We recap the EA Masters interview between British broadcaster, Dermot Murnaghan and Executive Director of TwentyEA, Katy Billany.
Dermot Murnaghan:
We know all too well the types of headlines the media have been putting out there over the past year or so, and if you believed everything you read you'd think that we've had a terrible year and things are only going to get worse. What does the data tell us is actually happening?
Katy Billany:
Don’t believe what you read in the media! Although the market seems tough after the boom years of 2021 and 2022, and it does indeed have its challenges, it is nowhere near as bad as the doom-mongers would have us believe. The challenge for agents is two-fold;
- readjusting to a market where demand is subdued (at least for sales)
- educating potential sellers and landlords that what the media is telling them is not actually the reality of the market
If we believed what the media was telling us, we’d be heading for, or more likely already experiencing, a market crash. As I’m sure most agents will agree, that is very much not what the numbers are telling us. Nationally we have seen supply levels increase and demand drop off, although demand is only 9% lower than in 2019. The volume of price changes has increased by 87%, but this is only 9% up on pre-pandemic levels. Fall throughs have dropped after the steep increase following the mini-budget in September 2022 but are still slightly higher than 2019 at 25% in September.
However, the average time to agree a sale is sitting at 62 days, which is 18% faster than in 2019. Asking prices are continuing to rise, which perhaps is a challenge in itself for agents when it comes to setting realistic expectations for vendors, but actually although we are seeing more listings being reduced in price, the average completion price was only 0.3% lower in August 2023 than in September the previous year.
I think I saw one market commentator claiming that property prices would drop by over 30%, but it’s clear that we’re a long way from that happening!
Regionally, the South East has seen the biggest drop in completions at 9%, followed by the East of England at 6.6%. 9 of the 13 UK regions have actually seen an increase in the number of property sales compared to 2022, with the highest increases in Scotland and Northern Ireland.
Dermot Murnaghan:
So, how should agents be using this information on a local level?
Katy Billany:
In order to identify opportunities in your marketplace and to ensure that you’re targeting your marketing to the right audience, it’s important to understand what is actually selling in your patch. In a more challenging market, it can be tempting to try to appeal to everyone and list every property you can.
However, agents need to think about the bigger picture. How much time and effort, and therefore money, is outlaid for every listing that doesn’t sell? Exactly the same amount as for the ones that do. Most agents will think that they do target their marketing effectively, but usually that targeting is selecting what they ‘think’ their sweet-spot is, not what the market is telling them.
For example, many agents will only market to properties above a certain value, or within a particular Council Tax band, but if currently in their patch demand is strong for 2 bed terraces below £150,000, they will be missing out on potential opportunities by not including them in their marketing.
Obviously I can’t go in to detail on every local market in the time we have here, but to give some examples at a national level, demand for flats is up 10.5% year on year whilst 2.4% fewer semi-detached properties are selling than last year.
However, as an example of the importance of understanding both national and local trends, looking at the North West flats are currently taking 114 days to get a sale agreed. That’s over 3 and a half months! Then, 37% of those sales are falling through. Compare that to a semi-detached property which are taking 57 days to agree a sale on average, with just a 21% fall through rate.
I know which of those I’d prefer to list. Clearly it’s not practical for every agent in the North West to stop selling flats, but at the very least, agents need to ensure that they have diversity of stock to ensure a mix of sale times and a consistent feed of income from completions. Furthermore, if you can tell potential vendors exactly what the market is like for their particular property type, it engenders trust, manages their expectations and increases the likelihood they will instruct with you.
In terms of consumer demographics, we have seen fewer of the usual mainstay of the market moving over the last few months. The demographic groups with usually comfortable lifestyles and secure jobs, have been less likely to put their house on the market, whilst activity at either end of the demographic profile has increased. Perhaps unsurprisingly given the market conditions, we’re seeing an increase in home moves for both the wealthy and poorer social groups. Those who still feel comfortable enough to move, and perhaps those who are forced to.
The important thing for agents is to ensure that if your key market is that middle ground, at the moment you need to consider including other consumer profiles in your marketing.
Dermot Murnaghan:
You've talked a lot about sales activity, but what about the lettings market?
Katy Billany:
Well, the lettings landscape is a completely different story. I’m sure that agents wouldn’t disagree that the two biggest challenges for the lettings sector are availability and affordability, and of course they are intrinsically linked.
Although we’ve seen stock levels improve slightly – we are 6% up on 2022 – supply is still 22% lower than in 2019. Unfortunately for renters, the majority of the increase in stock has been in the higher price brackets i.e. over £1,500 per month. Supply of the lowest priced properties, those under £800 per month has fallen by 19% in the last year and there are currently 67% fewer properties available in this price band than pre-pandemic.
We recently did some analysis for the Financial Times, and that showed that in every region apart from the North East, rental prices have become unaffordable. That is defined by housing charity Shelter as being over 35% of your disposable income.
What all of that means, is that perhaps inevitably, tenants are now staying put for longer. In 2019 the average length of tenancy was 3.6 years. In 2023 that has increased 32% to 4.8 years. Wales is the most affected region, where tenants stay in their properties for 7.1 years on average.
Of course, this causes a big problem for agents as the turnover of lettings stock and therefore their income, decreases significantly from let only landlords. Since we don’t see this situation changing going in to 2024, my advice to lettings agents would be to ensure that you have as much of your lettings book on full property management as possible, or at the very least on rent collection. If you haven’t already, you should be prioritising contacting your existing landlords to encourage them to move to full property management.
One final note on the lettings market, we have seen the market share of hybrid agents increase rapidly since pre-pandemic. The majority of this is made up by Open Rent, whose market share has increased by 90% since 2019 and now sits at 12.5% of the market. In comparison, the next largest agent is Foxtons with a market share of 1.7%.
This means that not only are there fewer rental properties available, but more landlords are choosing not to use a traditional letting agent. However, this can be a great opportunity for agents to identify landlords. Looking at stock in their patch on Open Rent, and then viewing a specific landlord’s list of properties can be a very effective means of finding landlords with an extensive portfolio and then actively prospecting to those landlords to educate them as to the benefits of using a letting agent.
Dermot Murnaghan:
If you could recommend one thing that agents should be doing going into 2024, what would it be?
Katy Billany:
Monitoring the market closely! It’s never been so important to understand what is going on both at a national level, and within your own patch. Those agents who take the time to study trends, rather than just relying on what has worked for them in the past, are the ones who will manage to create opportunities from the changes we’re experiencing in the market.
Our Insight platform gives agents access to five years of market data at a granular level. If you’d like to find out more, or book a demonstration, you can do so here.