Armchair Analysis

I’m a generalist, interested in most things and an avid absorber of facts and anecdotes.

I also go through phases and a recurring one is reading the sort of popular economics based commentary books that Tim Harford, Steven Levitt and Stephen Dubner produce.

Having this enlightened way of looking at things swimming about my mind, whilst musing on why the property market is so dysfunctional, made me think “Is the property market unique?”.  Unique among markets in general as opposed to among global property markets. 

My knee-jerk answer to my own question was “no”; but then I struggled to come up with a reasonable comparator.  Indeed this Wikipedia post suggests it is unique: 
Real estate economics

Dysfunctional is an emotive word and I use it from the perspective of someone who needs, but has struggled, to get the UK property market to help me solve a problem for me and my family. 

I have an answer though following from my own, armchair, analysis after 6 years of reflecting on why I’m still wrestling with the same problem. 

The UK property market suffers from poor flow of 

information between buyers and sellers.

From what I observe, people want to get on with their lives and not lose out financially in the process.  If they had excellent information about each other and were able to deal with one another throughout the life-cycle of making a move (not just at the late stage when they finally appoint an estate agent) then I believe they’d figure out how to do this.

A brilliant example of what good information flow can do is eBay.  Want to sell something and have no idea of it’s value?  No problem.  Load a few pictures and an honest description and instantly get feedback on what ‘the market’ thinks about it.  Watcher and Bidder stats come through the instant they take place and you rapidly understand what your thing is worth to those interested in whatever it is.  You’re also in easy reach for those buyers who can ask you directly about your item.

Now there are very good reasons why the property market can’t work exactly like eBay (although I’m intrigued by the auction service offered by http://www.auctionhouse.uk.net/) and the Wikipedia post above explains this well.  eBay isn’t best suited to selling your most valuable asset that, typically, you only own part of.  Especially one so vital to your families’ well-being that you can’t do without it for one night.  But some of the principles that make eBay a success are valid for the property market:

• Direct contact between buyers and sellers
• Competing buyers inform sellers directly about the value they place on the item being sold
• Sellers get instant feedback on how interested buyers are in what they are selling