Brexit challenges for agents and the property industry
Suddenly Brexit Day is nearly here.
It may have taken three and a half years from the Referendum but the UK will, within days, be outside of the EU. Whatever one’s views, and whether or not that is a cause for celebration, there is substantial work to be done by the end of 2020 – the transition period.
The object is to achieve clarity over this country’s future, and that applies to our industry as much as any other. It will take years, possibly decades, for a stable post-Brexit landscape to emerge as this country disentangles itself from the EU.
The mistake is to assume that on February 1 we’ll wake up and “it’s happened” – in fact, the hard work may only just have started.
– Will today’s Boris Bounce turn into this summer’s Johnson Jitters?
Only those with a vested interest in talking the market down deny that there’s been a renewed confidence in the mainstream and prime buying and selling since the General Election.
There have been more sales completed (up 6.2% in December says HMRC, despite Christmas), higher asking prices (up 2.3% with the biggest New Year leap in 18 years according to Rightmove), and more optimism (a doubling in the number of agents expecting an improved market, says RICS).
But the question is, will this last? If, by the summer, there is no sign of a successful trade deal with the EU (or maybe even the US) the debate from September onwards will be defined by the question: Is the UK heading for No Deal at the end of the 2020 transition period.
If so, will the housing market return to something like the hesitant state it had before last month’s General Election?
– Will agency-focused legislation begin to diverge from the EU?
The introduction of the Fifth EU Anti-Money Laundering Directive into the UK just a matter of days ago shows how closely harmonised some agency-related legislation is with the European Union.
But there are more such links, much more commonplace than those surrounding money laundering issues. These are long-term issues agents have to think about.
For example, the Energy Performance Certificate (introduced in the UK in 2007) was a product of the EU Directive 2002/91/EC.
Now one might guess, especially in our current climate crisis political landscape, that EPCs will remain in place in the UK – but outside of the EU, the UK is now free to change them if it wishes. Will there be pressure to do so?
In construction, the British Board of Agrément – it even uses the French term for ‘approval’ in its name – is a certification body for some standards (FENSA for doors and windows, for example), many of which are based on EU legislation. Again, the UK may continue to harmonise with EU standards but it’s likely there will be pressure from some quarters to diverge.
There could be long-term, ongoing change affecting agents as a result.
– Will City of London job losses hit the capital’s high-end housing market?
So far the financial services fall-out from Brexit has been less-than-expected, but many players have made it clear they have been waiting to see if the UK would actually go, and if so under what terms.
Bloomberg has predicted that potential staff relocations from London include 4,000 staff from J P Morgan, 150 from Barclays, 1,000 from Morgan Stanley, 1,000 from Goldman Sachs, 1,500 from UBS and 1,000 from HSBC. This adds up to a potential 8,650 jobs leaving, out of a total of 48,000 London-based posts currently accounted for by these companies.
What of the City’s sales and rentals markets if London is somehow under threat as a premier financial hub?
– Will overseas buyers continue to want to buy in the UK?
There are two aspects here. Firstly, irrespective of Brexit, there’s the anticipated three per cent SDLT surcharge proposed by the government and likely to be confirmed in the March Budget. This will apply to overseas investment buyers living outside the UK.
The second aspect is Sterling: it went into freefall after the referendum (have you seen the cost of those holiday Euros?) and within a year of the Leave vote, those buying in the UK and using other currencies were receiving what were effectively discounts of up to 21 per cent.
If Sterling returns to something like its pre-referendum level soon, will those buyers go? And if so, will domestic buyers step in to bolster the prime London housing markets so heavily reliant on overseas interest?
– Will there be a labour force to meet UK’s new homes aspirations?
Leave to one side the abject failure of successive governments to meet housing targets in the past, and even without that this area looks like one of the biggest problems for the UK post-Brexit.
That’s because the 2017 Labour Force Survey (the most recent figures available) show non-UK workers were 14.5 per cent of the UK construction workforce, many from the EU.
The Construction Industry Training Board has led a number of schemes since 2017, aimed at fostering more home-grown construction workers.
Most notable has been the Construction Skills Fund – led by the CITB on behalf of the Department for Education – which aims to have trained 13,000 construction workers by the end of this year.
Will this and other projects provide enough labour, especially when hugely labour-intensive and heavily-delayed projects like HS2 and Crossrail drain resources at the same time as ambitious housebuilding targets are to be met?
Boris Johnson may dismiss such concerns as examples of doomsters and gloomsters – but that doesn’t mean these challenges will not exist. Whether Britain meets these challenges is largely up to the politicians – but our industry will have to be prepared to monitor and match the changes as they emerge in the years and decades to come.
Quality of agency service for high-end buyers has “dwindled” – claim
An estate agent has set up his own buying operation because he claims the quality of service for high-end buyers has “dwindled” in recent years.
