Property

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It doesn’t have to be like Spicerhaart – another agent’s approach…

It doesn’t have to be like Spicerhaart - another agent’s approach…

While controversy swirls around the approach and motives of the sackings and branch closures at Spicerhaart, other agents are showing how they can pull teams together at difficult moments like these.

Estate Agent Today has seen a message to the staff of Choices Estate Agents from its chairman, Simon Shinerock, revealing an open communications approach and an unusual way of sharing the pain of reduced income, if that happens, during the crisis months.

He says an event such as Coronavirus leads to companies showing their true colours, and that his letter – which we reproduce below, in full – has been met with universal support from his team.

 

 

 

Dear All 

I am writing to you so you can understand my thinking at this difficult and unprecedented time because it falls to me to make crucial decisions over the coming days that will affect the long term survival of the business and everyone who works in it. 

Before I go on I want you to know that compared to our competitors we are a relatively financially strong company, which means that if we are careful we stand a much better chance than most of getting through this crisis and out the other side. 

However, we don’t have unlimited resources and based on what I am now seeing we might not be able to sail through without some drastic temporary measures being put in place. I would also like to say that during the crisis I will not personally be taking anything out of the business and will if necessary make a substantial sum available from my savings in order to get us through.

That said, like any business or family we need to make ends meet and if our income is going to drop substantially over several months we have to plan to reduce our expenses accordingly. 

At the moment we don’t know for sure how badly we will be affected but it’s now obvious new business will be harder and we will take a hit if a significant number of tenants don’t pay their rent. 

Our biggest expense by far is our wages bill, it constitutes over 50% of all our expenses and it is the one over which we have the greatest control. 

In stark terms I have a choice, I can try and get through this by making a lot of people redundant, something I really don’t want to do, or, I can try and keep as many if not all of you employed by asking you to be prepared to potentially make a personal sacrifice during this difficult time.

Normally we expect to make a profit every month, our rental income means we can predict and forecast how we are doing quite accurately and we have been making great progress this year so far. 

I’m happier with my senior management team than at any other time and I can see the quality of all our staff improving all the time. I’m also more confident than I’ve ever been that we as a company are offering a market leading proposition which has become the envy of our competitors. 

So, under normal circumstances I would expect this to be a record year for us. However I can now see that it is most likely that over the coming weeks and months our income is likely to decline and put us in an unsustainable loss making situation unless we put a contingency plan in place now

Obviously the best outcome is that we continue to do new business and take advantage of the many opportunities that will arise as landlords and sellers find it harder to get a result from their agent either because of lack of proactivity, or because some agents will throw in the towel, something we are already beginning to see. 

There will also be a lot of private landlords in distress who may want our help and we should be on the lookout for them. I can still foresee an optimistic outcome where we get through this in profit, now that would be an achievement and it’s something we must aim for and do everything we can to achieve. However, we also need a plan for what we do if we don’t make a profit and can’t sustain our current cost base. 

I want you to know we are exploring all avenues, negotiating discounts and payment holidays with suppliers, looking at government loans and assistance, getting rid of unnecessary expenditure, everything we can to get us through this. 

On the last point please try to help by keeping non essential expenses down to a minimum, every little helps. If after looking at all these options we still can’t cover our costs I am proposing that we apply a fair income reduction formula to everyone in the company.

What I mean is that whatever the percentage shortfall is in a month we apply that percentage to everyone’s pay which would be reduced accordingly. So, as an example, if our normal wages bill is £200,000 and we had a shortfall of £10,000 it would mean everyone would be paid 5% less than normal. 

If we put in this backstop now we may never need it, I hope we don’t but it will mean I can make firm plans for the future, retain as many of our people as possible, focus on the business and come out of this as strong and fit as possible. 

Because of the extraordinary nature of this situation I will be available to any member of staff who wants to speak to me personally to ask questions or tell me about their concerns. All I ask is you speak to your manager first and if you still feel you want to talk to me I’m available. 

I’m delighted to say that since writing this message, during today most of you have been told about its contents and that as a company everyone has received it positively. 

You will be getting an email on Monday from HR confirming the change will be in place, the earliest it can affect your pay is April. I really believe that by pulling together we can come through this intact, stronger and wiser.

Finally, this is new ground for everyone and I don’t claim to have all the answers, I may well make some mistakes and errors of judgement along the way but I promise you this. 

I will do everything in my power to steer us through this crisis and out the other side and I will fully recognise everyone who gives the company and me personally their support and trust along the way

House prices to drop 10% thanks to virus, warns OnTheMarket partner

House prices to drop 10% thanks to virus, warns OnTheMarket partner

A mortgage broker that’s just become a partner of OnTheMarket is warning that house prices are likely to fall 10 per cent over the rest of this year because of the virus crisis.

