Introducing The House Price Solution
Welcome to The House Price Solution. This is a modern-day free-market and economic alternative to the old council housing solution which satisfactorily resolved the housing crises of the early 1900’s.
Instead of building whole estates of council housing, or even whole new towns at the lowest cost possible, a new and necessary method is needed to facilitate all housing development in Britain. It would involve marrying land and house prices with local affordability. This way, local housing demand could be matched by the supply of housing built primarily by private developers, by working either on behalf of local authorities or working for themselves independently.
This solution is worthy of careful consideration as being the most viable way of resolving the housing crisis now facing several generations of young needing to set themselves up both as independent young adults starting out in life, as well as those starting families of their own.
You will find below, further advantages of this proposed alternative to the existing and now failed housing market economy.
An open discussion is invited both within these pages and beyond, upon the pros and cons of this comprehensive ‘housing economy’ solution.
“You should appreciate from reading this blog, that much is required to be done to restore housing markets around our great country into good health in order to regain a thriving housing market with equal opportunities. To help explain this, I have divided my explanation of the complete cure into three separate but main postings. The first part (i.e. this post), is more about the reasons for and benefits of the changes being proposed. The second and third parts give greater detail about how the necessary changes could be implemented in all local housing markets across Britain, should they be adopted both by the government and its agencies.” The author, Peter Hendry.
Originally published: 5 December, 2013.
(Last updated by PH: 22nd Nov, 2024).
By reading this blog you will appreciate that much is required to be done to restore housing markets around our whole country to good health and see the establishment of thriving housing marketplaces with reasonably equal opportunities for buyers and renters alike.
So, before we talk about the actual solution, here is my explanation as to what is going wrong in residential housing markets generally and why this has been continuing to happen for such a considerable time.
Every working person, whether part of a family or as an individual in this country, needs, and should rightly expect to be able to afford, a roof over their heads. Unfortunately, this is no longer the case for an increasing number of home-seekers at the present time.
Because of this there is undeniably a rising crisis within present-day housing markets up and down our country. It concerns the increasing lack of affordability of the ‘supposed‘ fair market price levels which we are being fed. This especially affects those least able to afford to buy owner-occupier residential property for themselves and their families. The following House Price Solution is designed to remedy this.
First and foremost, it is necessary to find a viable substitute for the present inefficient marketing of residential property, by changing the way all houses and property, with consent for residential use, are marketed, whether they are for sale or to let.
Doing this should involve changing from the existing estate agency marketing model, which is primarily seller orientated, to a far more inclusive form of agency that allows buyers and renters the ability to negotiate properly.
Although this is a significant departure from conventional practices in marketing methods for residential property, whether in sales or lettings, this change is clearly warranted in order to correct what are abundantly clear failures brought about by current house-marketing legislation.
Second, and as importantly, the process of giving planning consents for residential property throughout the country should be urgently and substantially revised.
Residential planning consents should be delegated exclusively to local Town and Parish councils rather than being decided by the regional authorities as happens at present and there should no longer be an appeals process like the existing government inspector one, which is decided by higher government-run authorities.
Town and Parish councils know best when it comes to how to distribute the use of residential buildings within there jurisdictions and so they deserve to have the ability to decide on the most suitable distribution of such planning approvals within their areas.
Whilst this is a significant departure from conventional practices in planning methods for the provision of residential property in the built environment, this change is clearly warranted in order to correct what are now abundantly clear failures in current town planning legislation. More on this later.
These two main changes together, are the foundation for successfully improving all housing markets across the country, so that the markets may start working fully and efficiently. They are designed to accomplish true levelling-up within local housing markets everywhere in the UK by making prices more affordable to those beginning on their journey into home ownership; whilst preserving house price levels further up the housing ladder based on true open market economics.
This in turn would release much needed housing in every area by increasing the overall supply of housing going onto the market at the lower price end, in addition to simply building new houses to increase the overall housing stock. This would have the additional effect of reducing existing unsatisfied demand for housing accommodation in all areas.
Having achieved this, house prices could then more closely relate to affordability especially, as explained, as far as starter homes and lower-value properties are concerned. That, in a nutshell, would be the benefit of this House Price Solution.
Basic introduction to The House Price Solution:
The following explains, in basic terms, the method by which The House Price Solution may be implemented.
When an estate agent sells a house currently, their client is not the person who is moving in. How odd!
This is what needs to be changed in the near future, if we are to correct the flaws within all housing markets across the UK.
