that you will have a prospective buyer and understand why they can’t proceed or thirdly, you will know why you aren’t under offer. What you then do with that information depends upon your plan for your move.’
Through the years times to sale vary and it’s hard to find data but Zoopla also mention that ‘Homes will always take longer to sell in a cold market, and it can take up to 101 days, or just over 14 weeks, for an offer to be accepted by the seller.’ Let’s do some crude maths on this one and average hot and cold markets to get a rough guide of nine weeks to represent the time to sale for a normal market.
A lot of importance is placed upon the mortgage market and it’s impact: ‘UK has highest number of mortgage-backed homeowners in Europe‘
Wow, what a fact! Do you know what that equates to?
37.5% of homeowners have a mortgage. Does that figure surprise you and if so, in what way?
62.5% of homeowners don’t have a mortgage.
How easy is it to buy and sell? Look at availability, demand and access to funds.
2. How well does the process work?
If you have moved home in the last two years let me ask you a question. How was the experience for you?
It has recently been suggested that the average time from agreeing a sale to moving home, completion, is now one hundred and fifty days. (My 1985 guide would be around one hundred and eighteen days!)
What has changed? Most people will say Covid but that is just one piece of the puzzle, an important one, but the issues started a long time ago.
The heady days of the late 1980’s saw a boom and then a crash begin. Within that conveyancers began to fight for business, they took the ‘volume is great’ view and consequently fees charged dropped. I find that I often disagree with the concept that ‘competition is good as it drives down prices for the consumer’. Why do I disagree? With volume, unless you can mechanise, quality tends to drop. Will you work for free? No you won’t. Why should anyone? If you reduce your unit income then you need to shift more units to maintain income. I would suggest that in 2018 the average conveyancer had between seventy five to a hundred files on their desk to work on. In 2021 it was more likely to be between one hundred and twenty five to one hundred and seventy five. If it takes three ‘uninterrupted’ hours to read through a contract properly, how many hours do you need to spend to go through your case files? I’ll let you do the maths.
A period of ‘No sale – no fee’ conveyancing at the end of the eighties hurt the industry. That period devalued the service in people’s eyes inside and outside of the sector. In truth there are elements within the ‘profession’ that resist change, are protectionist and that provides a poor image too. Conveyancing isn’t the best paid area of the legal profession, it isn’t the sexiest side of the law, although it has its moments and it is a pressurised high volume conveyor belt. Many at the top in conveyancing forget they are a service industry, they provide a service to human beings who want and deserve time and respect. Those human beings should however remember time is money and if you want a person to spend time with you, you need to pay them for their time.
Too many people have left conveyancing and too few are drawn to it. Factory conveyancing has made much of the industry faceless, impersonal, seemingly uncaring, which I don’t believe is the case. The conveyancers we work with on a regular basis are highly pressured but they are real people, caring, they feel hurt when things don’t go according to plan, they try to find solutions, to help clients and they have families of their own to care for, issues to deal with like all of us.
They have to deal with pointless calls and emails from multiple estate agents, they have issues with clients being too busy to respond, paperwork not being returned on time, they receive enquiries that have already been answered, incorrect mortgage offers, partial information, they uncover historic issues with land registry, boundary disputes, planning issues, building regulation omissions. People go on holiday, have babies, suffer illness, work short weeks and or reduced hours. In amongst all of that they need uninterrupted time to read the contract, the one you are just about to sign and commit how much money to? None of us are perfect in life so do give them a break.
A lot of people have a part to play in the process. We haven’t touched upon surveyors (the Stephen Kings of the property world(a joke I make light heartedly and I’ll explain in an article some time)). The building societies and banks ravaged that industry driving valuation fees down and again creating a ‘volume is everything’ culture. What happened? People left the industry. Does anyone remember what it was like trying to book a mortgage valuation in late 2020 or through 2021?
Spending your whole day running around countless houses doing a two page report to satisfy ‘We don’t Care Mutual’ who will be very happy to sue the ‘surveyor’ into oblivion in a few years time over historic valuations also isn’t conducive to bringing new people into the sector. There are exciting areas of surveying, ‘Valuations’ for lenders isn’t generally seen as one of them.
Lenders and mortgage brokers? A sector weighed down by layers of regulation. Protection is a good thing but it takes time to satisfy, it costs and people are people. Set rules can’t account for every individual circumstance.
Banks and building societies need to make money, to do that they need to lend.
Estate Agents have a huge part to play too. The industry also requires volume, has targets for staff and too many forget they deal with people’s lives. When hitting sales targets trumps caring about clients then things go wrong.
I won’t lay the horrible figure of forty percent of house sales fell through in 2021, or so it was reported, solely at the feet of estate agents, a lot of that was created by the ‘if you aren’t under offer there’s no point in viewing’ situation last years craziness created, but agents are too often interested in getting signatures, in hitting listing targets rather than in talking to potential clients to help them decide if and when they should go to the market.
Back in 1985 the average person moved twenty eight days after exchange. Today it is more likely to be a week. I had far fewer stressed people when they had twenty-eight days to prepare their home move.
How well does the process work? Not as well as it can and there is one factor I haven’t mentioned in all of this. People.
People get distracted, interrupted, have to make decisions. Do I deal with my sick child, my ailing parent, my own health issue, daily life. This includes You, the client, the buyer and or the seller. You will be asked to provide paperwork, sign documents, be present in the process and when you are available may not coincide with when it is easy for someone else to be. Your expectation plays a huge part in this. You can add or remove stress for yourself and for others.
There is a tendency for everyone involved to allow unrealistic expectations to creep in. To set the ‘we want’ as a deadline, to add pressure, stress unnecessarily. No one wants to believe it should take as long as it does. No one wants to wait. We live in a world where so much happens instantly, why shouldn’t the selling process? We all have distractions, you, me and all of the people involved and mentioned above; oh and I haven’t mentioned the disruption of working from home have I!
3. What number defines normal?
One point two five million!
In 1988 we saw one point nine nine million (1.99m) transaction take place. We had a population of around fifty five million people.
Last year, 2021 we saw just under one point five million (1.5m) homes change hands, with a population of around sixty seven million people?
Since 1971 the average number of transactions is one point two five five million (1.255m)
One point two five million (1.25m) transactions can sustain a healthy property sector, keep the wheels turning and each year a smaller percentage of the country are needed to keep that number.
What is a normal market?
For me a normal market today sees the average home under offer within six to eight weeks, sees conveyancing sorted in ten to twelve weeks and gives buyer and seller two to four weeks between exchange and completion. Let’s say twenty four weeks, four weeks less than nineteen eighty five. It also sees people begin the process of buying and or selling for the right reasons, at a time that is good for them.
If you want to know what drives the market follow patterns of activity. The school year defines the property market (read more here: When should I sell?). First time buyers are important but so is everyone else. With people staying in their homes for longer, with fixed rate mortgages still looking attractive and with a growing number of homes owned without mortgages the outlook for the future isn’t necessarily terrible.
Please note, I am not suggesting that the normal market described above is ok, nor am I saying we aren’t in for trying times and that things can’t be better. I’m just trying to help everyone get a proper perspective from which to make a judgement on where we are today and what the reporting really means out there.
We are a long way from perfection. When there is a ‘single source of truth’ for every home in the UK, when every action taken by anyone involved with a house is recorded in one place and one place only, where every owner, every contractor, every surveyor, every mortgage lender, every conveyancer every estate agent, everyone, has to record what they do in one place, then we will approach a solution. But, do you know what, even then, someone will try and avoid something, hide something, cut a corner and we will still need to check it all.
If you haven’t already, please also read: Ten key questions to understand where the property market is heading.