HOUSE PRICES HAVE RISEN OVER 18% SINCE FIRST LOCKDOWN
According to a recent analysis by Halifax, the average house price in the UK has grown by 18.2% which means the average cost of a property has gone from just under £240,000 to nearly £283,000.
As Russel Galley, MD of Halifax puts it: “strong house price inflation remains unchanged: limited supply and strong demand, despite the prospect of increasing pressure on households’ finances.”
All of this is despite the Bank of England base rate increasing from 0.1% to 0.5% in short order, and there being the largest cost of living deficit in three decades.
Now the SDLT holiday introduced by the chancellor has fallen out of the equation and in April we are going to see higher personal rates of tax, higher utility bills and higher fuel bills for vehicles, it seems that the housing market is still an unstoppable beast.
But as we have seen many times in the boom and bust cycle of the housing market, a huge juggernaut does not stop overnight. However, when it does it can take an awfully long time for it to start up again.
The real test will be when the housing market hits the school holiday season at the start of Q3. Will the market be racing in September, the usual second wave of the annual housing market activity? Or will the crippling debt, increasing inflation rate and the hyperinflation in the wages sector start to bite?
Inflation has always been curbed by the very blunt instrument of raising the Bank of England rate, which then makes the cost of borrowing money for housing much higher.
Another big factor is that last year nearly one in two completed sales were for first time buyers, 408,000 of them last year. With property prices increasing, so too does the amount required for a deposit. A 20% deposit of £283,000 equates to £56,600 now, up from £48,000 in Match 2020.
Now the bank of mum and dad are huge players in the deposits for homes matrix, but even they are seeing that their capital has to stretch to look after siblings, pay the utility bills and the increasing cost of food. At some point, something is going to give.
Not all is doom and gloom, those looking to exit the market or even landlords sitting on a good-sized portfolio will welcome this rampant housing inflation. But of course, it is always the poor who suffer most, many of whom are in the long term rental sector. A sector that is also seeing spiralling rents, pushed on by all of the underlying levers that the residential marketplace is being hit by.
ARE TRADITIONAL AGENTS LOSING MARKET SHARE TO AGENTS USING TECHNOLOGY?
Behind the present bullish residential housing market of 2022, where inventory scarcity is rocketing marketing prices, another market dynamic is very much at play, some estate agencies seem to be far ahead of their competitors.
In a recent study, the five top-performing agencies in a number of large-sized towns were found to be, in 80% of cases, agencies utilising a more automated and tech-driven service.
And whilst established teams and local brands definitely did factor into the market share of these companies, so too did the simple fact that automating processes, cutting overheads and providing a better level of service.
One agency in the study said that spending money on software that prospects inventory, was a better return than putting that inventory on property portals, as the market was so strong. They also said that by using more tech in their lettings operations, they actually had grown their lettings book by 18% in the last year, without increasing their headcount.
For a very long timem I have been a huge advocate of the digital transformation of real estate, or putting software into property facing situations so humans can do things quicker, and clients get a better level of service.
Maybe we are at the tipping point, hastened by the pandemic, where the public is increasingly seeking a more hands-off approach to buying, selling, leasing and renting property.
Yes, they want to have contact with a human property professional, but as in other industries, as and when they want it, preferring to click on their smartphone to navigate more and more of the process themselves.
There has been much written about digital solutions being a waste of money, solving things that do not need a solution and agency is a people business, but as Amazon shows, property is also a service industry. Get it right and you are going to be in the driving seat with regard to making a profit, sit back and fail to evolve your business model then your market share may well suffer.
Increasingly we are seeing a number of lettings based agencies exiting and selling up, some are doing so because of the needed investment in technology to keep ahead of the game, and indeed to keep compliant is costly.
Much better to sell a large book of landlords to an operation that is already bristling with software that runs the overarching operation.
Perhaps it is time for agents to realise that it is not technology that is the danger to their business, it is their local competition that is modernising its approach to delivery in a digital way.
As Robert Peston put it at the 2021 Negotiator Conference: “No one reads the news anymore.” What the ITV political correspondent and journalist meant as he addressed a huge audience of estate agents was that no one reads the paper or watches the news anymore. Instead, news is broadcast across dozens of digital platforms, by many different players. The old model is over.
He then went on to say that, in the same way as news, why do agents feel clients doing property will be going into estate agents’ offices on the high street in the coming years?
Things have changed, and the need to reposition how estate agency is done should be high on everybody’s agenda.
Andrew Stanton is the founder of Proptech-PR, a consultancy for Founders of Proptechs looking to grow and exit, using his influence from decades of industry experience. Separately he is a consultant to some of the biggest names in global real estate, advising on sales and acquisitions, market positioning, and operations. He is also the founder of Proptech-X Proptech & Property News, where his insights, connections and detailed analysis and commentary on proptech and real estate are second to none.