What is needed instead is the situation, whenever a buyer moves into a newly acquired house it is HE or SHE who is paying the estate agent – the agent who found it for them – in gratitude for what that agent had done for them.
Only then will they be happy with the service they obtained and of course, the property which they will have just purchased.
This post explains precisely how such an outcome could be swiftly and economically achieved. It comes to the conclusion that the Estate Agents Act 1979 is no longer fit for purpose. This should therefore be repealed and a new Act drafted to bring in trained & specialist agency services for carrying out sales and lettings of most residential property assets. Buyer-representing agents should cover the whole country, taking instructions from the buyers not sellers as is the case at present.
Such reforms are now sought through those in government if we are to achieve balancing supply with demand for housing currently on the market in all locations at reasonably affordable prices.
“This Solution to the main problem within the housing markets can happen, but only if it is supported by government,” says Peter Hendry.
This, together with the necessary planning use changes described here, is the complete answer to resolving the ongoing ‘apparent’ housing supply crisis.
It also deals with severe buyers’ problems, which are the direct result of the present methods of marketing residential property. This includes the urgent need to calm excessively rising house prices whenever this should be necessary.
Until new arrangements for buyer-advising agents actually become law, house buyers (and indeed renters increasingly), ought to employ specialist agents working directly for them whenever planning a move. Such agents could then highlight issues and fully advise the buyer (or renter), as well as negotiate contract prices on behalf of each buyer. This is especially important because property is currently so expensive, relative to other commodities and mistakes will therefore be extremely costly.
Until our Government considers adopting these recommended changes, all those owning houses should be advised to consider using a fully trained buyers’ agent in any case.
(It should be stressed this site however has no affiliation with such agencies and cannot therefore recommend any.)
Here is a list of some of the main concerns that a dedicated buying agent would be able to advise upon:-
Excessively high asking prices
Excessively high asking rents
Giving specialist advise when negotiating buying & selling in the marketplace
Rising / Falling market turnover
Too many new homes being planned in some places
Too few new homes in other areas
Overseas buyers affecting the supply for locals
Too many second home owners in the area
Too many empty houses in the area
Mortgage cost problems and the need for truly independent advice
Taxes payable by those that become owner occupiers
Poor design considerations
Planning issues needing major consideration
Building safety requirements
Social housing developments affecting the area
Leasehold obligations and concerns
Red tape in general regulation-wise
How newly qualified agents could improve all housing markets:
Peter says, “The government should now look into why owner-occupied housing is out of reach for the many whom are working full time in their chosen careers. These individuals and families still cannot afford even the most basic housing for themselves using their earning abilities because house price-levels now far exceed any level of affordability for these people. Yet we, as a society, totally rely upon these people for making everything work smoothly within the towns and village where they cannot afford to live! This situation is mostly repeated throughout the whole of the country.”
“These proposals, described as The House Price Solution or Hendry Solution, are believed to provide the answers to and methods for correcting the severe difficulty of a lack of affordability.
It is notable that no such answers have been advanced previously.”
“A solution such as this ought to be afforded appropriate discussion, including by those working on behalf of our local authorities, by our MPs, and be covered in the news yet there appears to be a reluctance to consider or even discuss such new ideas. I would relish the opportunity to convince them of the merits of this solution, rather than see many of us continue to suffer as a result of continuing with what are ineffective current housing market obstacles,” says Peter Hendry, author of The House Price Solution.
The first change to be considered is to bring in a new ‘RHA’ or Registered House Agent’s strategy for use within The House Price Solution:
To explain in brief, using this solution Registered House Agents (RHAs) would need to be licensed to deal with residential sales, purchases and assured shorthold tenancy lettings. The key difference would be that this would involve a new type of agent. As explained, these new agents would primarily act for the purchaser or the tenant, rather than the vendor as happens at present. House sales can be dealt with more efficiently this way, because these processes would be handled more professionally and transparently.
Sale particulars:
The sale particulars would be written by a selected (local) RHA for a single agreed fee, and paid for at the time by the vendor, after which the particulars would be broadcast.
The particulars would continue to be broadcasted through the offices of the RHA who wrote them until a completion of sale or letting had taken place, when they would be taken down by them, upon receiving confirmation of the sale’s completion by the solicitor completing the sale on behalf of the vendor, or by the vendors themselves in the absence of this.
The Guide Price should be set by the selected RHA (by initial agreement with the vendor), in a similar way to the old estate agency system.
However, an important difference would be that extra care regarding the level of price would be as advised by the RHA. It would be mandatory that the price is stated as only a guide price. Having set this, it would not be able to be amended by anyone subsequently.
