News
It's Crunch time
15 April 2008
As the UK property industry braces itself in the fallout of the Bear Stearns and HBOS debacles, we reflect on a tempestuous few months which has seen the effect of the credit crunch begin to snowball and look at ways that agents and developers can keep their heads above water.
It was only a matter of time before the crunch claimed its first big victim. Last month, on the verge of collapse, Bear Stearns, one of the largest and most established investment banks in the US, was acquired by JP Morgan Chase. Bear Stearns, who had invested heavily in the US sub-prime market, saw their stock fall dramatically in response to defaults in mortgage payments by US consumers.
In the immediate aftermath, as the lack of confidence in global financial markets exacerbated, UK-based companies started to feel the effects. Days after the collapse of Bear Stearns, HBOS, the UK-based banking and insurance company, saw its stock fluctuate dramatically as ‘short sellers’ tried to capitalise on market uncertainty by spreading false rumours of a Bank of England emergency loan.
Just last week, the Halifax Price Index showed a 2.5% drop in UK house prices; the steepest drop since 1992. The Bank of England reacted by cutting interest rates again; this time by 0.25% to 5%.
Robin King, movewithus founding director, believes that the interest rate cut is not enough to alleviate the crisis of confidence in the property market.
Robin King said: “In 2008, we have to accept a few tough truths. With house prices falling and mortgages increasingly difficult to obtain, home movers are going to do what they always do in times of uncertainty – nothing, meaning fewer buyers and sellers on the market.”
However, although numbers are falling, there are still home movers out there. We’re working hard to ensure that our lender, developer partners and our member agents have all the help they need to make the most of the business still available.
For developers, we’re making sure that site reps manage vendor expectations and only proceed to the valuation stage if they have the financial means and motivation to move. The key to success in today’s market is to ensure that the valuation is set correctly from the very first day of marketing. That way, a property is likely to sell quickly, decreasing fall-through rates.
White Hot Property, our new online venture, sells developer Part-exchange property directly to the consumer, showcasing resale stock to buyers who can proceed quickly.
For agents, we’re passing on record numbers of out of area referrals as well as offering a myriad of moving services including HIPs, conveyancing and utility Switch to give agents additional revenue and a more comprehensive moving package to offer customers.
Robin King added: “Our success is depends on the performance of our partners. Therefore, we are doing everything we can to make sure that our member agents and developer clients are fully supported with services that can bring them real financial rewards. Times are tight, but if we stay positive and keep on top of our game, there’s no reason we can’t weather the storm and emerge stronger than ever.”