John Charcol is saying that the peak UK house price for 2020 is likely to be the one recorded in the March Nationwide house price index – already released – or in the price reflected next month by the government.s UK House Price Index.

Thereafter, Charcol’s mortgage technical manager Ray Boulger expects prices to fall 10 per cent by year end, with transactions tumbling in the next three months alone to a figure lower than that recorded at the worst depths of the 2009 credit crunch.

“It is clear activity in the property market will be severely curtailed, not only because of the economic uncertainty dissuading people from moving but also as a result of practical problems of surveyors visiting homes to prepare a mortgage valuation” he says.

However, if any silver lining can be found to the current crisis, it appears that first time buyers may be the beneficiaries eventually.

“Many people who had planned to move home this year will delay their move until conditions stabilise, not least because it will become very difficult to put property chains together” suggests Boulger.

“This will put first time buyers in pole position and so when they decide the time is right to buy, they will be in a very strong negotiating position to secure their first home at a good price, an advantage that will dissipate when the market begins to recover” he continues.

John Charcol has this month announced a partnership with OnTheMarket, meaning portal users will have access to digital tools and guides from the mortgage firm.

Luke Somerset, chief commercial officer at John Charcol, says: “We are delighted to be partnering with OnTheMarket. This latest partnership offers prospective homebuyers access to a leading property portal combined with expert advice when seeking a mortgage. Ultimately this will offer customers an effective and enhanced journey when purchasing a property.”

Savills the latest agency to warn of Coronavirus threat to transactions

Savills the latest agency to warn of Coronavirus threat to transactions

Savills is the latest agency to warn about the possible threat of Coronavirus to its business activities and success this year.

In its preliminary final results for 2019, issued this morning – and showing a strong performance for the international property group – the company says: “It is difficult accurately to predict the full impact of this issue on our business for 2020 as a whole. However, given the nature of the real estate market, we would anticipate that any near term slowdown caused by sentiment and specific measures taken to combat COVID-19 would generally result in a temporary delay in activity rather than an absolute loss of business.”

It continues: “In Asia, particularly China, it is clear that COVID-19 is having a significant impact on transactional activity and may have a similar effect elsewhere, depending to an extent on the length and severity of each outbreak. Our focus is on the welfare of our staff and clients and we have instituted protective measures in locations potentially affected by this virus.”

The trading figures for the company – which has a vast commercial and international infrastructure as well as its UK resi sales and consultancy activities – show a successful 2019.

Today’s statement says: “Our UK residential business continued to perform well in challenging conditions for much of the year which saw the UK market volume of transactions with values greater than £1m declining by two per cent year-on-year. “Against this backdrop and buoyed by the clear General Election result in December, Savills UK Residential business performed well, growing revenue by six per cent year-on-year.”

The company also says it successfully acquired and integrated London agency Currells.

Latest Countrywide “shambles” sends share price tumbling

Latest Countrywide "shambles" sends share price tumbling

Countrywide’s share price fell by as much as 17 per cent at one point yesterday afternoon as investors assessed the latest pratfall by the company – the collapse of its bid to sell its commercial arm.

As we reported yesterday there was an announcement from Countrywide a few minutes before the Budget, prompting industry cynics to say that this was a classic example of attempting to bury bad news.

The announcement effectively admitted that its bid to sell Lambert Smith Hampton to Monaco-based John Bengt Moeller for £38m was dead in the water, with new buyers being sought.

The revelation was described on Twitter as a “shambles” by respected property commentator Peter Bill, the former editor of Estate Gazette.

In a brief trading update released at the same time Countrywide reported a £17m drop in revenues last year and revealed the tenant fees ban had cost it £12m.

Within a few minutes of the announcement the Countrywide share price plummeted from 265p to 220p; it recovered slightly during the afternoon to close at 232.4p, down well over nine per cent.

Agent repays ‘non-returnable’ reservation fee after property row

Agent repays ‘non-returnable’ reservation fee after property row

An agency has repaid a £6,000 reservation fee to someone who thought they had purchased a property for £83,000 but was later told they must pay £100,000.

The Sunday Times reports a case where a reader made what they believed to be a successful bid of £83,000 for a property in Newport, south Wales, in an online auction held by Pattinson.

At the time of the auction they paid a £4,150 deposit and the £6,000 reservation fee.

But when they later tried to visit the property they could not, and told the paper: “My solicitor subsequently confirmed that the house had been repossessed … by the bank that had provided the mortgage for the previous owner.”