Viewing arrangements:
By comparison of course, viewings would be arranged / supervised by the RHA introducing each and every new viewer. They would each make appointment arrangements direct with the vendor or current owner.
Existing Estate agents could continue to trade and still offer both sales and management services to all their existing clients if they wish but not on residential or part residential property sales. In other words, sales of all types of property other than residential property could still be dealt with exactly the same as before by existing or remaining estate agents. However, a reduction of business opportunities would be likely.
Only Registered House Agents (RHAs), would be licensed to act in dealing with the sale and purchase of residential property. Only these agents would be licensed to manage such property too.
Those licensed to act in such matters would be expected to have passed a new examination/qualification, prior to obtaining a license to carry out this type of business anywhere in the country.
You may well ask, in this case, would anyone else be allowed to act on behalf of those wishing to buy or sell residential property? The answer to this is NO.
Market forces could then be harnessed to act both for sellers as well as buyers by making use of different and competing Registered House Agents, tasked with the work of obtaining for their clients, the best combined buy and sell prices in the market, whenever moving house.
Fair competition would be achieved because the selling process would be carried out using a separate and competing RHA in almost every case.
Even though the selling of residential property may only be carried out by Registered House Agents (RHAs) under these proposed new rules, existing house-buying agents, once newly licensed, could of course continue to operate as normal by negotiating terms of purchase essentially as they do at present. The main difference for them would be that they would be negotiating with other Registered House Agents, when dealing with the sale of a former client’s residential property, rather than with traditional estate agents.
This unique plan is designed to eliminate the exaggerated house prices which are generally being quoted and which are seriously damaging our housing markets.
By stabilising prices in this way many more people would be able to move house, as and when they may needed to. This would solve one of the most prevalent problems in our present-day housing markets. namely that of broken sales chains.
That is among the main causes of the blockages we currently see and is slowing the efficient operation of housing markets throughout Britain in the process.
As explained above, a second reason for the present scale of house price inflation is this:
House price rises are currently being driven to quite an extent by lax bank lending restrictions, following the relaxation under the bank and building society lending regulations of the mid 80’s. All markets suffered from the effects of QE following the financial crash in 2008 and now the same scenario is repeating itself across Britain. These two factors combined, are a main cause of all housing markets in the uk to overheat price-wise.
For this reason the method by which properties are ‘traded’ on the market should be the subject of urgent improvement and reform by adding a new regulatory framework to the agency sector as explained.
Economic theory tells us that true market prices can only be determined by supply and demand in a perfect marketplace. The present UK housing market, as a whole, is very far from perfect! The House Price Solution is the best way to finally resolve this failure by bringing in near perfect market conditions.
IF, housing markets around the whole country were near perfect, economically speaking, it wouldn’t take a year or more for each house-move to happen. Houses and flats going onto the market would take much less than a year to attract a buyer ready to complete on their purchase.
There would then be fewer unsold and empty properties waiting to find buyers. Supply and demand would be in balance. House prices would enable this to happen and would facilitate sales to take place more swiftly than upwards of a year.
On the rental side of things, here markets are in a very different situation. There are far more people wanting to rent than there are rental properties available. Also, the supply of flats and houses is shrinking currently, which is forcing rent-levels to inflate. Demand for these properties seriously outstrips supply, economically speaking. Here, the obvious solution clearly has to be to provide more properties available for rent.
It should be noted however, if there were to be less unsold properties at any one time, there would be a lessening of demand for properties to rent, because more tenants would’ve become buyers! Therefore, improving buyers’ markets would clearly help with lessening the rental-demand side of things as well. That would be an important added bonus for both marketplaces, which is why ‘The House Price Solution’ is the final answer.
Therefore as part of the required process of change, substantial amendments to The Building Societies Act 1986 (as subsequently amended), are also required because these laws are causing housing marketplaces across the country to overheat price-wise. The 1986 act is therefore now no longer fit for purpose and so needs very substantial revision.
A main aspect of the financial deregulation as enacted by The Building Societies Act of 1986 was intended to widen access to homeownership by providing increased access to finance for house purchase. However, by doing this, more risk was unwittingly introduced into the marketplace. The risk/choice balance was tilted too far towards risk (arguably to try and correct the inefficiencies within the supply-side, which was slow at stimulating housing construction). Unfortunately, the 1986 Act and its deregulation caused swiftly rising house and land prices – the very thing that should have been guarded against!
