I’m ignoring the noise and see things as generally ok so far and my best guess is they will stay that way. The online model has failed but Purplebricks has a bright future. Here’s why…
Cutting through the noise
There’s been a lot of noise about the UK housing and property market since Brexit, a lot of it contradictory. Barratt Developments reported completions and selling prices up, including in June, but the bigger indicator is probably that forward sales were flat; existing housing transactions may see some weakness (Jackson-Stops sees so sign so far) but prices will generally be supported (Halifax).
Foxtons profit warned on Brexit but I think it was likely to happen anyway: the number of properties it lists for sale on the portals has actually increased by c.2% since the vote but its likely to be difficult in London. Turnbull Property sees prime London transactions at a 5 year low and 80% of those have seen a price cut (I think SDLT reforms have had a greater impact on this than Brexit). The Home website index suggested sales prices were down 1.1% since he vote however this was contradicted by Halifax which saw June prices +1.3% vs May with predictions of continued rises albeit at a slower pace than recently. Noise but general trend is soft.
Connells reported that the number of valuations had increased by 4% in June vs June 2015 and The National Association of Estate Agents (NAEA) was clear it was not predicting any impact on house prices from Brexit.
More positively and fundamental, the number of Neighbourhood Plans adopted in England and Wales grew to over 200 with a further 1,900 community plans covering 10m people as communities look to take action on housing supply to address need. Nationally these plans yield c.10% more housebuilding than similar council plans and can be seen as a positive for housebuilding.
Property Week reported that a number of property company directors were buying shares in their own companies post-Brexit. The old adage: “There are many reasons for director selling but only one for buying” applies (I caveat it by looking at the recent net position. If the buying director has sold more in the recent past, the current buying is a meaningless indicator).
New PM Theresa May made a wide-ranging speech last week effectively reiterating the 200,000 starter homes per year target of the Cameron government, that more house building was the answer to reduce house price growth and generally continuing similar policies as the current government. Related, the Intermediary Mortgage Lenders Association reports that government incentives are not increasing first time buyers or home ownership levels. It speculated that these were the voters most likely to vote Tory so may see further support but this may already be easing with Connells reporting a 23% increase in valuations for first time buyers vs a 40% decrease for landlords. Meanwhile, London’s Deputy Mayor for housing (James Taylor in case you were wondering) commented that City Hall would like to see a significant acceleration in build-to-rent flats (currently c.20,000 per year) and has started new apprenticeship courses to fill the skills needed.
Some online thoughts: Online is failing; Purplebricks hybrid is succeeding
Online estate agents continue to look interesting. They received some free advertising on ‘The One Show’ recently with a (mostly nonsense) faceoff between a traditional agent and the Settled online agent. Online won the vote for best service from buyers 2-1 but crucially there was no exploration of which of the two agents could get the higher price. We’ve had YOPA, eMoov and now Settled move to hybrid model blazed by Purplebricks. It will be interesting to see which others do (easyProperty?). I think the online-only model isn’t going anywhere and is slowly bleeding to death by cash. Incidentally, expect Purplebricks to expand into other overseas territories following the launch in Australia as it makes a dash to dominate the industry before somebody else does. I’d expect the USA first and other English speaking/legal systems as top priorities. It’s the Amazon “every £ of reported profit is market share lost” mentality.
OnTheMarket- which is the traditional industries response to the online portals- has had a few woes. Connells is challenging its “only one other portal” clause in the High Court. I’ve always considered that misguided and will be surprised if it passes legal scrutiny being anti-competitive. Also 50 of its original supporting agents have together launched legal action believing they were promised early bird benefits but actually it’s the later joiners who are offered lower prices as it tries to gain share from Zoopla and Rightmove. There could be some difficult days ahead for OTM.
In summary, I’m ignoring the noise and see things as generally ok so far and my best guess at the moment is it will stay that way. Carry on.