The property sector has been in a state of flux, in no small part due to the recent COVID-19 pandemic. Lockdown and other restrictions have forced businesses and individuals alike to make drastic changes to their everyday operations, working from home and the financial issues that come alongside a period of time where many consumers are separated from the businesses they contribute to have dealt a hefty blow to the property sector in general.
Figures from the Royal Institute of Chartered Surveyors found that in the midst of the pandemic, retail and office sectors were hit the hardest with a decline in tenant demand by 86% and 79% respectively. Alongside this, housing prices increased by 10% in 2021 to the behest of many potential buyers.
It’s not all bad however, with the economy now reopening and restrictions gradually being lifted, many are touting the potential comeback of commercial real estate with a reduction in vacancies, but many are wondering, how will the housing market fare?
In the latest roundtable, hosted by the Great British Entrepreneur Awards and haysmacintyre, a wide range of property professionals and experts, from architects to entrepreneurs, get together to discuss the state of the property sector and if it needs a “bust”.
In need of incentives
Kicking off the conversation is Lorraine Thomas, founder of View From my Window, “this topic is one that touches me quite deeply,” she begins, furthering into describing her experience developing properties in Croydon.
“We developed from the ground up nine units,” says Lorraine, mentioning that despite initially selling the majority relatively quickly thanks to the help-to-buy scheme, difficulties were found further down the road.
“A couple of the units fell through, we’re still having difficulty shifting those,” elaborates Lorraine, “there’s just now no incentive for anyone to rush at it, the market has just changed overnight with the stamp duty holiday gone. It’s washed away this potential market to get people onto the ladder.”
Finishing up her point, Lorraine pins the now-lack of incentive as one of the culprits behind the problems with the current market.
Andrew Stanton of Proptech-PR, jumps in to give his own perspective:
“What we’re finding now is, there’s a shortage of stock on the market,” says Andrew, “each average agent has got about 12 properties to sell.”
Andrew makes another point in response to Lorraine’s: “what [the stamp duty holiday] has done, is heighten the prices for first time buyers,” he explains.
“The average house sale price last year was 250,000, this year it’s now 275,000.”
“There’s a lack of inventory,” attests Andrew, “there’s not much stock on at all, that means nobody’s moving.”
Andrew finishes up by explaining that despite the variety of factors influencing the market, including cost of living and utilities, he believes the market will eventually flatten out, “it’s as if the market is catching its breath,” he finalises.
Attitudes towards property have changed, the increased prices and work from home routine we’ve all become accustomed to have left people wanting, in both their own homes and a potential move up to another property. But which is more beneficial for the prospective buyer?
James Collinson of Design Spec chimes in from an architectural standpoint, “four or five years ago, about ten to fifteen percent of our phone calls were people saying ‘I’ve bought a new property, what can I do with it?’” he says.
“Now, that number is lower than five percent, we do not get phone calls like that anymore, now every single phone call is ‘we explored moving, the cost of moving is too high’.”
James cites stamp duty and solicitor fees as a big contributor as to why many are having trouble moving, “we had one client who we had a great conversation with, he was over the moon,” explains James, “he basically came back to us yesterday saying ‘the cost of moving would mean we either spend £100 thousand on an extension, or we spend £120 thousand to get one tiny tier up on the quality of our living.’”
“For us in our industry, it’s been amazing, last year we worked with 300 homeowners on separate projects,” he says.
“While the market is the way it is, whatever that is in reality, people are investing internally and not moving.”
With the contrasting success from James compared to the other members of the roundtable, the matter of perspectives is further considered. From an individual and business standpoint, attitudes are changing but the restrictions stay the same.
Queried on what he’s been seeing from his side of the table, Daniel Jefferies of Resooma is brought into the fold, giving some insight into what’s been seen on the rental side of things.
“I was kind of anticipating that, once the bubble from the stamp duty tailed off, for properties to dip back down again,” says Daniel, admitting, the current situation isn’t what he expected.