The then new financial regulations set out within the 1986 Act also altered the relationship between the housing sector and the rest of the economy by making household equity more liquid, by allowing increased borrowing against it. The subsequent pricing-out of the dreams of owner occupation for many people especially from less well of families has resulted and is now plain for all to see.
It is this that this proposal for improving the housing marketplace is aimed at rectifying.
As already explained, the economic importance attached to increasing total housing wealth was behind the drafting of much of the 1986 policy but also, so was the rush to further encourage homeownership itself. Sadly, these two aims happen to run in direct conflict with one another and so, this issue really should be fully addressed.
I challenge the argument of economists saying the lack of supply of sufficient housing is causing the severe house price increases which we are seeing.
The cause of unaffordable house prices today isn’t simply because of a lack of supply or an excessive amount of demand. It is in fact a price-side problem, not a supply side or indeed a demand caused problem at all.
How so? There was a time when latin was in general parlance and the words: “Caveat Emptor” were in frequent use. The true meaning of this has been forgotten since then.
This used to be an express warning which was applied especially where property or real estate was concerned. The words of the warning mean: ‘Let the buyer beware – (unless they are covered by the seller’s warranty in terms of quality and worth’). The meaning of this simple latin saying amply describes why the current failures are occurring, now manifesting within all housing markets up and down our still great country.
We should remember this because in actual fact it is the one thing which is required, in order to restore and correct the damaging anomalies surrounding today’s accelerating house prices. As explained, these anomalies arise from our having departed from and forgotten what were previously well-known and established wisdoms, to be relied upon whenever undertaking commercial transactions such as those involving the buying of houses for family use.
The actual problem of unaffordable house prices today simply isn’t a supply-side matter at all. It is a price-side problem not a supply-side one. A-level students studying economics ought to know this! Once this is understood, the requisite changes to the way in which our housing markets operate across the whole country may be realised so that they may, once again become normality. Central government necessarily would need to take a lead in resolving this current-day house price crisis of course.
Peter says “In the local area where I live for example, there are clearly more than a sufficient number of houses that certainly could be used to satisfy both present and future demand for residential housing but they are not coming onto the market. Instead they are being used for non-residential uses and/or holiday lettings. It is this that needs addressing most urgently, not the headlong rush to build more houses to satisfy a purely notional lack of supply when in fact, there is a more than adequate supply of suitable property both in our locality and in plenty of other locations all over the place!
Please consider what is being explained here and raise any relevant questions on this for public scrutiny and discussion. A campaign ought to be mounted to bring this matter to the attention of our government should those interested in this wish that to happen.
If you agree with this, having read what is outlined on these pages, please take the plea for such change to your own MP to try and build support for bringing about the wholesale change needed to make the housing market fully efficient going forward.
Part 1 of The House Price Solution:
Further details of the solution
The House Price Solution – otherwise known as The Hendry Solution
In brief it is essentially about locating and entering into a contract with a highly motivated agent to ‘find’ your next house, negotiate the best terms AND have a similarly qualified agent to sell your present house too! This is a simple but profoundly important proposal, one which is unique and comes from within the land professions.
By doing this, a much closer degree of relational parity between what you may pay and what you may get for your existing house could be maintained and, gazumping should be practically eliminated as well.
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We must change the way we decide house prices from that of depending on how much each buyer might be able to borrow, to how much they each prefer to afford.
It would be a simple change but one having very profound consequences.
A fact: The definition of affordable homes is currently decided on ‘the supposed open market’ but sadly, the prices arrived at are not at all affordable to those who require housing in very many specific localities around Britain.
Instead, prices, especially at the entry level, ought to be based on what people on lower incomes can afford locally.
Unquestionably, and in other words, in each local area we must have housing that is genuinely affordable to those living and working in that area.
It is simply not feasible to try and remedy this problem and correct this lack of affordability by constructing huge numbers of new houses in a short timescale. In any case, the price problem itself is a market economics problem not a simple supply problem. The shortage of housing supply is, in fact, secondary to the market economics issue described here. Aside from this there aren’t the skilled craftsmen currently available to build upwards of the 300,000 good quality new private and social houses , which are arguably needed each year for the next 10 years – according to the large housing developers’ own research!
Also, the idea that ‘the market itself’ might correct for the shortage of housing by facilitating the building of more houses as and when prices rose, is not what has actually happened. The market has patently not done so but has failed to achieve that objective.
Improved market economics are immediately required. They are needed to improve the efficiency of the housing market itself.
This could be done quickly and without large government expenditure and is the preferable solution. We should re-organise how house prices themselves are arrived at. This would lower them in areas where local affordability would justify this.
