Without doubt, 2021 was an exceptional year in the property market, with the stamp duty holiday and favourable market conditions helping to fuel record high levels of sales agreed, completions and buyer demand.
But such high levels of demand and activity surely can’t last forever. The market is still highly buoyant and demand remains very high – we only need to see Rightmove’s recent festive figures for proof of that – but it seems unlikely 2022 will repeat 2021’s record highs. That’s just not sustainable.
While agents might think they don’t need to consider plan B alternatives right now, because they can just sell a home onto the next buyer if a previous transaction hits the rocks, what happens if demand starts to fall away a bit?
It isn’t always the case that another buyer is on hand and things are likely to get trickier in the next few months as the cost-of-living crisis takes hold. April will not only see NICs increases to help fund the NHS and social care, but soaring energy bills, which could potentially rise by 50% for some households. This, coupled with higher interest rates (they this week went up again to 0.5% and are likely to still increase further), could start to put buyers off to a greater degree.
Post-April, the rising cost of living and tax rises are likely to start having a wider impact, while there could be fresh political turmoil if pressure over partygate forces Boris Johnson out of Downing Street, as seems increasingly likely.
In my role as Client Services Manager at HBB, I have spoken to many estate agents, asset managers and developers directly in recent weeks. All their feedback is around the market being too good to need us…but the big question is will that last?
On discussing the current market with one agent, he said: “You call the current market right, as we’re experiencing the worst shortage of properties in my 30-plus years as an estate agent. If we have a sale abort, we are readvertising with another 5% on the previous sale price and getting it. So speed of sale is not an issue for us at all.”
While that shows how (quite frankly) bonkers the current market is, the need for plan B alternatives needs to be thought of as a long-term thing. It’s not necessarily now that contingency plans are required, but what about three, six or nine months down the line when the ability to put a property to market and re-sell isn’t as fruitful? Does that impact the purchaser’s onward purchase? Is the seller happy to wait for another sale and another set of conveyancing?
This is where alternatives – such as chain repair or part exchange – suddenly become very attractive.
The stamp duty holiday is fast becoming history, and there has been little to no change in the marketplace since it ended. The fact that its ending was baked in for some time helped to avoid a dreaded cliff-edge scenario, but most experts predict a far less busy and frenetic marketplace this year, in part because the holiday is not in play.
Furlough ended at virtually the same time, but despite the emergence of the Omicron variant, and new restrictions being put in place that negatively affected travel, hospitality, cultural venues and other industries, unemployment has not yet suffered.
However, 2022 could bring fresh uncertainty if, for example, speculation about further interest rate rises persist, or a new variant emerges. It is for these eventualities that agents may be wise to have back-up plans up their sleeves.
The government will be keen to get soaring inflation under control before it gets totally out of hand, so don’t be surprised to see further interest rate rises, particularly as the economic effects of Omicron seem to have been less bad than feared.
This could put some potential buyers off (knowing they’ll likely face higher mortgage repayments) and leave some sellers in a more difficult position. It could lead to more fall-throughs and withdrawals.
Part-exchange and chain repair specialists become worth their weight in gold in these instances, ready to fall into action at any point when required. In the example of a possible chain break, with the top of the chain unwilling to wait any longer for those below them to act, a company like HBB can step in and secure that chain to completion.
No-one knows for sure where the market will go this year – although most expect it to remain strong, if not quite as strong as last year. But with so many uncertainties and variables in the world right now, it would seem prudent for agents to have a rabbit out of the hat in their armoury if this is needed at quick notice.
*Neil Tayler is Client Services Manager at HBB Solutions