On the basis that it is said that history is written by the winners, it will be some time before anyone can talk with any certainty about the aftermath of covid and its changes on all of our lives.
In the property industry, the last eighteen months have seen three main phases occur.
- The initial shock of covid and lockdown with all of the understandable fears and uncertainties resulting in the battening down of hatches and slashing of costs as part of a cautious approach to surviving.
- Government intervention that, on a wider level, provided business support through the JRS scheme and business grants and loans and, on a specific industry level created an active marketplace with the introduction of stamp duty discounts and relaxations that allowed the sector to continue to trade. This resulted in estate agents enjoying a year of high activity and success that far exceeded pre covid expectations.
- The third phase is now underway. Lockdown restrictions have been eased as a result of the successful vaccination roll out but, as economic and social activity increases, the levels of Government support and subsidy are being removed. In the short term, economic growth will race ahead although inflation is increasing, unemployment is likely to rise and there may be increasing pressure on interest rates. The surge of activity in the home buying and selling market seen in phase two has slowed with supply falling way short of demand. At some point the Government will have to find ways of increasing tax revenues in order to recoup the huge costs incurred during phase two.
So, what lessons have been learned and what, longer term, outcomes are likely?
Businesses should have learned a lot from phase one. How resilient their operations were, and are, to seismic change. They should have learned what areas of expenditure were vital to their operations and what were just vanity or superfluous to success.
Productivity is the driver of profitability and being “leaner and fitter” is key. The complacent days of “too much fat on the bone” should have ended but I wonder if they have?
Premises were of no real value when closed and, in many sectors, the benefits of physical inventory became outweighed by the flexibility and lower cost of remote and more flexible working patterns.
Better use of technology helped many, with customer facing platforms that enabled 24/7 remote access and the use of video technology to organise viewings on a much more time efficient and productive basis coming to the fore.
Many forward-looking businesses took the opportunities presented by phase one to change their modus operandi forever. Many however, presented with the lifelines of Government intervention in phase two, simply reverted to type and their businesses do not look significantly different to how they did pre-covid. They will point to the success of the year in question. I will point to the potentially greater successes of those who adopted new thinking, adapted their approach and improved on their propositions and delivery.
Phase two saw a huge growth in new business models – noticeably it gave a “leg up” to the so called “self-employed” models where, often good quality individuals, were able to generate faster returns from scratch than they might have been able to do under a more “normal” market.
As part of reviewing operations in phases one and two, we have seen considerable consolidation amongst businesses in the sector. Connells took the opportunity to acquire Countrywide and whilst they were always likely to turn this poorly performing oil tanker of a business around, they have been able to use the market to do so more quickly and to benefit even more significantly from the goodwill amongst staff created.
We have also seen a number of regional and local mergers and acquisitions where synergy and the benefits of increased “buying power” and “economies of scale” make sense.
Phase three will, in my opinion, start to see a truer picture of the fallout of covid.
We are already seeing weaker agents cutting fees in order to try and secure stock. We are also likely to enter a new round in the “Portal Wars” which saw a new entrant – Boomin – emerge during phase two. Phase One saw the “No to Rightmove” campaign arrive but disappear nearly as quickly. Some agents did change their marketing strategies as part of their reviews on cost and effectiveness but, with the market uplift in phase two, most carried on as before. As things tighten, portal expenditure will, once again, be in the spotlight – not just in pound note terms but in effectiveness and value add to an agent and their clients and customers.
Those that failed to review and instigate change in phase one and have been “patting themselves on the back” for their successful phase two, may now find that they start slipping behind those that did as we move forward in phase three.
There are too many agents, the fixed costs of running an agency are generally too high, customer expectations are increasing, as are the requirements for greater professionalism and compliance with increasing regulation.
Those that had a business plan pre covid were best placed to adjust and react. Those that didn’t have a plan had only a “gut feeling” to rely on and many have just worked harder not smarter and their businesses are no better placed for the future than they were pre covid.
One of my favourite quotes is that “I cannot change the wind but I can adjust my sails” – this has never been truer than in the last eighteen months. It is not too late to change. The question is - who will be consigned to history and who will be writing it?
Michael S Day MBA FRICS FNAEA FARLA
Managing Director Integra Property Services
Advisory Board Member Coadjute
Founder Member Agents Together
This artricle was written for Property Industry Eye and published by them in August 2021