It can only be done by changing the way agents work when selling and letting houses that are currently on the market. It should involve referencing these properties to affordable prices in each local housing market. Now is the time to recalibrate local housing markets in this way and put in hand an economic solution which is of paramount importance and is fully described below.
As explained just now, new construction should only be a secondary remedy, to help to ensure that house prices never again spiral up to the unaffordable levels that we have currently been seeing everywhere in England, Wales and even in Scotland and Northern Ireland. The primary fix for this is to improve the way houses are bought & sold, as well as rented & let.
Each individual local housing market requires this and the best way to accomplish it is to legislate for a complete new breed of estate agent (instead of attempting to build thousands of new houses in a vain attempt to satisfy a supposed national demand)!
The fundamental problem with present day selling agents (or estate agents) is, that not only do they maximise house prices by leveraging buyers’ offers ever upwards; they also maximise mortgage loans by dealing in the procurement of ever increasing mortgage borrowing. This further boosts house prices!
The House Price Solution deals with these problems by facing them head on. It does not however interfere with the operation of the market economy itself and it completely avoids the use arbitrary and inefficient price and/or rent controls.
For the purposes of this paper let’s call these new agents, “Registered House Agent(s) or RHAs”.
The following are further details of the proposals which comprise the House Price Solution.
The main job of these new agents would be not only to sell or indeed let owner’s houses but more importantly to find and secure the houses which their contracted client(s) are seeking both for themselves and their families – whether these clients are wishing to buy or to rent.
How could this be achieved?
RHA or Registered House Agent’s Moving Contracts (or MC agreements) should replace the traditional vendors’ selling contracts. These would effectively be buyers’ agency contracts.
Similarly, ‘Letting Contracts’ (or LC agreements) would be the instructing instruments for agents advising tenants wishing to move from one rental property to another.
All this would be a relatively simple but a game-changing improvement to the way in which residential property transactions occur at present.
The proposal is that we should now do away with old estate agents’ sole selling contracts altogether and bring in Registered House Agents’ ‘MC agreements’, where each RHA or Registered House Agent engaged would be contracted to work to facilitate a vendor’s complete move from one property to another. The aim of this would be to bring greater satisfaction to all those in the throes of moving house and to get the whole UK housing market operating far more smoothly – in all possible economic conditions and, it should be said, without the need for government-backed mortgage guarantees for those requiring to get onto the first rung of the housing ladder either.
MC agreements of RHAs would always include a mandatory clause stating that as part of offering their services, they undertake not to negotiate any mortgage deals on behalf of any prospective buyers at any time or in any way whatsoever.
As a professional surveyor/valuer (although now retired), I am a senior contributor claiming that this new method would help to stabilise house-prices broadly, across all regions, instead of tending to make them rise a lot in some areas but not anything like as much in others. That alone would be a very significant market improvement.
In addition, the new version of Registered House Agents (RHAs), would be fully empowered by becoming more responsible for ‘the progress’ of sales and lettings of properties across the whole UK and would gain more control of the volume (or throughput) of house sales and lettings completions.
By contrast an earlier government’s plan was to increase the availability of mortgage finance, including to people becoming first house owners. This was and still clearly is not the right approach. As has been seen subsequently, that resulted in higher prices; the very thing that buyers simply do not need or want, either then or now.
‘Help To Buy’ government mortgage guarantee schemes have more recently been taken up in substantial numbers. This is resulting in upwards pressure on house and land prices as more money in the form of long-term loans must have this affect on asking prices by definition.
In some locations, the excessive price levels which we have recently seen, have been generated, in part, by significant corporate purchases of larger residential properties as investments, financed by business loans. These were business loans, mainly advanced to private landlords for buying and renting out multiple units and not for owner-occupation. This has been another of the catalysts for the general increase in house prices as well as dragging up rent levels.
The issue just described is in addition to (and separate from) the unregulated way in which current day estate agents negotiate and agree terms of sales with unsuspecting house buyers. These people are generally unaware of either the scope of other offers, or indeed if there actually are any being made on the object-property at that time.
A certain amount of additional regulation in the marketplace would go a long way to further helping to resolve these serious drawbacks.
For example, fixed fee rates should become mandatory. No percentage fees should be allowed to be charged by any RHAs.
With appropriate regulation, Registered House Agents could improve themselves in competition with other agents by becoming more efficient and more factual.
They could, for example, correlate from the current data they would have available from all the applicants, the maximum sustainable rents or buy price levels currently feasible and deduce using their training and expertise, exactly what the mean and the mode price should be on any specific property to be acquired.