The buyer was told the purchase could only go ahead if they paid the bank’s valuation of £100,000; the buyer could not afford the higher cost but received back only £3,685 – the deposit minus legal fees.

The £6,000 reservation fee was kept by Pattinson at the time, as the firm had said from the outset that the fee was non-returnable.

The buyer concludes in its comments to the paper: “I think it is highly unethical for an auctioneer to list properties under a repossession order without disclosing this to potential buyers.”

The newspaper’s personal finance section pursued the case and obtained guidance from the Royal Institution of Chartered Surveyors that all relevant documents relating to a property should be available for inspection – online, at the agent’s and auctioneer’s office or at the seller’s solicitor.

The buyer claims to have previously been sent a pack containing a draft contract, the property information form and other documents – but none that raised concern with their solicitor.

“RICS found no evidence of misconduct by Pattinson” says the newspaper; nontheless, the paper asked Pattinson to refund the reservation fee – which it has now done.

The newspaper goes on to say that the company apologised for having failed to respond to the buyer’s recent queries. “It said it had been in an ‘unfortunate position’ as ‘the repossession after the sale had been agreed was completely out of our hands’.”

Sellers desert online agents for High Street rivals, says Zoopla

Sellers desert online agents for High Street rivals, says Zoopla

Almost eight in 10 sellers have instructed High Street agents in the past year – a significantly higher figure than 12 months ago.

The study involved 6,000 people and was conducted for Zoopla; specifically it shows 79 per cent instructed High Street agents in 2019, whereas in 2018 the figure was 66 per cent.

Some 20 per cent of the same instructed online agents – although Zoopla’s research shows only nine per cent actually sold through online firms, suggesting the rest went on to commission High Street companies.

“Estate agency as an industry is increasingly diverse and the emergence of onlines and hybrids have certainly given the market a new dimension. That said, with research indicating High Street agents steadfast in their appeal, it suggests all operators are working to differentiate and add value to consumers whether it’s through local knowledge, sage market insight or competitive fees” says Zoopla’s chief commercial officer, Andy Marshall.

“We are also seeing agents actively diversify the services that they offer vendors. Not only does this reap financial rewards for their businesses, but also provides a one-stop shop and eases pain points for buyers and sellers” he adds.

Regionally, High Street agents are most popular in the South West, with 83 per cent of vendors using a traditional firm in 2019. East Anglia and Wales follow with 82 per cent. Scotland saw the lowest proportion of sellers opting for a High Street agent – 64 per cent.

The portal’s survey also suggests that, aside from their core business, agents are diversifying revenue streams.

Some 43 per cent are now offering mortgage advice and brokering, with 42 per cent providing legal services.

The Zoopla survey – conducted before this week’s government statements about possible disruption in the near future caused by Coronavirus – also shows 52 per cent of agents anticipating more properties coming on to the market in 2020.

This is significantly higher than the 39 per cent recorded in 2018.

Mystery surrounds top agents quitting firm’s landmark branch

Mystery surrounds top agents quitting firm's landmark branch

Estate Agent Today understands that three senior figures have departed from a key central London branch of Knight Frank.

Each of them was a partner in the company and they formed the senior management at the agency’s Kensington office: it is not known why they left.

They are believed to be Tom Tangney, who had been in the industry for over 35 years and had been at Knight Frank for 20 years; Pete Bevan, who had been closely involved in high value PCL sales for some years; and office head Sami Robertson, who was regarded as a key contact in the agency for some Far East clients.

Knight Frank recently lost central London legend Daniel Daggers, known in the industry as Mr Super Prime, who was the subject of media speculation with regard to posts of properties on Instagram. He had sold £3.85 billion of properties including a £95m mansion at London’s St James’s Park, bought by a US billionaire, and an unmodernised off-market house sale in central London worth £45m.

Knight Frank has provided EAT with a lengthy statement about the three Kensington departures, which we have published below; it does not mention any of the three departures by name.

“This is a great opportunity to ensure we have the strongest management and hire the best talent in the market. We firmly believe in recruiting or moving talent from within and in parallel to this, always looking for the very best external candidates within the market who have indicated they would like to join our award-winning team.

“Immediately after the department head for Kensington left the firm, James Pace, proprietary partner and head of the Chelsea office, moved to lead the Kensington sales team. James has been in the Knight Frank Partnership since 2006 and opened the Chelsea office in 2007, building a highly successful team and an unrivalled track record in the Chelsea and wider prime central London market.

“Supporting James, William Allen also joins the Kensington sales team as partner following 10 years at Strutt & Parker in their prime sales team, specialising in the Kensington and Holland Park markets. Tom Van Straubenzee, who jointly runs Knight Frank’s Private Office, will also take up a strategic position working closely with James, William and the existing team moving forward, assisting both vendors and buyers.

