Property market is being ‘hamstrung’ by the lenders

Tim Groves

Tim Groves

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Spotlight on Tim Groves as part of a series of articles on the island’s key influencers. Mr Groves is residential director at Black Grace Cowley.

I started in the property industry when I was 22, almost 15 years ago, in the commercial department of Cowley Groves.

I had no qualifications to speak of other than my degree, so I wasn’t able to do any professional work at the time.

While I was there I elected to study for the Certificate in the Practise of Estate Agency, the CPEA, which effectively registered me as a professional estate agent.

The CPEA preceded the National Federation of Property Professionals, or NFoPP qualification, and is the major qualification in our industry, short of becoming a chartered surveyor.

I spent two years at Cowley Groves and during the latter part of my tenure took on a family office client who was then very heavily involved in property investment and development.

St Mary’s Court

The family offered me a role within their business to become business development manager in the Isle of Man and the UK, and to manage their trophy office development, St Mary’s Court, here in the island.

From final phase construction and practical completion to letting and management, I delivered St Mary’s Court while also keeping an eye on business development in the UK, but I had always wanted to become a qualified chartered surveyor.

From my perspective, it would give me the confidence that I had gone the extra mile to educate myself about the business, that I could give better advice to my clients and customers, and it gave me peace of mind about the longevity of my career.

In the background, I studied for a Master’s degree at the University of Reading.

I got my post-graduate diploma in surveying, but I realised that in order to qualify as a chartered surveyor I needed to work for a firm of similarly qualified professionals.

I rather quickly came to the decision that I couldn’t continue working for the family if I knew I was going to have to leave, which I had to do to qualify.

So, one morning I turned up to work, spoke to the head of the family and explained the situation.

I said it was likely I’d return to university, fast-track the course and try to take up a position in the UK, but things were uncertain.

Thankfully, they were entirely understanding, if somewhat taken aback.

I walked out on to Athol Street with his blessing and almost immediately bumped in to Mark Grace, commercial director at Black Grace Cowley, whom I’d known for 20 plus years and was the agent I had been dealing with for St Mary’s Court.

We stopped and had a chat, I explained what I’d just done, and I went on my way.

Black Grace Cowley

The very next day Mark phoned and offered me the chance to come and work for him, in commercial, with the opportunity to take the reins in 20 or so years’ time which, of course, I jumped at. I took up office at Black Grace Cowley in 2004 and haven’t looked back.

Next came the Assessment of Professional Competence, a two year in-industry structure that tests your competencies in modules such as valuation, law, sales, marketing, building technology, and sustainability, and all manner of industry specific subjects necessary to gain chartered status in the property industry.

At the final interview stage I remember being taken to a box at Bolton Wanderers FC where I was to be cross-examined by three assessors.

I walked in and tried to break the ice, saying something like ‘great view of the pitch’, but was met with the curt response ‘yes, if you like football’, which immediately put me on the back foot.

I was grilled for close to two hours by these three guys playing the roles of good cop, bad cop, and chairman, and gave as good an account of myself as I possibly could.

A month or so later I found out I’d passed, and became a member of the Royal Chartered Institute of Surveyors.

In hindsight, this was crucial. The industry is now very highly structured and well regulated, and rightly so.

As a chartered surveyor and registered valuer, therefore, your competency and your ability to deliver consistent market related advice can be tested at any point, and you and your company can be held to account.

And you have to be right, as far as it’s possible to be. Ultimately, market value is subjective; there is no black or white answer.

If a house is listed at £250,000, the client offers £210,000, and I accept that offer, that’s what the property is worth because a transaction has taken place - ‘offer/acceptance’.

So if you’re advising a client, a bank, lender or investor, you have to be certain of the advice you’re giving and be ready to be called to account if you’re challenged on your valuation.

This is particularly important for an island agency. Broadly speaking, the Isle of Man follows the economic trends that the UK experiences.

In terms of property, there’s generally a lag of 12 to 18 months against the UK’s economic cycles, but this isn’t to say that the island follows the UK like for like.

There’s always that element of its being cocooned against certain market forces because of its unique structure, tax and employment situation.

Technically, for example, we didn’t go into full recession.

What we did experience was a fall-off in sentiment and a fall in confidence, which meant that those of us who wanted to buy a new house, car, washing machine or TV took a step backwards, rather than commit.

The demand was still there, but we held back.

Since 2008/9, that dent to our confidence means house prices have remained, on average, fairly flat.

Some areas increased, others fell away, but there was a natural correction from a high that was based on a credit bubble of 12 to 15 years - a natural cycle then at its peak, but now coming to an end, albeit relatively softly.

Today, we’re starting to return to the early part of the cycle.

We’re in the position now where the lower end of the market – the sub-£250,000/£300,000 - is the most active in the island.

Because of the way our economy is structured, it’s that market, those prices, that supports everything else.

resilient

Overall, the island has proven quite resilient to outside influences in its own unique way. There’s an inherent level of demand, and we’re starting to see that reflected in buyer activity.

Unfortunately, some of the prices that sellers are asking are not commensurate with the advice that agents will give.

We’ve had a 15 year boom, where house prices went up and people became used to making money on their property, which means an awful lot of homeowners in the island ended up with fairly substantial equity held in their houses.

Many are, therefore, not selling for the traditional reasons – up-sizing, downsizing, et al. – but are selling simply to release some of that equity. This means that their evaluation of the market is not based on buyer, or market, sentiment, which creates a disconnect between the two.

stock

This, I think, is one of the major reasons for there being a lot of stock on the market. The agents are selling properly priced, well presented and located properties, but if a vendor is being over ambitious with their asking price the pool of purchasers becomes far shallower.

We should also remember that there are plenty of buyers out there, and that we are returning to something resembling the traditional market that was apparent when I first started in the industry.

That market is, however, still being hamstrung by the lenders.

Banks are still not lending enough into the economy, and when they do they charge far too much at the outset.

The margin between the Bank of England base rate and the rates at which borrowers pay their mortgage is historically far higher than when the base rate was 4-5 per cent.

So it’s more expensive, even though the rates are lower. They’re not lending as much, and they’re charging more for it.

Allied to that are some over ambitious asking prices in the market, so we get a plateau, or impasse, in certain price brackets.

In response, we’ve adapted. We have to. We sold 12 properties under £300,000 in June alone, and we had great figures for April and May.

We want the stock and would encourage all would be vendors to tell us their story so we can understand their ambitions and motivations.

We want to sell their house for them.

Ultimately, people buy from people. Understanding that is what’s going to change our industry for the better.

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