Matthew Jackson, a former head of new homes and investment at London-focussed agency Chestertons, has now set up Oakmont Private Office.
He is damning in his assessment of how the industry has served well-heeled clients.
“Throughout my property career I have seen a decrease in the level of service clients receive from those who are meant to be acting in their best interests, with advice being far more focused on what will earn a fee than the creation of longstanding relationships” he says.
“I have therefore set up Oakmont to become a leading private office for international high net worth families and individuals, and to provide them with the best possible property advice and client engagement to create close and enduring working partnerships for many years to come.”
Jackson says his business will offer a bespoke service for HNW families and individuals in prime areas of London and the South of France, including Monaco.
A statement from the company explains that it will be “acting as the intermediary between selling agent and client, Oakmont manages the sales process from start to finish to include establishing an exacting mandate for each client, providing impartial and independent advice, shortlisting suitable properties on and off the market, undertaking full price and market related analysis, submitting offers, negotiation, pre contract due diligence, steering the transaction through to completion and collecting keys.”
Jackson’s business will also offer overseeing and/or organising refurbishment works and looking after property when vacant.
He will also offer a complimentary sales management service “to ensure the process of selling is as efficient as possible.”
Don’t use an online agent! Lawyer makes warning to sellers
A leading property lawyer is urging sellers not to use online agents because to do so would be “a gamble”.
Gillian Wright – the legal director of Scottish law firm Gillespie Macandrew – writes in The Scotsman newspaper that those who resolved to start 2020 by moving house may not know where to start. “We often speak with clients who haven’t moved house in more than 20 years” she says, adding that on the other hand much of the market is made up of first time buyers with no prior experience of moving house whatsoever.
“In recent times there has been an increase in the number of DIY estate agents in the market, and there is often a temptation to go with the cheapest option when selecting your adviser. Whilst this is understandable when it comes to everyday commodities, for most people their house is their biggest and most valuable asset. Is it really worth taking a gamble when selling your current home and buying your new one?” she writes.
“There is real value in appointing an estate agent who knows the market in your area, they can recommend the best price at which to market your property to maximise interest and can help you navigate notes of interest and closing dates” adds Wright.
“DIY estate agents often put this burden on the seller, who can be completely out of their depth and may end up making the wrong decision under pressure.”
Wright says that in her core area of activity, Edinburgh, there has been an increase in transactions involving chains, which require expertise at legal and agency level to negotiate through.
On top of that, many sales are triggered by death, divorce or other sensitive and emergency reasons.
“These sensitivities are best dealt with by an estate agent and solicitor with experience in these particular fields” insists Wright.
Phil Spencer to advise agents how to meet public expectations
The hugely-respected Phil Spencer is to write a regular column for the industry on Estate Agent Today under the auspices of his MoveIQ service.
Throughout his 30 year career Phil has worked as a buying agent, housing market commentator TV property expert and as an awards ambassador; throughout this time he has always championed the best estate and letting agents, emphasising their importance in helping buyers, sellers, landlords and renters.
Phil Launched MoveIQ in 2018 to share his experience with the public, providing them with unbiased professional expertise to allow them to make well-informed decisions.
Now he is keen to share that experience across the industry, explaining the areas where buyers and renters feel they need more assistance from agents, and how sales and lettings experts can improve their offer to the public – whether in communications, explanation about properties, and working to help clients understand how agents work. This is becoming all the more important as government reforms of the house moving process become more urgent.
Phil – already well known to many agents through the ESTAS awards – will write a column for EAT on the first Monday of each month, beginning on February 3.
He has plenty of ideas on how agents and the public can work better together, especially in the revitalised housing market of 2020; if you have ideas, he’d love to hear them too.
Prices up! Transactions up! Agent forecasts a boom in 2020
Some buying agents have batted away the many signs of an improving housing market but one says the Boris Bounce is likely to create a huge boost for prime London.
Fraser Slater, chief executive of buying agency Ludgrove, says: “With a vastly improved political backdrop, the threat of a hard-left government removed and Britain’s transition out of the EU settled, we expect 2020 will be the year the prime London property finally regains its mojo.
“Strong pent-up demand, limited stock availability and the backdrop of a record five year-long property bear market is likely to provide upward momentum and we forecast prime London prices and volumes to grow around 10 per cent and 20 per cent respectively in 2020.”
He says there are nine key factors behind the predicted boom.
