By using this website, you agree to our use of cookies to enhance your experience.
Graham Awards


'Furlough could wreck housing market' - warning to government

The government is jeopardising the success of the housing market relaunch through the inflexibility of the furlough scheme, claims a group of agents, conveyancers, valuers and other property professionals.

The Home Buying and Selling Group has now written to Chancellor Rishi Sunak proposing that property sector employers should be able to furlough and un-furlough staff on a weekly basis rather than the current three weekly basis. 

The HBSG claims that because of the financial implications of having to commit to paying un- furloughed staff, and faced with uncertainty in respect of income, many industry companies are taking a conservative approach to bringing people back on to the payroll. 


It adds that due to the way the housing market operates with most transactions forming part of chains, it only takes delays due to lack of resources at one point in the process to cause a logjam for homebuyers and sellers in completing transactions. 

By amending the furlough arrangement to allow firms to bring employees in and out of furlough on a weekly basis these delays should be avoided and enable the market to run as smoothly as possible in the current circumstances, the group claims.

Group founder Kate Faulkner says: “The decision by the government to re-activate the property market has been widely welcomed by all parties, not least those consumers who are desperate for a whole variety of reasons to complete their home moves. 

“It is really important that government now does all that it can to ensure the smooth operation of the market, helping to minimise stress levels for many people who already feel under great pressure, particularly essential workers moving home”

The HBSG describes itself as “an informal mix of people across the property and finance sectors all of whom passionately believe that by working together we can improve the home buying and selling process for consumers.”

The group meets on a quarterly basis and is currently working on reservation agreements; changes to leasehold; industry; and consumer education and information required prior to legals being carried out.

Here’s the full letter Faulkner has sent to Sunak:

Dear Chancellor

We are writing to you with regards to the Government’s Furlough Scheme.

As a group we represent estate agents, lawyers, search agents, valuers, surveyors, energy assessors and removal companies.

The Government announcement lifting restrictions on the operation of the housing market has been welcome both for consumers and all parties involved in the home buying and selling process. The whole property sector has come together in a co-operative effort to ensure that transactions which are now able to proceed do so in the safest possible way in accordance with Government guidance.

The sector has considered the impact of ‘re-starting’ the market and there is a very real and practical issue that needs to be urgently addressed to optimise the smooth operation of the market.

Whilst the extension of the Furlough Scheme and the flexibility that will become available from 1st August is very welcome, current furlough arrangements require that individuals can only be moved into and out of the scheme at three weekly intervals. This requirement will present difficulties for businesses in the property sector as the home buying and selling market begins to reactivate.

There is a universal view across the sector that there will be a spike in activity in the immediate future as pent up demand to complete transactions is released following the lifting of restrictions – indeed there are already signs of this after only a few business days. This spike will be concentrated at the start of the process with listing of new properties for sale and property viewings by those who have had their plans put on hold over the last two months, and at the end of the process where all those transactions which had progressed through the process to the point of exchange of contracts during the period of restriction will complete and allow home moves to occur. There are approximately 450,000 transactions (as MHCLG Secretary of State Robert Jenrick referred to last week) that underpin this spike in activity. Once the spike at each end of the process has passed there will be a lull in activity whilst the pipeline of transactions rebuilds.

It is of course the case that the spike in activity will not happen uniformly across the country, or indeed with a consistent demand on resource from one week to the next (or even one day to the next). There will be inconsistent demand for the whole range of services across the homebuying and selling process, whether it be for EPCs, lenders valuations, buyers surveys, property viewings, removals, conveyancing and Land Registry registrations, the production of searches or the provision of mortgage advice.

In order to manage this short spike in activity property practitioners will need to move furloughed staff back onto the payroll. However, the property market is dominated by small practices, who cumulatively cover a significant proportion of the market (for example, 90% of law firms offering conveyancing services employ fewer than 15 specialist conveyancers, and these firms account for at least 45% of the market share of completions). If the market is to get going again, as is intended, these small firms will need to be able to reactivate their workforces to deal with the spike in demand. Individually, however, it is unlikely that the amount of work that this spike brings to each individual firm will be enough to make it economical for those firms to return staff to the payroll for the minimum three weeks required.

In these circumstances taking staff off furlough will present too much of a financial risk, and early evidence suggests many firms are instead opting not to do so. The end result of this will be a logjam in the market. The current furlough arrangements present companies that are involved in the home buying and selling process with very difficult short and long term choices which must be set against their ability to survive over the coming weeks and months. Government will be aware that businesses involved in the home moving process, particularly estate agents and property lawyers, are in the majority only paid once transactions have completed. This means that cash flows must be extremely carefully managed, and for so many organisations that serve the property market, employee costs are the largest expense.