Having selected the best applicant for the property in question, they could then advance the most suitable offer to be made on behalf of each buyer and ultimately be in a position to stop inventing higher offers to help secure the deal their firm aspires to winning!
If the seller (or landlord) agrees, the offer would then be formally accepted and the whole transaction process (exactly as described here) would commence.
As explained there would be no question of agents ‘tweaking’ buyers’ (or tenants’) offers upwards any more as to do this would contravene their business ethics as well as putting them in jeopardy of their licensed (or newly regulated) business registrations.
Here are the three main benefits of using this new marketing solution.
Included below are the most significant advantages which the various different local housing markets around the country could derive benefit from. They could be used to increase sales and lettings throughput right across the whole of the country.
- First-time buyers (or renters) of both new and second hand houses, would not have to budget for agency fees when making their house purchases because these buyers/renters would not need to engage a buying agent or sign a Moving Contract (or MC agreement) with any agent. The arrangements would not therefore penalise first-time buyers financially. These applicants should simply approach the agent marketing the property in question. (The agent involved would already have a fee arrangement with the person moving from that property to their next one.)
- Registered House Agents would benefit since it would become more difficult for owners or landlords wishing to transact their own sales, purchases or lettings without using them. Indeed with this system, it would even be possible for government to declare that such a practice would be banned if they should decide there is a need to do so. The extra sales/lettings throughput generated by making all of the local housing markets around the country more efficient would further enhance RHAs’ profitability.
- It would also be possible to identify, specifically, all those transactions that involve house purchasers whom are moving a long distance, when in the process of buying the house in question. Additional taxation could theoretically be applied to second home purchasers if it was deemed appropriate. For example the government could theoretically start to levy a tax on all second home buyers. This would tend to help reduce prices in those areas where second home buyers have been pricing local residents out, thus helping first time buyers as well as raising taxes for the government.
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From this we clearly need something considerably more effective than the current Neighbourhood Plan’s H1, The affordable homes provisions and H2, The full-time Principal Residence restrictions, to help bring local house prices down further towards levels affordable to the local workforce and especially to assist local key workers. I say this because prices of whole freehold registered titles of ‘affordable homes’ are still well beyond the reach of most key workers within their sectors.
This should therefore involve strengthening the planning system rather than relying on changes to existing house-marketing methods on their own.
It would be to impose new restrictions on residential uses by using planning criteria contained within democratically agreed neighbourhood plans and registers similar to the system currently being proposed in Wales. These would at the very least include introducing three new classes of property use into the planning system: – primary home, second home and short-term holiday accommodation.
(The restrictions ought to be defined in a democratically agreed local neighbourhood plans and registers but more on that will follow.)
This would limit the purchase of scarce housing and so better assist those with local requirements who could then compete with one another to buy the available houses, without being continually beaten to the post by those with more capital coming from outside.
Our assertion is that the only way to bring house prices back to levels in line with local buyers’ levels of affordability is to change the present rules for selling such houses by using both of these methods combined – namely both a wholesale upgrade to the workings of the British housing market across the board and the imposition of restrictions on residential uses – using planning criteria as contained within democratically agreed neighbourhood plans and registers.
This new combination would be more inclusive, more local market orientated and be able to include local buyers, rather than to largely to exclude the least wealthy families, as happens at present.
In peacetime (i.e. whilst our country is not at war with another), residential planning consents should be delegated to all the local town or local parish councils for them to determine, depending upon local housing need.
This way, genuinely democratic decisions may be arrived at using local decision-makers whom are best able to understand what the current needs of the community are at any particular time.
It is unreasonable to expect those making decisions about local housing quotas centrally, to be able to understand what is best for each town or parish when it comes to deciding residential land use and development. A change in this particular regard should therefore be considered essential for debate at government level.
The different local housing markets could be brought to balance and price levels better able to reflect local demand for housing, more appropriately.
The other necessary change would, as explained, involve making housing markets operate more efficiently than currently happens, by requiring estate agents to work for buyers rather than being able to work for both buyers and sellers as happens currently.
As a retired residential property valuer I remain convinced that if democratically elected local councillors were to be granted full authority to decide local residential planning applications, this would have a great effect in helping to resolve the whole housing crisis.
Decisions made by such elected representatives would not be based upon NIMBYism ‘Not In My Back Yard’; quite the contrary!
Instead it would be a question of ‘IN My Back Yard’, as these councillors would be representing the wishes and needs of the local community – not simply trying to resist necessary change!