1: adjusting for inflation, prime central London prices have fallen -28% from 2014 to 2019. Historically very similar real-terms declines were recorded at the point of previous troughs in the market in 1992 and 2008, says the agency;
2: the 2014-2019 Prime London property recession at five years in duration has been the longest in 30 years, making a bounce well overdue;
3: relative to the mainstream London property market, prime London prices are near a 10-year low, making ‘trading up’ more affordable;
4: there are “extreme levels” of pent-up demand and a limited availability of stock;
5: rental values are rising as supply diminishes in response to government tax changes – a trend Ludgrove expects rents to harden further in 2020 as the full impact of mortgage interest tax relief changes take effect from April;
6: future housing supply in London’s central Zone 1 is set to decline significantly on the basis of recent ‘construction starts’ data;
7: Sterling still trades near a 40-year low against the Dollar making UK properties appear cheap;
8: finance is cheap with mortgage costs having fallen 39 per cent since the peak of the market in 2014; and
9: there remains a possibility of a stamp duty cut in the upcoming March Budget.
“The last five years has seen an almost perfect storm of negative news flow affecting prime London property, and we are now confident a sunnier climate is on its way” insists Slater.
“Having studied past bear markets as a former fund manager, market bottoms are characterised by extreme negative sentiment, despondency and despair with the recovery in price typically being a function of an amelioration of negative news flow and fundamentals … And it is in this context we are confident we will look back on the dark days of 2014-2019 as a time when a bull market was ‘born in pessimism’.”
Home ownership amongst young people up after a decade of decline
The proportion of 25 to 34 year olds who own their own home in England has risen for the first time in over a decade.
There are now as many owner occupiers in this age range as there are private renters according to the government’s annual English Housing Survey.
It shows that in 2018-19, some 41 per cent of 25-34 year olds lived in the private rented sector and a further 41 per cent were owner occupiers.
The reverses the trend recorded each year between 2003-04 and 2013-14 during which the proportion of 25 to 34 year olds in owner occupation plummeted from 59 per cent to 36 per cent.
Housing Secretary Robert Jenrick says of the figures: “We’re doing everything we can to make the dream of home ownership a reality for more people, and it’s great to see this is happening for more young people who have taken that first step onto the housing ladder. We’re continuing to work to improve standards in the private rented sector, making buying a home more affordable and building homes fit for the future.”
Meanwhile, the proportion of 25 to 34 year olds in the private rented sector has dropped from its 2013-14 high of 48 per cent to 41 per cent in 2018-19. However, overcrowding has doubled over the last 20 years in the private rental sector and has hit a record high in the social housing sector.
Better news is that the average length that a private sector tenant lived in their current rental property was 4.4 years, up from 4.1 years in 2017-18. This is the highest average length of time tenants were staying in their current homes over the last decade.
The policy manager of the Residential Landlords’ Association, John Stewart, says: “The vast majority of landlords who do a good job welcome good tenants staying in their properties long-term and today’s figures bear this out. They clearly refute the picture some create that landlords spend all their time looking for ways to evict their tenants and it is time to end this scaremongering.
“The market is meeting the ever changing demands on it without the need for legislation. It is vital that the government continues to support and encourage this with pro-growth policies that support good landlords to provide the long-term homes to rent to meet ever growing demand.”
Watchdog issues “strong signal” to rogue agents who price-fix
The Competition and Markets Authority says it wants to send “a strong signal” to the estate agency industry that price-fixing will not be tolerated.
The CMA has in recent times probed three cases of price-fixing amongst agents in different areas. These were:
2019: agencies Michael Hardy, Prospect, Richard Worth, and a fourth company, Romans, broke competition law by running a cartel which set minimum commission rates for sales in Berkshire. They fined more than £605,000 and have only four weeks to pay;
2017: In Somerset the agencies Abbott and Frost, Gary Berryman Estate Agents, Greenslade Taylor Hunt and West Coast Property Services (UK) Ltd all admitted breaking competition law and were fined over £370,000;
2014: Waterfords (Estate Agents) Limited, Castles Property Services Limited and Hamptons International, which were members of the Three Counties Estate Agents Association, entered into an agreement which prevented other members of the association from advertising fees or discounts in a local newspaper. The long-running case ended with a fine of £735,000;
Now the authority says that in setting its penalties for the most recent case – the cartel in Berkshire – it “considers that the need for general deterrence means that the CMA should send a strong signal that anti-competitive behaviour in this sector will not be tolerated.”
In addition, the public are being asked to inform the authorities if they know of agents operating fee-fixing cartels.
The CMA says anyone who has information about any other cartel is encouraged to call the so-called cartels hotline on 020 3738 6888 or email cartelshotline@cma.gov.uk.
The investigation by the authority into the Berkshire price-fixing included damning evidence of telephone calls, emails and occasional meetings between the agents, including a monitoring system and penalties to try to deter any individual company from breaking the anti-competitive deal.
In its report on the case, issued yesterday, the CMA sets out why it found the agencies guilty:
“The commission fee charged by residential estate agents is an important factor considered by consumers (home sellers) when choosing between estate agents. Consumers who sought quotes from one or more of these estate agents will have been deceived as to the competitiveness of those quotes and may well have approached alternative estate agents had they been aware of the cartel conduct.
