20th May 2020
I have started to write this blog several times over the last few weeks, but each time I put my headphones in and settle down, I am distracted by yet another change to the narrative. There are new market recovery forecasts, government announcements, regulatory guidance, and the constant predictions of what is to come, that ultimately leave me in a perpetual state of confusion. Does anyone truly know what the future holds?
There are plenty of predictions flying about, but what I haven’t seen very much of, is an admission that this crisis is causing complete chaos. Because rest assured, for every director and business owner out there, that is exactly what it is doing. Despite running a business that is largely cloud-based, the last two months have been unlike anything I have ever experienced; it has been constant firefighting, rapid scenario planning, daily financial modelling, frantically strategizing routes out of this crisis and reading prediction after prediction in the hope that one of them sounds about right!
I don’t think I am the only one recently to have become slightly obsessed with tracking the property market. It has become a daily occurrence now to read through the latest figures from Zoopla, Rightmove, Reapit, Coadjute and the latest opinions littered across LinkedIn and industry press. Naturally in a team of data scientists I am fascinated with analysing and making predictions for the future; trying to make sense of the chaos, so we can embrace it and look for new and innovative routes to market, to support our clients and to be productive from our remote work places.
Our Hazard Alert/New Case data (which provides visibility of approx. 70% of the residential property market), has tracked the trend rapidly downwards from the week prior to the announcement of the lockdown on the 24th March and then more gradually through until mid-April. From there it seems (fingers and toes crossed) to have stabilised at the bottom of the market, which is actually much higher than I predicted in late March. At 35-40% of pre-crisis levels, the market appears to have been propped up during lockdown, but by what?
Could it have had something to do with this recent report by Hometrack/Zoopla that was tracking almost 400,000 transactions, frozen in place on or around the lockdown announcement? Were a proportion of these transactions trickling through or did the mini-resurgence in Buy-To-Lets during April help keep the market from dying completely?
How many of these frozen transactions will fall through, how many were first-time buyers emboldened to get on to the property market post-brexit but now facing difficulties getting high LTV mortgages? What is the lenders appetite for risk with an uncertain future of higher unemployment, deepening recession, and increased delinquencies on mortgage repayments? Unfortunately, at the moment, there are many, many more questions than answers. The positive news remains that there is not only an appetite within the property industry to get restarted but also the guidance to do so. The obvious sticking points: surveyors, agents hosting viewings and removals companies will need to think up new and ingenious means to adapt and fast but this a crisis and crisis breeds innovation.
What do I think will happen in the next 6 to 12 months? Honestly, I have no clue and I wager that truly nobody does. For what it is worth, I expect we will see an artificial spike in the volume of conveyancing searches in early summer as a consequence of the pent-up demand and transactions in progress during the first few months of 2020. While property prices remain stable, it appears people are still very keen to move (especially to somewhere with a garden, decent Wi-Fi, and an office!). As the industry finds its feet and as the lockdown continues to relax, volumes may slowly begin to stabilise but likely at no more than 50% of pre-crisis levels. Eventually the total shutdown that agents and surveyors have been experiencing these last two months will catch up with the legal sector, as well as with the property and environmental search providers and I think it is inevitable we will see a further drop in the volumes towards the end of summer and into the autumn. After a likely winter lull, one in which we will probably all be desperately hoping we don’t see a second wave, 2021 should bring hope of a quick and sharp upturn as confidence is found in the form of a vaccine or widespread therapeutics. It seems like a long time from now, but it isn’t, and I am hugely confident that we can make it through this.
It may be overused and a bit of a cliché, but this crisis will rapidly ‘accelerate the digital transformation in business’ and industry. The virus has exposed in several weeks what the innovators and pioneers have been slogging away to do for several years. Left, right and centre the stagnant, old and broken parts of business and industry are being highlighted and addressed in a matter of hours and if you step back and watch from afar, this collective ambition to adapt and embrace the chaos is inspiring and invigorating.
Here at Terrafirma, I have been proud to see how our team have risen to this challenge and how hard they have worked to make this the ‘new normal’, delivering the same fun working environment and the same level of service excellence and passion. Don’t get me wrong, it has been challenging but alongside our partners, our suppliers, and our clients, we are galvanising behind a common goal to sustain, survive and adapt. Already, in only a month, there appears to be some order in the chaos with businesses quickly re-examining what the essential costs are (will we ever again need the size of company offices we had pre-crisis?), rapidly adopting remote working practices and the infamous virtual backgrounds on Zoom but most importantly we are all revisiting our workflows to identify ways of saving precious time, money and effort, all of which will make each and every business more resilient post-crisis.
As much as we may not want to admit it, this virus is not going away anytime soon. It is here to stay and the longer this crisis continues, the more engrained the changes we are making will become. The future of business will inevitably be different, but it can’t just be me that feels we will be better off for it. Right now, all we can do is stick by our teams, embrace the chaos, and rise to the challenge - and read the odd prediction or three.