We’ve been here before – all economies have ups and downs – but I haven’t seen market conditions quite like this since the housing market crashed in 2008 in the wake of the global financial crisis.
Recent sales figures from HMRC aren’t pretty – down 15% year on year to June, and even worse in May, at 25%. My own business has seen the volume of offers fall by 34% compared to this time last year. Stock levels are also down in equal measure, which means we’re in for a long hard slog!
If we’re struggling as a sector, spare a thought for all those industries that support estate agency – from recruitment and marketing to property tech, external coaching and mentoring. How viable will these be? Many will be on their knees before the dust settles.
While agents benefited from the Stamp Duty holiday and Help to Buy booms before both schemes were scrapped, we didn’t forecast 14 interest rate hikes by the Bank of England in 18 months, with analysts predicting this will continue until late 2024.
This means that homeowners who have a mortgage tracking the base rate face an annual average bill hike of £5,000! Who can afford that? With many fixed rates ending this and next year, more disposable income will be siphoned off to pay the mortgage, with disastrous knock-on consequences to other businesses and the economy.
So where do we go from here?
First, the Government needs to put measures in place to boost the economy and increase housing stock. With a general election looming, it’s now or never if the Tories want to have any chance of holding on to power. They need some innovative ideas – and fast.
They could start by bringing in a replacement for the Help to Buy scheme, which ended in March, but widen it to include all properties, not just new-builds. A chunk of mortgage at zero percent interest would be a sure-fire winner.
Next, the Government needs to sort out the country’s archaic planning laws and work more closely with developers and communities, not keep dancing on a pinhead trying to allocate numbers to different local authorities. This messes with their Local Plans, which is a crazy way to plan society.
Housing Secretary Michael Gove has announced some new plans to improve the planning system, and wants to see ‘shops, takeaways and betting shops’ converted into a million homes to help tackle the housing crisis. Plus the government says it will support the construction of at least 30,000 new social homes a year so that working people don’t have to ‘live in vans, caravans and hostels’ – but, in my mind, that’s nowhere near enough.
That age old issue of supply and demand is never going away. The UK population has risen by 10 million in the last 25 years, from 58m to 68m. It’s forecast to rise to 73m by 2035. If we haven’t got enough property now, we sure as heck won’t have in another decade or so.
Meanwhile, the big-name house builders are scaling back on new-builds because of subdued demand, with high priced materials pushing their prices up and profits down. It’s so topsy turvy if you take a long-term view.
Plus, demand for rental properties is sky high, pushing up rents, and we have the Renters Reform Bill, which is likely to take another 18 months until it’s approved by Parliament, more EPC regulations and the abolition of the Assured Shorthold Tenancy, to contend with.
Perhaps the most important change for our sector must be to upgrade our antiquated sales process. Our conveyancing and property transfer process puts our country to shame. Do the Law Society, central Government and local authorities not realise it can all be digitised! A house should be conveyed to a new buyer with the touch of a button. Our pipelines would convert so much quicker. I can’t understand why this isn’t happening. A lot of talk, but no action.
We, as a sector, must therefore hold our nerve and not cut our fees – but raise them instead, as we provide an excellent quality service that people respect and admire. Cutting fees doesn’t increase market share and just becomes a downward spiral in the race to the bottom and we’ve already seen what’s happened to the likes of Purplebricks if you don’t charge what you’re worth. Mark my words, there will be plenty of job losses there before Strike is done with their restructuring.
As for estate agency giants like Connells Countrywide Sequence, how much longer can they go on with two, three or even four branches in some towns? Isn’t it more likely that one brand will become the preferred option and they’ll have just one management team to save costs?
Amidst these challenges, the estate agency sector itself is at a crossroads and needs to adapt to stay competitive in this rapidly evolving landscape. With technological advances, we’ve seen a rise in online estate agents and property tech companies plus the evolution of AI, which are reshaping the way we do business.
I will keep reiterating that agencies that hit the phones, go above and beyond for customers, and increase their marketing spend to stay front of mind will be the ones that will come out the other end once the market and economy bounces back. Focus on training and developing, mentoring and coaching, ensuring your teams have the skills they need to meet future challenges.
In a world increasingly shaped by uncertainty it is vital that we, as an industry, take the opportunity to influence policy and drive change, seizing every opportunity to shape a housing market that’s fit for purpose, in a way that benefits us all.
Paul Smith is chief executive officer of Spicerhaart
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