“The [agents’] conduct would have had a direct impact on home sellers given the significant cost of selling a home. Depending on the price of the property, the CMA estimates that the conduct could have increased commission fees paid by individual home sellers by hundreds of pounds.
“The conduct involved the setting of minimum commission fee levels to be charged for the provision of residential estate agency services in the Relevant Areas. The commercial objective of the agreement was to ensure that the Parties’ turnover levels and fees were maintained.
“The Parties agreed to the use of penalty payments for breaches of the Minimum Fee Arrangement, and at least two of the Parties developed internal monitoring mechanisms to check compliance. These penalty payments, however, were only enforced on potentially three occasions and the Parties did not always adhere to the Minimum Fee Arrangement.”
Conveyancing call for Knotweed info shows need for treatment – claim
The increasing demand for information on Japanese Knotweed during the house buying process is emphasising the need for householders to pay more attention to the problem, it is claimed.
Mortgage lenders now require the sellers of properties affected by knotweed to provide evidence of a professional treatment plan along with an insurance-backed guarantee for remedial work, before they will offer a loan.
Sellers are now also required by law to tell buyers if a property is or has been affected by Japanese knotweed, as a specific question now forms part of the TA6 conveyancing form.
Specialist knotweed removal firm Environet UK says it costs the average homeowner £2,500 to treat Japanese knotweed with herbicide and £5,000 or more to excavate it.
Householders who attempt to deal with the problem themselves by cutting it down repeatedly, pouring diesel on it, covering it in salt, burning it, burying it and saturating it in over-the-counter weed killers, will find those methods categorically don’t work the firm insists.
The recent wet weather – thought to have made recent months England’s fifth wettest autumn on record – has apparently prompted the spread of invasive plants such as Japanese knotweed, Giant Hogweed and Himalayan Balsam, which can hitch a ride in floodwater to spread and take hold in new locations.
Environet UK says homeowners who live near watercourses – particularly those in areas hit by severe flooding in recent months such as Yorkshire, the East and West Midlands and parts of South East and South West England – are particularly at risk and should be vigilant for new infestations appearing this spring.
Stamp duty receipts down again – agency demands government action
Data from HM Revenue & Customs shows tax receipts from stamp duty fell a further 5.2 per cent between 2018 and 2019, part of a broad decline in income since late 2016.
The figures have prompted a demand by Jackson-Stops’ chairman Nick Leeming that the government wake up to the fact that the duty is unpopular.
“In order for the UK property market to thrive again and provide the economy with the extra boost it requires, we need the stamp duty pledges Boris Johnson made in his original campaign to be Prime Minister to come to fruition” explains Leeming.
“We’ve already started to see some initial green shoots of recovery in the London market as demand among buyers increases, however ensuring this confidence follows through to sellers to unlock supply of homes is vital.
“Recent research of ours shows that 41 per cent of consumers believe there should be a wholesale reduction in stamp duty across all price brackets, while more than a quarter think government should abolish stamp duty on all homes under £500,000.”
There is growing concern that broad pledges on stamp duty made in the second half of 2019 by politicians – ranging from a wide-ranging call for its reduction to more specific proposals about shifting emphasis from buyer to seller – appear to have fallen away since the General Election.
The only specific manifesto pledge on stamp duty from the victorious Conservatives in last month’s General Election was to introduce a three per cent surcharge for non-residents buying UK residential property for investment purposes.
“It all currently rests on the changes Chancellor Sajid Javid decides to implement in the upcoming Budget” explains Nick Leeming.
Revealed – the agent posting Instagram pictures of clients’ houses
The high-end estate agent who has quit his post after being found to have posted pictures of clients’ houses on Instagram has been named.
Last week The Times made reference to speculation that an agency was being sued by clients upset at seeing images of their properties on an individual agent’s Instagram; but now the Financial Times has identified him as Knight Frank’s Daniel Daggers.
The FT, and other national papers quoting the FT, say that Daggers was nicknamed Mr Super Prime on his social media hashtag, and had claimed to have successfully sold £3.85 billion of properties, including a £95m mansion at London’s St James’s Park, bought by a US billionaire, and an unmodernised off-market house sale in central London worth £45m.
As of last evening, Daggers’ Instagram profile referred to himself as “The Luxury Real Estate Advisor”; amongst the images posted is an eight-page presentation of his 2018 and 2019 performance which includes £241.67m in sales deals.
Estate Agent Today contacted Knight Frank after emails to Dagger’s Knight Frank address received an out of office message saying: “This mailbox is no longer monitored” and giving enquirers the email address of a Knight Frank negotiator.
A statement to EAT from Knight Frank itself says: “Knight Frank can confirm Daniel Daggers resigned in November 2019 and will leave the firm in February 2020.”