This has to be set against a reality that income levels for all market participants have been devastated over the last 8 weeks and cash reserves affected accordingly. Realising income from the spike in completing transactions will not restore these cash reserves particularly as the majority of businesses will have to bear the cost of the up-front spike in activity as well as the spike in completions. It is the loss of overall transaction volumes occasioned by the pandemic which has the greatest financial impact on the property market. Government schemes, whilst greatly appreciated will not absorb this impact.

Against this backdrop, if companies cannot bring employees in and out of furlough on a shorter term basis do they:

- Delay bringing employees out of furlough now with the consequence that they struggle to deal with the short term spike in transactions. Firms acting rationally can conserve cash in the short term by simply allowing cases to drag out until they have a stronger incentive to un-furlough staff to work them through to completion.

- Customers and the overall market will suffer but the labour cost of waiting is largely covered by the furlough scheme. As transactions only progress and complete at the pace of the slowest party this would result in disruption in the market place, particularly with so many transactions being subject to chains. The knock on effect would be a further negative impact on company cash flows creating something of a ‘vicious circle’. Disruption in the market place will of course dilute the economic impact which home moving has on the economy and could also potentially increase the risk of Covid-19 infection if consumers or other parties become frustrated by delays.

- Bring employees out of furlough, but find that they cannot carry the expense of employment as entailed by a three week commitment to pay wages which could ultimately result in redundancies or company failure. This has the potential to seriously inhibit the longer term recovery of the market.

It would be possible to overcome this dilemma for firms by providing greater flexibility in the job retention scheme. Allowing employers to move people into and out of furlough on a weekly basis would allow them to deal with the expected spikes in activity without risking unmanageable staffing costs once the spike has passed. It would help to smooth the re- activation of the property market, save jobs, promote the long term future of viable businesses, and ultimately save the Treasury money in unemployment costs.

This increased flexibility would also likely result in short term savings for the Treasury, as risk averse employers will feel more comfortable taking staff off the job retention scheme with the benefit of this increased flexibility.

According to early figures from the estate agency, removals, and conveyancing sectors, less than 50% of employees have been brought out of furlough following the lifting of restrictions on the operation of the housing market. Increased flexibility in the job retention scheme could, we believe, lead to an additional 10% to 15% of furloughed employees being returned to work. At such figures, the cost savings to the Treasury of one week’s less furlough payments at the lower estimate of 10% is in excess of £18.5 million

We would be delighted to meet with your officials to discuss this proposal in greater depth.

  • icon

    I think this is wishful thinking Too many companies in the property industry have been sailing too close to the wind. You cannot have your cake and eat it. You cannot expect HMRC to facilitate the administration for us to pick and choose when staff can work.

    My accountants have had a nightmare dealing with the volume of work across Furlough - you then expect it to operate on some sort of flexible basis? I would suggest that those agents who are experiencing a spike, top up the cash reserves and we all run our businesses accordingly.

    Maybe too what we have been through will end the cheap fees debate once and for all.

  • icon

    An embarrassing knee jerk reaction. We’ve only just got working again. The furlough scheme was a relief for many but it is expensive and complex to run for businesses and Government. This letter will hit the bin pretty fast.

  • icon
    • 27 May 2020 09:27 AM

    No lender in their right mind would consider any application from anyone in receipt of furloughed wages.
    They are fantasy wages.

    Until price discovery is resumed by life getting back to normal lenders won't know whether jobs are real or not.

    So anyone with their feet underneath the Kings table not a problem.
    Everyone else a very big problem!!
    Just imagine you are a BA cabincrew member on legacy wages of about £45000.
    That job no longer exists at that wage level.
    It will for furlough purposes but once that is ended BA staff are all to be sacked and reemployed if they wish at 50% of their previous wage levels.
    I imagine property markets around airports to take a major hit.
    Until price discovery for wages can be achieved then very few lenders if any will consider anyone in receipt of furloughed wages.

    You couldn't blame lenders for this.
    They are only carrying out DD on mortgage applicants.

  • icon

    Won't be as bad as people think.
    Banks will be tougher.
    But agents need to work their crms.
    Plenty money still out there.
    Globally surprisingly volumes haven't dropped as much as many thought.

  • icon

    Some lenders (understandably) reviewing existing mortgage applications. A good friend of mine had a mortgage offer reviewed and then reduced due to his wife's furlough payments. As an agent, I hope I'm wrong.. but once furlough payments are withdrawn, the proverbial will hit the fan ! Think there are lots of people wanting to buy but will they be able to borrow what they need??

  • icon

    What a load of nonsense. Are HSBG for real.


Please login to comment

MovePal MovePal MovePal
sign up