"May you live in interesting times" is an English expression that purports to be a translation of a traditional Chinese curse. While seemingly a blessing, the expression is normally used ironically; life is better in "uninteresting times" of peace and tranquility than in "interesting" ones, which are usually times of trouble.
Well, I don’t think anyone can deny that the times are certainly interesting. At one extreme, terrifying, incredibly stressful and life changing and, at the other, creating the opportunities to analyse and assess and think about how we want things to be going forward, both personally and in business.
The last three months will, in my opinion, be the catalyst for enormous change across all sectors, accelerating actions on trends that were already underway (moving away from the High Street and for home working are obvious examples).
In the property market we are seeing a number of changes as estate agents and related businesses look to become more flexible in their approach, more fleet footed in their decision making and to operate more productively and with reduced fixed costs, harnessing technology and automation to both drive new business and also to process work, often on a 24/7 basis that allows the consumer to interact in ways and at times that suit them and their changing lifestyles.
During the lockdown and effective closure of the property market, I attended a webinar delivered by economist Roger Martin-Fagg in which he suggested that recovery would be fast. He likened the situation to having put a foot on a hosepipe to stem the flow of water, and then seeing the pressure build so that when the foot was lifted, the water flowed even faster than before.
A month after the property market was “reopened” and agents have been allowed to operate from their offices and carry out physical appointments (with strict safety and social distancing protocols in operation), the market does seem to be flowing as Roger suggested it would.
Activity levels started with significant increases in web traffic to the major property portals (Rightmove, Zoopla and OntheMarket) but agent’s sales “pipelines” that had held up well during lockdown, did see some unravelling as people either withdrew or buyers tried to negotiate price reductions based on adverse press reports of an impending fall in house prices.
This negative element was relatively short-lived and has been followed by significant increases in instructions and transactions being agreed, often at or very close to asking prices being quoted.
There has, of course, been a little downward pressure on prices but I would, anecdotally, estimate any drop in values to be no more than 1-5%.
Overall, the “pent up demand” has seen the market “bounce back” or even get ahead of what was being transacted pre covid19.
The lettings market was able to operate a little more easily during lockdown due to many properties being vacant and prospective tenants sometimes being prepared to take a tenancy based on a video tour rather than a physical inspection.
Renting involves less commitment than buying and landlords are also less emotional about their properties, seeing them as investments and therefore take decisions on commercial rather than emotional terms.
Some renegotiation of rental payments has taken place and there has been a small increase in arrears cases but due, in part to Governments support via the job retention (furlough) scheme this has, at least been mitigated for the time being.
So what’s next?
Key to a sustainable recovery and the longer-term market is, of course, jobs.
There have been nearly 9 million people furloughed in the UK and, in reality, many of those have probably sadly already lost their jobs but don’t know it yet.
As we see a continuing easing of restrictions in the coming weeks and the Government support reduces, we are likely to see unemployment levels rise. This may have a negative impact on both confidence and ability and could certainly slow down the speed of the current positive direction.
In the estate agency industry the cashflow issues are likely to hit hardest in the next three to four months as Government support reduces and pipelines, whilst being replenished, are not yet producing decent income. Businesses have, in the main been cautious about un-furloughing staff with their owners often back in the front line and those staff working showing much greater levels of productivity but possibly risking “burning out” if too stretched.
STOP PRESS : July 9th - see footer
I was honoured to be asked, and have, become a Founder Member of Agents Together a charitable foundation for the estate agency industry providing well-being and business support through mentoring to try and mitigate these well-being issues and help the industry with business growth via our two maxims of Healthy Minds and Healthy Business.
The shape of the industry is changing. New ways of working utilising home working, self-employed staff, video conferencing and more sophisticated technology and automation are coming to the fore.
Wearing my teclet Director hat we are seeing many agents benefit hugely from the 24/7 automation that our platform brings. Chestertons and Haart have gone on record as saying that it helped them achieve excellent results during the lockdown period by enabling transactions when physical contact was impossible. It will serve them even better in the future.
Haart, amongst many others, have just announced that they are moving to a new business model with much less reliance on High Street premises. There is a huge growth in new self employed agency businesses, often under the umbrella of a support organisation such as Keller Williams or EXP Realty (both American). I must admit that I feel a huge number of these will fail as the individuals involved find that working for themselves is not everything they hoped for, particularly their ability to win sufficient new business largely based on their personal networking and not an overarching brand.
The prognosis for the rest of 2020 is therefore uncertain. If job losses are, as we all hope, within manageable numbers, then there is no reason why the property market recovery cannot be sustained with prices stable.
If unemployment rises to 3.5 million or more and, or, a second covid19 wave strikes then, I’m afraid, all bets are off.
Oh, and then there’s Brexit at the end of the year but that seems strangely insignificant in the current scenario!
Michael S Day MBA FRICS FNAEA FARLA
Wednesday 8th July saw the UK Government announce a number of measures to try and mitigate the impact of an impending recession and huge predicted job losses.
As well as a number of employment benefit changes the big announcement was a stamp duty holiday coming into effect immediately and raising the threshold at whcih tax becomes payable from £125,000 to £500,000.
This will potentially save a purchaser up to £15,000 (if buying at £500,000 plus) and is likely to create a frenzy of activity between now and March when the "holiday" ends. The saving may aslo enable lenders to be more flexible on their loan to value criteria by using the SDLT saving as effectively part of the deposit.
The benefit to buyers (and knock on benefit to sellers) will be geographically sensitive in that the greatest financial benefits will be in areas of higher property prices.
Agents should now be "farming" and "prospecting" like never before as there will, at least in the short term, be many people who take this change as the catalyst for a move that they may have previously been delaying.
Details can be found here:
Critics will, rightly in my opinion, argue that this move was unnecessary and that the monies could have been better targeted elsewhere. Whilst there is no doubt that the housing market drives a lot of economic activity, the market was already buoyant and history shows us that short term interventions such as this have a likelihood of creating a boom followed by bust scenario.
Hopefully the Government will use the "holiday" period to permanently overhaul and reform SDLT so that, come April next year, the market is able to move forward on a new basis and avoid any risk of falling off a cliff, in part created by the good intentions of the Government.