There could be no finer outcome than this, especially where residential property is concerned, because with this solution these councillors could work to actually resolve the housing crisis which we are now all being affected by, particularly owing to its increasing severity.
The need for The House Price Solution (otherwise known as The Hendry Solution), is because price levels in basic housing stock everywhere are currently driven by and depend upon how much any individual buyer can afford, including the most that buyers might be able to borrow at the time!
Instead, prices should be decided by the amounts which buyers, making firm offers, decide a particular house is worth to them. That may be a very different sum of money indeed.
To correct that as far as local buyers are concerned the new buyer-agents advocated here would be called Registered House Agents (RHAs) and they could operate from either retail-based premises or online, or both and would replace present-day estate agents.
Facet 1 of explanation:
All agents (RHAs) would work by operating on behalf of buyers rather than being paid by sellers as happens at present. Their fee income would be solely from finding buyers the next houses they seek.
In other words all RHAs would have to forgo signing to act as a selling agent completely. This would include not acting to sell a house that the client they’ve just found their next house for, is still needing to sell. This is probably the most fundamental change being advocated here.
Facet 2 of explanation:
Nevertheless, there would be no restrictions on RHA buying agents advertising or displaying for sale, houses on behalf of non-clients, in order to introduce more enquiries by the buying public and/or from other buying agents. This would be a free of charge (FOC) or non-fee producing activity only. RHAs would provide this service by cataloguing property with sufficient details to interest buyers however, the price of sale named would and must always be stated as being merely a Guide Price only and it would always be set by the current owner (or vendor), not by the RHA providing the free (FOC) advertising.
All free of charge (FOC) advertising would have to wait for any RHA (with a signed Moving Contract with the buyer) before bringing that buyer forward as a client. By doing so the introducing RHA would, of course, earn their sole fee payable on completion.
However, and this is critical, any agent or RHA with a buyer moving contact or client could introduce newly signed-up buyers to purchase those free (FOC) advertised properties – and thereby earn their fee from a newly introduced successful purchaser. A valuable income stream could thus result for RHAs providing the free (FOC) advertising.
As explained whoever the introducing RHA was however, they would be negotiating the BUY price on that house, acting for the new buyer under a valid buyer’s moving contract – not acting for the seller originally placing the free (FOC) advertisement of course.
To clarify further, while different RHAs may often be working simultaneously on various chains of purchases, they would always be working solely for their respective buying clients so no conflict of interest could apply.
To emphasise the main change here, all agents would always be negotiating for buyers rather than sellers.
Facet 3 of explanation:
Another aspect of this is that all agents would be looking carefully over all properties being marketed, in search of its good qualities, both structurally and from locational point of view. They would always be representing their buyer-clients’ best interests in the process.
Prices paid would therefore better reflect the condition of each property currently on the market as well as better reflecting the prices which buyers might be prepared to pay.
Facet 4 of explanation:
The new Registered House Agents (RHAs) would need to modify their existing agency skills and abilities, to be able to best represent buyers and negotiate (generally to lower the purchase prices) on behalf of their clients instead of trying to maximise them. This would clearly involve new training schemes for any existing estate agency staff to include both the different emphasis and the extra skills required.
Facet 5 of explanation:
An important point is the actual prices being obtained would be decided primarily by different buyers’ offers, with buyers operating in competition with one another for any one individual property, using the services of multiple buyer agents (the RHAs), simultaneously having to consider the various written offers involved and get their clients instructions on which ones to accept in writing.
Facet 6 of explanation:
Borrowing levels by individual buyers ought to be a significant factor and excessive borrowing requirements should naturally weigh against some higher offers being considered. That is another reason why there should be new government initiated restrictions on such lending, including rules for lending institutions wishing to make loans specifically for housing occupancy purposes. This would help to create a more level playing field for all buyers. That ought to particularly help local buyers, because the prices they could afford would tend to become the benchmark price levels for each separate locality. This is a very important aspect of the implementation of the House Price Solution and should not become a secondary or separate matter at all.
Facet 7 of explanation:
Fixed-fee terms of commission must be mandatory for all licensed or RHA agencies and must be a requirement of all agency contracts made to facilitate a buyer moving from one location to another i.e. complete Moving Contracts or MC agreement would be required – please see the main explanation below for further details.
In other words, no percentage fee commissions should be allowed, as otherwise these would provide an incentive for agents to try and edge prices up which is the practice requiring to be curtailed. Also reverse percentage fees must similarly be disallowed.
