Traditional markets and a new order
These are incredibly interesting and tumultuous times politically and economically but also within the property sector.
Traditional markets such as those in the leasehold and ground rent world and also the residential sales and rental market seem to be about to go through some considerable changes from market pressures and also parliamentary scrutiny.
It is reported today that a fifth of estate agents could go out of business. Research from accountancy firm Moore Stephens suggests the growth of online rivals could leave one in five estate agents at risk of going out of business, with almost 5,000 agents showing signs of financial distress. It warns that with higher staff and property costs, traditional agents are struggling to compete with online challengers such as eMoov, Tepilo and Purplebricks. Mike Finch of Moore Stephens said: “Traditional high street estate agents’ profit margins are being squeezed from both sides, from cut-price online competitors to their larger counterparts on the high street who are forcing them to up their spending or give up the race.” The report comes in a week where Countrywide and Foxtons reported declines in profit.
Last week also saw an increase in reporting on the leasehold ground rent sector as evidenced in particular by parliamentary and media scrutiny of the way in recent years that ground rents have been attached to houses (and of course flats) and the formulaic way in which those ground rents increase periodically over the life time of a lease to appear to make the ground rent disproportionate to the value of the property. Only last week The Guardian reported that the communities secretary, Sajid Javid, had outlined plans to ban developers from selling new-build houses in England as leasehold, and restrict ground rents on new flats to as low as zero. The newspaper went on to describe how victims of the so called ground rents scandal are demanding ministers go further in tackling unfair abuses of the leasehold system, amid claims that as many as 100,000 existing homeowners remain trapped in properties that are “unsellable”.
Neil Shearing, legal services consultant of SLC Solicitors, says “there will need to be some out of the box thinking from a broad strand of property entrepreneurs and investors. Markets that were once a secure and long term investment and relatively recession proof are now under some pressure. Within the leasehold sector there will always be a thriving and competitive marketplace for those interested in block management and service charge work and relationships with ground rent investors will remain in place and I expect will continue to thrive. However, certainty of ground rent incomes will now be a subject of interest and scrutiny and it would not surprise me if there was to be a consolidation of the market place by very large institutional investors once a clearer idea of the returns for this sector are known. That will take time but as we have seen in the private rented sector the emergence of institutional investors replacing smaller traditional investors has taken place over a very short period.”
Whatever happens next, and all of the above is without factoring in economic and political events such as Brexit and the possibility of increased inflationary pressures and interest rate rises, SLC Solicitors will continue to support its clients across the leasehold and private rented sectors and will react to the prevailing circumstances of the time and adapt and enhance its services to maximise and protect our clients’ interests at all times.