BREAKING PROPERTY NEWS – 02/02/2022
Daily bite-sized proptech and property news in partnership with Proptech-X.
Are you levelling up yet? And is this Gove’s biggest disaster?
The Secretary of State for Housing Michael Gove, otherwise known as the “great leveller”, appears to be following a populist-tinged strategy.
Combing through the details of his white paper, the central blueprint of the levelling up agenda, it seems that it is bad news for the private rented sector and the cash pipeline to the building industry.
In a strange way, on first reading the Conservative government’s 12 bold national missions, it looks a lot like a dystopian fantasy landscape dreamed up by the Labour party rather than the Conservatives.
Leaving politics aside though, it clearly looks like a way to shore up the marginal Conservative seats in the North. There are some really radical (or reckless) measures that will once again hit the property sector if they come to pass.
The full white paper, which can be found on Gov.UK, reveals the following:
- Twelve bold national levelling up missions, given status in law, will shift government focus and resources to Britain’s forgotten communities throughout 2020s.
- Biggest shift of power from Whitehall to local leaders in modern times announced – every part of England to get ‘London style’ powers and mayor if they wish to.
- Starting gun fired on decade-long project to level up Britain, with radical new policies announced across the board.
- Domestic public investment in Research & Development to increase by at least 40% across the North, Midlands, South West, Scotland, Wales, and Northern Ireland.
- At the heart of this new way of making and implementing policy will be 12 bold, national missions – all quantifiable and to be achieved by 2030. These missions are the policy objectives for levelling up, and thus form the heart of the government’s agenda for the 2020s. They will be given status in law in a flagship Levelling Up and Regeneration Bill.
- The government will announce a plan that for the first time ever, all homes in the Private Rented Sector will have to meet a minimum standard – the Decent Homes Standard.
- Section 21 ‘no fault’ evictions will further be abolished, ending the unfair situation where renters can be kicked out of their homes for no reason. We will consult on introducing a landlords register, and will set out plans for a crackdown on rogue landlords – making sure fines and bans stop repeat offenders leaving renters in terrible conditions.
- Home ownership will be boosted due to a new £1.5 billion Levelling Up Home Building Fund being launched, which will provide loans to SMEs and support the UK government’s wider regeneration agenda in areas that are a priority for levelling up.
- The government will further commit to building more genuinely affordable social housing. A new Social Housing Regulation Bill will deliver upon the commitments the government made following the Grenfell tragedy in 2017.
The key issues then are that Gove has decided tenants will be given the whip hand and the ‘naughty landlords’ will be disenfranchised, their powers curtailed, that is if Section 21 is abolished. I think this may just be a cynical mathematical exercise, what with there being far more voting tenants than voting landlords. So if you want to upset one group, landlords are an easier target.
Then there is talk of the Landlord register which, if plugged into HMRC, would’ve probably captured over 90% of landlords already. The notional rogue landlord is a fiction. In truth, most landlords want to protect both their tenants and their property asset. One benefits the other.
The other gem is that Gove is proposing a £1.5 billion “Levelling Up Home Building Fund”, so he is having a tussle with builders over their obligations regarding cladding, fire safety and construction issues, saying they need to pay out, while at the same time providing them with more cash. You just cannot make it up.
A huge reference is made to the fact that all of this new social engineering will be in place by 2030, very much a case of jam tomorrow…
My worry is that with inflation increasing, taxation going up and the general cost of living rising, Gove will have parachuted out of his present position in less than a year, just as his numerous predecessors have, leaving the next incumbent with the arduous task of radically changing the housing landscape…again.
Big ideas may win or lose elections, but big actions are what people remember.
Purplebricks half-year results to October 2021 confirm huge cash burn
Last year, 2021, was the most buoyant housing market for decades, with 1.5 million sales compared to the usual 1.2 million. Yet online agent Purplebricks has, in the six months up to October 2021, turned in a dismal set of trading results.
Given they had the natural advantage of being a virtual agent it really should have been a bumper time. Instead, they have sustained a cash burn in the preceding 12 months of over £27 million.
Though dressed up in the usual rhetoric for their disgruntled shareholders, saying profits had dropped by £26 million. In reality, looking at the balance sheet, Purplebricks actually made a 397% loss.
That is they had £6.8 million “profit” from trading operations 2021, compared with a £20.2 million loss for the same period of time, and they have burnt cash reserves to £58 million, down from £75 million a year ago.
They’re going to need a big war chest with big liabilities, not least for the potentially multi-million-pound class-action suit. Also, the share price hitting the 20p marker cannot go on.
I always feel that the balance sheet of Purplebricks is inventive. Showing a gross profit when costs are deducted usually presents a huge figure in the red. They have only had one marginal period when they showed a profit and most of that was through a disposable part of its business.
Famously, I was quoted in the Daily Telegraph saying that “Countrywide’s failure to embrace the Proptech Revolution will make it a financially wounded dinosaur.”
Similarly, I now feel that Purplebricks failed to scale up and live up to its potential, squandering hundreds of millions of revenue and building what is ultimately a very poor digital copy of a flawed analogue real estate model.
They had the vision, the cash and the opportunity…the C-suite failed to deliver.
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