Facet 8 of explanation:
The anticipated effect of this new house marketing solution would be to increase house sales turnover across the nation, reduce the amount of abortive work experienced by present-day selling agents and in so doing, increase the actual fee income potential for all licensed agents acting for buyers. This method would breathe new life into what are currently, moribund housing markets in most localities around the country.
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AND The $64,000 Question is:
HOW can this solution bring house prices down in your area?
As explained by the reasons given above, this can only work if existing estate agents, acting for sellers, are exchanged for agents acting exclusively for buyers. These agents would have to be legally registered or licensed to operate under a process of national registration. To distinguish these new agents from agents that no longer have a mandate to deal with housing they should be named for example, “Registered House Agents”. All house agents registered would be required to carry out business in accordance with the rules laid down by the new registration authority.
The first difference would be that each house being sold (owned by different sellers of course) would also have several different Registered House Agents (RHAs) sending in offers for the present owner’s consideration.
Buyer’s agents or (RHAs) appointed by local buyers are likely to have received offers at broadly similar levels to each other.
Buyer’s agents or (RHAs) working with clients wishing to come from further afield may have higher or even much higher offers in respect of the subject property.
The existing owner, in each case, would have the choice whether to sell to a local buyer or to refuse to and instead sell to an incoming buyer. However, under these solutions, selling to an incoming buyer may require obtaining a planning consent first, depending upon the changes in planning criteria mentioned elsewhere in this explanation.
If they should choose to sell to local buyers they will know that the price-level is based on local affordability not incomer’s affordability whereas with the present-day estate agent system – they, the existing owner, cannot be certain of this when making their decision to sell because the lower offers are soon discounted, especially by the commission-earning estate agent.
Despite this if, as a seller, they are moving to an area having similar price levels they need not necessarily take a higher (incomer’s) offer.
Significantly with Registered House Agents, the buying agent whose offer is to be accepted will not know what the other offers were – only the seller will know that so, once again, they will be protected from coercion by agents wanting to escalate the prices just in order to win the fee.
In addition, where there are Neighbourhood Plans with restrictions on the sale of certain houses in favour of local residents, local planning departments could take enforcement action against anyone involved in a sale to an incoming purchaser, if there is any breach of the planning requirements.
Finally, if there are occupancy restrictions applicable to specific groups or classes of house in any one location, all Registered House Agents would be expected to know and understand this and therefore would not take on instructions from outsiders to negotiate to buy such properties in the first place! This could thus become a self-policing issue.
I hope this illustrates the advantages of moving from a selling agent system to a Registered House Agent one as being the main development of the solution I am proposing.
Part 2 of The House Price Solution:
For a 2nd (or further) explanation of this unique proposal please click on the following link.
The House Price Solution 2nd (or further) explanation
If there remain outstanding questions relating to my proposals I’d be glad to discuss these.
Footnote:
The Hendry Solution does not attempt to forecast what house prices might be in the future. Under its proposals doing that would be for the newly created Residential House Agents (RHAs), who would be acting exclusively for house buyers, not for banks, building societies or for other lenders. House prices would be a matter for negotiation, depending upon the economic state of the local housing market(s) at the time. They would therefore reflect the present Price to Disposable income ratio (or the ‘affordability quota’) existing at the time. This would enhance the level of fluidity in the marketplace and in so doing, would assist the market by increasing market turnover. This, in itself, would increase confidence and enable more participants to become both home owners and renters in their own right. Banks and building societies would be there to conserve the newly established price-levels in the housing markets without letting these increase as dramatically as has happened in the recent past. This change would allow our government to revert to championing the common law principle of Caveat Emptor which, by prescription, still remains available for implementation by the present government.
The essence of the Latin words Caveat Emptor, means “Let the buyer beware”. It suggests that buyers and renters should avail themselves of loyal agents to advise them about fundamentally crucial things like how much a property is worth in today’s market and what sort of condition a property is in currently; including the likely repairs liabilities which might reasonably be expected in the near future.
The House Price Solution (or Hendry Solution) incorporates all this by allowing a new, modern and fully workable way for housing markets to still operate under central government control whilst delegating the granting of residential planning decisions to the relevant truly local planning authorities across the United Kingdom.
To those who are uncertain about supporting these proposals I would invite them to look at the house prices and rental costs now damaging the Australian housing markets before commenting critically on these postings. It is not only Britain that needs to face up to dealing with these dilemma.
Posted by: Peter Hendry, Housing Valuation Consultant
Author of:– The House Price Solution