BREAKING PROPERTY NEWS – 07/09/2021
Daily bite-sized proptech and real estate news in partnership with Proptech-X. Today, Stanton looks at Boris backing Jenrick, September’s early indication for completions, and Purplebricks’ latest play
- Boris backs building 300,000 new homes
- Will September see more completions than June?
- Purplebricks share price continues to fall. What now?
Boris backs building 300,000 new homes
Prime Minister Boris Johnson has come out in support of Housing Secretary Robert Jenrick, confirming that the target of 300,000 new build properties a year across all housing verticals will be achieved.
However, the stark reality is that the materials required to fulfil just the usual 178,000 new homes are now in short supply.
Stuart Law, CEO of Assetz Capital, said in Development Finance Today: “Difficulties accessing raw materials, labour shortages, increased transportation costs and the realities of post-Brexit trade have resulted in the perfect storm for the construction industry…
“With private housebuilders starting to feel the strain more recently, these issues must not be ignored given the potential knock-on effects a significant decrease in housing construction would have on the wider market.
“With expectations that house price growth will pick up pace again over the remainder of the year and well into 2022, shortages in new housing stock will only serve to inflate prices further – possibly outstripping the record levels seen this spring which would be very disappointing for many first-time buyers and those looking to upsize in the near future.”
Supply chains for raw materials around the world have been decimated by the pandemic. Natural disasters, such as the fires in Northern America, have also caused a shortage of softwood. The delivery times for basic materials have slowed the pace on both domestic and commercial buildings.
And it is not only HGV drivers that are in short supply, skills shortages in the trades that new home builders rely on are now once again scarce, leading to wage inflation just like we’re seeing with the aforementioned HGV drivers.
For all their proselytising, Johnson and Jenrick’s lofty ambition to deliver 300,000 new builds is certain to come back down to earth with a resounding thud.
Will September see more completions than June?
June 2021 was thought to be the high tide of completions, with 213,000 buyers moving into homes in a single month, either on or before the last day of that month to save on SDLT.
But now many conveyancers are saying that a greater tsunami of completions might be on the way in September, as the second part of the Chancellor’s SDLT giveaway ends abruptly in just over four weeks.
According to data from TwentyCi, the pipeline of unexchanged sales as we moved into September has actually been 34% more than in June. This is indicative of a greater amount of completions.
At present, no one is able to say if that sales bulge will translate into a record number of move-ins. What is certain is that the present scarcity of new stock to sell is going to make it hard for agents to achieve large volumes of new sales before late October, when the housing market seasonally tapers off.
Purplebricks share price continues to fall. What now?
It still is worrying that in a time of apparent bounty in real estate, Purplebricks’ share price has hit its lowest point in the last week, trading close to 56p. This is a long way to fall from its 498p high point just four years ago.
Since then, the company has looked to scale up and expand across the globe, before having to retrench in the UK. It was then forced to change its model, offering a limited, money-back guarantee. No, in what might be its final swan song, it is converting from a self-employed “Local Property Expert” model to a traditional employee model.
This is going to have an impact in three key ways.
First and foremost is the obvious cost implication, as the direct cost of PAYE employees is an expensive add-on to the company balance sheet.
Secondly, the company now needs new layers of staff to deal with permanent employees, recruitment, and the likes.
Thirdly, especially a worry in the current climate, is finding the type of person who will be looking to join the company.
Many journeymen and women in the agency business survive for a whole career in a cosy corporate environment. Will this type of agent push the online brand back to the top? Lest we forget, Purplebricks’ ethos was that it was redefining the agency for the modern age. Does your run of the mill agent have change-driven, future-forward DNA?
It is also interesting that some Big Agency brand names are cashing their chips in, too. Maybe they’ve sensed that some companies are at the zenith of their value. Perhaps Axel Springer, the largest shareholder of Purplebricks stock, might feel it too would like to go the same route, before the cash at the bank begins to burn and it is left holding the bag.
The period between September and January will be a telling time for Pureplebricks, especially as its income flow comes directly from new instructions revenue generated at the point of listing. But new instructions are at an all-time industry low, meaning they, like many others, will be fighting for fewer and fewer homes to list.
If you have a view – please let us all know by emailing me at [email protected] – Andrew Stanton Executive Editor – moving property and proptech forward.