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How can agents and property professionals adapt to an increasingly digital world?
Online marketing is often seen as a panacea to traditional models, however in real estate there are even more factors in play.
Having worked with agents, developers and legal advisers to help address some of the challenges in the prime real-estate market for the last few years, I thought I would share some of my thoughts and equally, areas that are working well. I have broken this into two main areas:
- Challenges in a changing property market
- What you can do to embrace digital and grow
Part 1. Challenges in a Changing Property Market
Firstly and importantly, the changes that we are all experiencing, especially in property, are both real and quite simply, not going away.
A recent report from accountancy firm Moore Stevens highlighted that 19% of UK estate agents are at the risk of going bust. This may seem like quite an aggressive statement, so what’s behind the challenging market? Furthermore, if digital is part of the challenge, could it also be the saviour of the real estate market?
The answer is more complex. Though digital – in all its various formats – has a role to play, fundamental marketing principles and the understanding of outside market conditions have to be factored into your approach.
Currently there is the sentiment of a slight slump, however if one looks behind the numbers we can see that while some sectors are suffering from oversupply and a perceived lack of demand, others remain steady.
The report by Moore Stevens mentions the likes of online estate agencies such as PurpleBricks, House Simple and Emoov that are squeezing the margins of traditional channels. This squeeze according to the research is showing 4,928 of the 25,560 estate agencies as being in financial distress.
Though these figures are plain to see, the reality of the situation may be a little more three dimensional.There is no doubt that the online agents are disruptive and follow in the footsteps of property aggregators like Rightmove and Zoopla before them.
Reported by S&P Global Market Intelligence, PurpleBricks are due to show a widening loss up £6M to £22M year on year. Though this loss is part of an overall investment in American markets, the disruption to traditional agents is also a big wake up call to start think more digitally.
So, before we go into the digital lifeline that can be used by all agency and property professionals large and small, it’s worth putting some of this alarming news into a little context.
Also, what are the other areas impacting on this challenging time for the property market? Here are a few below:
The Global Financial Crisis
One of the world’s largest real estate firms, Savills, produced an excellent and engaging report looking at the 10 year anniversary of the of the global financial crisis and the impact of that.
Lucian Cook, of Savills Research said in the headline of the report, “The Global Financial Crisis has fundamentally changed the UK housing market”. The impact of this statement is more powerful than just the collapse of financial markets alone. The impact on the property market was the loss of confidence and how governments would react.
As the impact was global, the UK benefited slightly as money in markets from High Net Worth Individuals (HNWIs) and especially the Ultra HNWIs, sought safe havens for their assets. This has declined slightly with more stringent government control as assets of billionaires are especially being under more scrutiny.
According to leading global wealth information and insight business, Wealth X, the proportion of billionaire wealth held in real estate and luxury assets in 2017 reduced to 2.3%, equivalent to about $80m in luxury holdings per individual. This largely reflected the shifting structure of billionaires’ broader portfolios, as luxury asset markets performed strongly. Whether this trend will continue remains to be seen.
Decline in the Buy to Let market
Savills also forecast that landlord purchases will dive 27 per cent by 2022. This means that over the next 5 years buy-to-let property purchases will fall from 75,000 this year to just 55,000.
This impact is partially a hangover from George Osborne whose legislation change under the austerity banner, capital raise (tax grab) at the expense of smaller landlords. This disposal of property has added to houses that are sat on agents books or will soon be under the hammer in forced sales.
Tougher Lending Criteria
Though the mortgage market has changed slightly over the last few months, the fall in mortgage applications is also having an impact on property sales. Larger deposits, lack of first time buyers and more scrutiny in ability to pay, are all factors that have led to a hardening stance by lenders to borrowers.
This is frustrating both lenders and borrowers as this very key component that could resurrect the market, is seeing no sign of shifting in the short term.
Personal and household debt also remains high and though the outlook economically is a little rosier than first expected, there are too many unknowns that are causing a lack of confidence in global money markets.
Changes to Stamp Duty Legislation
In the higher end of the market, changes to Stamp Duty and Land Tax (SDLT) have had an impact on property sales. This impact though is far reaching and has a ripple effect on the market as a whole.
Many believe this to be a knee-jerk and short term approach that saw abolishing the duty for first-time buyers up to £300,000, as well as giving those buying homes worth up to £500,000 a stamp duty exemption on the first £300,000.
Since June 2016 when the referendum votes closed, there has been a no clear path that has been outlined to top business or the man on the street. The impact on the property sector has been equally damaging.
Looking at some of the search queries on Google, sentiment remains sadly pessimistic.
Search terms like “Should I wait to buy a property after Brexit” and “Will house prices fall after Brexit”, are fueling a negative approach for housing sales.
Yesterday, The British Chambers of Commerce published a list of 23 “real-world” questions that it says urgently need answers to as the UK’s EU exit approaches.
Article 50 was triggered on March 2017 and the official date Britain leaves the UK will be 11PM GMT on March 2019. The only hope is that there are clear indications as to what type of trade deals we will have by then. Not just in Europe but Worldwide.
The Changing Face of the High Street
The amazon effect, or the disruption through online has claimed many casualties. With wholesale rent and rate reviews last year, the High Street as we know it, is in a state of flux. Nostalgia aside, the decline in household names like Maplin have disappeared and brands like M&S are under huge pressure, it seems to be the the thin end of the wedge and one that requires a more cohesive approach. The chancellors rate rise, local government’s short term view and the shift of what the High Street is for, all need a joined up approach to address the issue.
These are just a few challenges facing property professionals.
What can property professionals do to raise their game in this brave new world?
Part 2 looks to approach two key areas to help the estate agent market to succeed and maintain a business strategy ahead of the curve via digital;
- Social Media
- Search & Analytics
This will focus on areas that are working now and showing results for:
- Professionals marketing, buying and selling property
- Interior designers
- Property developers
- Independent brokers
- Luxury & HNWI advisers and consultants
If you have any questions in the meantime, please contact us here. Thanks for reading.