It is always entertaining to see the New Year predictions from the “great and the good” across the property industry and elsewhere..
Some are made with a great attention to detail, data driven, and usually wrong!
Some are made in a more anecdotal and “off the cuff” fashion, and usually wrong!
Last year I was working with a number of clients and we generally prepared for a market that was changing and my best guesstimate was that there would be a reduction in transactions of around 20% and falls in property values of around 10%.
As we leave 2023, it appears that this view was not too far off reality and, if anything, was slightly pessimistic as, whilst volume levels have reduced by close to my anticipated thoughts, property prices have generally been very resilient and drops in value have, according to many of the national indices, remained in single digit percentages.
National and average figures can, of course, be misleading as the market is made up of hundreds of local markets and with the individual circumstances of sellers and buyers also contributing greatly.
By having plans for business based on these assumptions, my clients were best able to take an approach that was neither overly optimistic or too doom laden. It did, of course, mean that for many sales businesses, the profitability of the sales business was going to be affected or even wiped out.
The prognosis for lettings was of a largely static market in terms of transactions but with opportunities for revenue growth from both increased rents and from moving more of the portfolio into fully managed services.
Key was having a plan and keeping it under review. I believe that is the case for 2024.
I recently spoke at a major industry conference about the ten Ps. The four major cost areas of people, premises, portals (marketing) and proptech. The need to have a clear proposition and the processes to drive performance and productivity. Ultimately leading to the most important P – Profit!
When asking the delegates about their business plans for 2024, less than 10% of the room had a written plan in place. Good news for the other 90% in my opinion!
My view on 2024 is that it looks set to continue in a similar vein as at present. Inflation figures recently announced have been encouraging and the Bank of England is, hopefully, looking now at the likelihood of a base rate reduction rather than further increases. They have the unenviable task of trying to curb inflation whilst not stopping economic growth.
Already, early in 2024, we have seen major mortgage lenders announce reductions in mortgage rates which will be seen as a positive move in direction.
We had already seen the shock of mortgage rate rises and, whilst the full effect of these increases may yet to be felt by many, lenders have been “stress testing” borrowers since the financial crash and so, whilst it may impact the ability of people to move, we are unlikely to see a significant rise in distressed sales.
Housebuilding will likely remain at levels significantly below those needed to satisfy demand.
There are, however, always people that need to move – employment, death, divorce, family, financial are all drivers of activity.
Lettings will continue with an imbalance between supply and demand and, although affordability will likely stop rents rising at the pace they have, there will continue to be a strong market for those with stock. Small landlords exiting the market will continue adding to the supply and demand imbalance.
My views on 2024 are therefore that transactional sales volumes will remain at current levels with prices perhaps edging down a little further but by no more than a precenatge point or two.
The lettings market will therefore remain fairly static. Major players will continue to grow by acquisition rather than organically. Opportunities to restructure business models (remember the ten Ps) will need to be taken in order to maintain or grow revenues and profits and to take advantage, or at least mitigate, any impact from the potential end of fixed term tenancies.
Crucially, take a detailed look at every aspect of your business and have a plan. Remember man doesn’t plan to fail but often fails to plan. Keep your plan under regular review and be prepared to adjust where necessary. 2024 will see a General Election that will likely see people sit on their hands. Those with a plan will be best placed to identify changes and trends and take appropriate action.
After all. we cannot adjust the wind but we can adjust our sails.
Michael S Day MBA FRICS FNAEA FARLA