LonRes Opening Thoughts – Residential Review Summer 2018

With the arrival of Kit Malthouse as the seventeenth incumbent Minister of State for Housing since 1997, one could say that this time, at last, we have someone with real experience of local government – he was Deputy Mayor under Boris Johnson and previously a councillor for Westminster for eight years.

Given that the important parts of their remit include planning policy oversight, Help to Buy, assisting on housing supply and delivery and developing home ownership policy, it would be fair to assume that there is a lot of work to be done. With the average minister remaining in office for just under 15 months is it any wonder that not much gets resolved? The government’s view on this position is clearly one of low importance and a holding position for a minister. I fear that it is for the property professionals to get on with the task required to move the residential market along.

In terms of Brexit and the property market, I believed that its outcome would follow the line of che sara sara, and we would accept the consequences and benefits of divorce from the EU. Recent events suggest that the outcome is a long way from working to our advantage with either a soft Brexit or another referendum now being mooted as leading options. I haven’t yet seen or heard of one meaningful concession from Europe but there is always a silver lining in any scenario. Still, there is a huge amount to do and now is the time to stop the blustering. All the property market wants is a period of certainty and stability, and none of what has happened recently with the revolving door at Housing or in the Brexit negotiations thus far have given us that. Surely we need our politicians to lead and give us more than soundbites, press releases, initiatives and consultations? Yet we get on with it and are rewarded with yet more legislation that is costly for business to implement and open to misinterpretation.

In other news, the prime central London (PCL) market appears to have woken from its slumber as buyers return in the hope of purchasing property that takes out the effect of both stamp duty and the second homes tax. This is certainly evident on transactions above £20m where discounts of 15% were to be had. Below £10m, however, buyers’ thoughts are still shaped by those high charges and quite possibly now, Brexit. The result is a strong lettings market across all areas.

Turning now to the online presence of the market leader, Purplebricks. There is an interesting article by Mike DelPrete, a thought-leader in real estate tech, who on his website, asserts that Purplebricks is now “materially profitable in the UK – at scale.” And that is the point. He does not mention that you still need to demonstrate growth even in a shrinking market. As far as I can see there is no reason why an online offering would be any more immune than a traditional agent to the vagaries of a diminishing market. He also makes no reference to PCL (why would he? But it does generate the most revenue of any of the residential markets in the UK) where the threat posed by the online agent is not growing at all, with just under 1% of market share. In America, where Purplebricks has recently launched into what is a crowded market place, theirs is not the cheapest option. With the cost to Purplebricks running at $21,482 per listing, I do not see them making any significant inroads into the New York City (NYC) market. NYC is a closed market with realtors who are embedded in their markets.

The presence of country agents on LonRes suggests that some buyers recognise that there is another market outside London, and one where there are deals to be done. The LonRes country agents get an instant benefit by selling the London connection to their clients, while the London agents can benefit by helping their clients find a property in the country.

Finally, our partnership with Let Alliance goes from strength to strength, partly because of the depth of its product and partly because of the experience of the company’s team and its founder. And that’s without mentioning their personal service – something that we at LonRes have always subscribed to. For those of you not familiar with Let Alliance, they provide our subscribers with a range of opportunities to generate new income streams especially where revenue may be lost by the coming tenant fees ban.

Written by William Carrington, Chairman of LonRes for the LonRes Residential Review Summer 2018 issue.