How Can Estate Agents Maximise Sales as Lockdown Lifts? May 2020

Housing Minister Robert Jenrick reopened the housing market for business 12 May and there has been a welcome flurry of activity in the sector, which is hugely important for the wider economy.

Most experts have taken a cautious view on this surge viewing it as resulting from pent-up demand, originally frustrated by the lockdown but which can't be taken as a more sustained boost.

In all probability the country will also benefit similarly when Scotland, Wales and Northern Ireland reopen their housing markets, however exactly when this will be hasn't been decided yet.

Our question for this month is what strategies can housing market practitioners, particularly estate agents, use to eke as much out of the current boom in market activity as possible and to sustain those considering buying or selling homes?

Focus on regional sales where possible, consider the domestic working angle

Zoopla has recently noted a 6% increase in its average asking prices for the beginning of June compared to the same period last year, according to press reports. The online estate agent's recent sales volumes can similarly be viewed with optimism, with sales agreed 12.6% higher for the first week in June compared to those recorded in the week ending 8 March, i.e. just before lockdown.

When you drill down into the regional picture for sales volumes however, the online estate agent noted that sales in London were nearly 25% down now compared to those in that week just before lockdown. This compared to sales in the northwest being just 0.9% down and those in the southwest just 1.7% down.

Zoopla's rival Rightmove has stated in the press that it has witnessed a spoke in enquiries regarding homes in the countryside with good transport links.

The wider trends at play have been greatly remarked upon in recent news reports. In particular the lockdown saw firms which were able to resorting to remote working as offices shut. These practices have continued and increased in popularity and are set to continue as the world waits expectantly for a Coronavirus vaccine, an event which is likely to take at least another 6 months at the most optimistic forecast.

Estate agents should therefore, where possible, place considerably more focus on dwellings in markets outside London, particularly well-connected smaller towns. On the micro level, there is an additional premium on homes with gardens and those where agents can point to agreeable working spaces or those with potential to be repurposed as such.

Focus on Shared Ownership re: First Time Buyers

The government has acted to support increased Help to Buy-related activity. RICS valuers are now working relatively normally - subject to conditions of social distancing - and Homes England/Target are 'open for business'.

Mortgage brokers have been given more scope by lenders as the latter are now reintroducing 90% loan-to-value mortgages, something which would-be first time buyers will greatly welcome as they would also welcome news of recent price falls of up to 10% compared to before the lockdown started.

That said, and as we pointed out in last month's report, the outlook for the majority of first time buyers is very unsettled, with Treasury economists forecasting unemployment rising to 10% or even 20% over the next year. This is likely to fall greatly on graduate-entry jobs and the more junior positions in firms which are more likely to be those which first time property entrants would normally hold.

Would-be first time buyers have, as a result, been opting to take the shared ownership path as a more accessible and less risky step towards home ownership compared to Help to Buy, something which housing associations will almost certainly have noted. Share to Buy, a property portal which focuses on this sector, has recorded a soaring 167% rise in registrations compared to the first week of lockdown.

Although all sectors of the home buying market will be experiencing pent-up demand, given the multiple challenges which current first time buyers face, it makes sense for estate agents (resales) and mortgage brokers to champion the shared ownership area of the first time buyer market therefore.

Focus on wider housing market positives

In a time of unprecedented challenges, the hardiest practitioners will take some comfort from any good signs and there are a few of these to be observed.

Government has extended mortgage holiday period for 3 months

The government originally acted to give a mortgage holiday period to mortgagees from March to May to provide stability in the market and prevent repossession with 1.8 million house owners taking up the offer. It has chosen to extend the scheme for another 3 months. This will please mortgage brokers in particular who would be expecting remortgage business and those who wish to see current average property prices sustained.

Increased activity from wealthier buyers

A larger national estate agent noted a 17% increase in sales agreed on homes valued at £500,000 or more in the first week of June compared to the year before, according to press reports. The more affluent end of the market has the opportunity to take advantage of any price falls swiftly not least because of its increased cash-buying potential.

Some 20,000 new homes started in London in first quarter

By the end of March this year, some 20,000 new homes in London had been started since 2020 begun, representing nearly 1/3 (65,000) of Mayor Sadiq Khan's target, according to media reports. The majority of these homes are focused towards the starter end of the market, something which can only assist whatever first time buyer demand there is.

[All statistics which follow are the most recently available figures from the Land Registry and the Bank of England unless otherwise stated.]

Decreases for average house prices and sales volumes England & Wales

Average house prices in England and Wales fell monthly for a second month, by 0.3% in March to £243,269. Year-on-year there was a small – 2.1% - rise. Sales volumes for January – the latest month for which data was available – however fell both month-on-month (27.2%) and year-on-year (5.2%) to 53,373, the lowest monthly volume recorded since September 2012 (53,119).

These figures, although disappointing in normal times, were to be expected given that the lockdown started in March and news from China would have started to unsettle the market regarding sales volumes.

London: average prices rise despite more falling sales volumes

The capital's average prices rose both monthly (1.2%) and yearly (4.6%), to £485,794, a trend which continued from last month. There was a decline in sales volumes for January – to 5,569 – however, both monthly (11.9%) and yearly (16.6%) and this was the least recorded sales since April 2009 (4,323) which was notably in the aftermath of the credit crunch. 

Once again and as for last month, it would appear that the luxury end of the market has had considerable effect on the overall average price level.

Real wages static for March

Nominal wages fell back to £540 per week in March, a 0.7% monthly decline and a 1.5% yearly decline, something entirely to be expected alongside the lockdown.

For April, inflation fell to 108.5, a fractional (0.09%) fall month-on-month and a 0.8% fall year-on-year. The Office of National Statistics has attributed this movement to falls in electricity and fuel prices slightly exceeding price increases for recreational goods.

Overall therefore, the situation seemed relatively static regarding real wages, although given that many sectors of the economy shut down in March - particularly the housing market - this finding is harder to analyse. 

Mortgages and remortgage approvals decline in March

Given that the housing market shut in March, the 72% month-on-month fall in mortgage approvals recorded, to 15,848, is entirely to be expected for that month. 

Remortgages also declined, but by only 19%, to 34,357, which would also reflect the closure of the market. It is likely, however, that of those applications going through the system, the marginally less rigorous remortgage application process (applicants already being home owners) would have led to this smaller fall.