“I think the surplus and demand, versus the amount of stock and people not selling just hasn’t allowed it to go back the other way.”
Giving a bit more perspective, Daniel explains the change in attitude towards renting: “When we first started in the rental space, we were mainly handling millennials,” he says, “renting was a big thing, there was more emphasis on travelling and renting as you go, digital nomads.”
“But now, with Gen-Z, who are now using our platform, the more we speak to our users, they’re actually really keen to get on the property market,” reflects Daniel.
“There’s definitely a demand for home buying, there’s nothing on the market and without it taking a significant dip, that age group is never going to catch up to the point they can actually put money into the market.”
A market monopoly?
Despite the difficulties faced by the conventional home buyer, many investors are not only willing to accept the jump in prices but aren’t feeling the slowdown frequently discussed by the roundtable at all. In fact, many of those that are benefitting from the market reside in the category of investors, where the wheels keep turning despite the difficulties in other sectors.
Melissa Lewis of ML Property Venture admits that the broader range of perspectives given has changed her mind: “When I first saw the question, I thought no, because there are still people buying and selling.”
“I just deal with investors mainly and they still have properties going through the sales process,” she says, “but listening to the rental market perspective, it’s going to be very difficult for first-time buyers,” she says.
“The investor market is still moving quite quickly, I guess there’s that acceptance that they’re going to be paying more for what they would have been able to buy with less money last year, or even the year before,” continues Melissa.
“It almost feels like a bust is needed to give the rest of the market time to catch up, it feels like investors are dominating the market a lot more than your traditional first time buyer, etcetera.”
“I think we’re sometimes set off against one another, particularly if we have slightly different perspectives from a political standpoint or anything like that,” says Richard Brown, founder of The Property Voice.
“Just looking at house prices and trends very simplistically, the long-term governments of both the conservatives and the new-labour governments in the recent past, fell off their perch when house prices tumbled, and were elected when house prices were strong.”
Richard briefly discusses the political implications of property, then moves on to a much less complex conclusion, “incentives do work,” he says, mentioning help-to-buy and government guarantees as methods that could give a much needed kick to the housing market as they have done so before.
“They’re examples of incentives that drive people to the market,” he says, “incentives do work and they will be used, probably over the next couple of years whilst the conservative government looks to try and get re-elected, regardless of what we think is needed.”
Steve Coulson from Kitt gives his own two-cents to Richard’s points, “Talking about a short supply and there being too much demand because prices are going up, I think we’ve got so many incentives to buy and there being such a bad alternative when it comes to renting, it almost follows inevitably that you’re to have an inflated price,” he adds.
Out with the old
Property is certainly one of the oldest markets there is, with many of the practices used in conjunction alongside it being considerably out of date. Methods of lending specifically are based on extremely old models, that, with such a drastic change in the market recently and the gradual change even prior to that occurring over the course of many years, are simply not cutting it for buyers.
“I don’t think the property market needs a bust, it needs a boogie,” says Lorraine, acknowledging that the otherwise stagnating sector needs a drastic “shake-up” before things can change for the better.
“The way mortgage applications have been assessed is based on a very traditional system,” says Arya Taware of FutureBricks.
“So many metrics aren’t taken into consideration for mortgages, insurance providers are so much better at [assessment], that sort of data driven technology needs to come in when it comes to issuing mortgages.”
A huge collection of factors come into play as to what’s influencing the current property market, and drastic change, bust or no, it seems is needed to bring things back down to pre-pandemic levels. What will be done remains to be seen, but what can be done is a long list, with many solutions on that list mentioned by the entrepreneurs today who seem to be itching for innovations in the property sector.
Jake Pearlman, director at haysmacintyre, had some input on the broad discussion between the roundtable, saying “The residential property market continues to boom as demand changes and the cost of living increases, whilst the future of the commercial market remains uncertain. It was fascinating to hear the entrepreneurs thoughts on the market, and the clear consensus that change is necessary. It is acutely apparent that prices cannot continue to rise as they have done, but the market will take time to reset and find a new equilibrium.”