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Will the green shoots sprout in time?
By any yardstick the last few months have been really tough for you all. Headlines full of fear sell papers, and boy have we had plenty of scare stories.
So where is the good news?
It may not seem it, but Estate Agents still provide an essential service. Death, divorce, changes in family size and job relocation will all lead to transactions. “The lifestyle move” (the reason why about 30% of people move) will not go away for ever.
President Obama has some of the “Camelot” quality that Kennedy had. He could inspire a wave of change and optimism. He aims to create (or save) 3,500,000 jobs in America, a truly huge number. America was where the housing market toxicity originated. It may be where it ends.
Some commentators are saying that the base rate may fall to 0% this year. For the time being it is deflation rather than inflation that is seen as the danger. The banks will come under ever increasing social pressure to pass on rate cuts and continue lending.
No one can forget that there’s an election in prospect! A healthy housing market means votes, an unhealthy market means no votes. I am sure we will see the Government trying ever more desperate measures to help “hard working home owning families” in the run up to the election, which could include a Stamp Duty holiday on homes up to £500,000.
Despite a softening in the rental market, lettings remain a reasonable source of contra cyclical income, if you can cope with the hassle factor!
In 2009 vendors will have less scope for delusional pricing. Increasing unemployment and accidental landlords will have a dramatic impact on the market. The good news is that once the market finds a bottom, then the recovery can begin.
There remains a huge appetite for property as an investment class. Investors will enjoy a wonderful window of opportunity - the meeting of distressed sellers and low borrowing rates.
So what should you be doing...?
I only have two words of advice. You need to manage your business to “be there”. Being there means doing everything you can to stay in the ring until the market picks up. Cash management is key; hence this focus contains some tips.
That also means thinking positively. The glass is half full and not half empty.
A lot of agents have given up being there! A lot more will follow. But for those that are there when the market recovers there should some good pickings.
I do think that commission rates will harden. The “cheap and cheerful boys” who charge cut rate commissions will all be blown away. Those who remain will have pricing power. When will the UK move towards continental commission rates?
I also think that the current market will give a huge impetus in the move to more virtual agents. They may have a small accommodation office but the days of palatial offices will soon be gone. Just think of the overhead savings!
The good thing is that when the market finally picks up (and it will) there is a window of opportunity for the agents who manage to be there. They can capitalise on rising prices and volumes. There will be a lag in new agents coming into the market. This time I would wager that the lag will be longer than usual.
Sadly, I do feel that despite the recent small pick up in the market, there is still some pain to come. The market may well bottom out at 35% below its peak. But I do feel positive. When the market turns the survivors, facing little competition, should make a great deal of money.
If you manage to “be there” at the end of all this, that is the opportunity which beckons.
In the past Estate Agency has been a remarkably successful way of making money. It will be again.
This is my last focus. Nick Haines is taking over from me. He will serve you well.
My best wishes to you all.
Jonathan Harvie
LLP Partner and Head of Team
Affiliate Member of NAEA
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