“In Chelsea, Charles Olver was promoted to Department Head for sales, taking over from James Pace. Charles has been with the firm for over ten years, based in the Knightsbridge office where he has been a Prime Central London negotiator.

“James is a true asset to our team, with over 25 years of experience and an exceptional track record earned during his time running the Chelsea office. Together with William’s local market knowledge and strong client relationships, they will bring a renewed energy and direction to the Kensington office. Charles is a highly respected agent in Knightsbridge and we look forward to him bringing his enthusiasm and understanding of the PCL market to his new role in Chelsea.

“Kensington is a crucial part of the Knight Frank network of offices and we expect it to remain as such well into the future.”

Stamp Duty change set to take centre stage in Budget next week

Stamp Duty change set to take centre stage in Budget next week

Increasing numbers of reports suggest that the government will use next week’s Budget to confirm a three per cent stamp duty surcharge on the purchase of homes by non-UK tax residents.

The new surcharge – strongly hinted at by the government for many months – would be on top of existing stamp duty on a property, and on top of the current three per cent additional homes surcharge.

The Financial Times, citing well-placed sources in The Treasury, suggest this measure will be finally confirmed by new Chancellor Rishi Sunak in his first Budget on March 11.

Leading PropTech entrepreneur Neil Cobbold, who is chief sales officer at automated payment platform PayProp, says this new stamp duty will be welcomed by domestic investors who may see competition from their overseas counterparts diminish over the coming months.

“It’s likely to have the biggest effect in the capital, where the government estimates that one in eight new London homes were bought by non-UK residents between 2014 and 2016. The surcharge was previously mooted at one per cent but its increase to three per cent will certainly act as a deterrent” he says.

But Cobbold warns: “Tenants in large English cities could suffer in the long-term if the additional tax burden leads to a fall in overseas investors and subsequently the number of rental properties available” says Cobbold.”

He adds that while there has in the recent past been much speculation surrounding wider stamp duty changes, the government appears to have put those on ice.

“Stamp duty is a hot button for consumers and property professionals, so the calls to reform the system are always plentiful in the lead up to a Budget. Boris Johnson has previously said that stamp duty rates are ‘absurdly high’ so there could be changes later in his tenure.”

“In the meantime, property professionals and consumer groups will continue to lobby politicians to reduce the pressure. Reconsidering the three per cent surcharge on additional homes and the tax rates which affect the very top end of the market would be a good first step” he explains.

Richard Donnell, director of research and insight at Zoopla, also wantsa to see SDLT reform in next week’s Budget.

“It’s time for the Chancellor to turn his attention to the core housing market and review the price bands and five per cent stamp duty rate that covers averaged priced homes across large parts of London and the commuter belt. No government wants to cut taxes indiscriminately, particularly when losses could be high. However, any cut to the rate of stamp duty could stimulate much-needed marketed activity in southern England in particular” says Donnell.

Trying to beat Rightmove is “at best expensive, at worst futile“

Trying to beat Rightmove is “at best expensive, at worst futile“

Any bid by Zoopla and OnTheMarket to displace Rightmove as the number one portal in the UK is at best expensive and at worst futile according to a leading analyst.

Mike DelPrete – former head of strategy at a New Zealand portal and a long-standing analyst of estate agencies in the UK and the US – says Rightmove is an example of a company with what he calls ‘network effects’

By this he means dominant online forces such as Rightmove, Facebook, eBay, and Craigslist are enjoy network effects – being ‘the’ place that people want to be seen, or want their products advertised.

“Even if a new entrant’s product is objectively better, a smaller audience of potential buyers and sellers means an inferior consumer proposition. Sellers want to advertise to the biggest audience possible, and buyers want the largest selection possible” he says in his latest report on the state of portals worldwide.

Specifically referring to the UK landscape he says: “For all the cyclical uproar aimed at Rightmove over its ever-increasing fees, its traffic dominance shows no signs of waning. It remains the undisputed best place to advertise properties for sale, with Millions More Buyers than its closest competition.”

DelPrete says all three major UK portals reported higher January traffic than the two previous years but while Zoopla’s and OTM’s percentage gains may sound impressive, they are from smaller bases than Rightmove’s.

“Rightmove’s traffic lead over its next closest rival remains strong and fundamentally unchanged over a number of years, despite several companies attempting to challenge its dominance” he says.

And he adds that even after Zoopla’s $3 billion acquisition by private equity firm Silver Lake in 2018, and OnTheMarket raising and spending tens of millions of pounds to compete, Rightmove’s traffic dominance remains intact.

And DelPrete writes: “The evidence suggests that it is nearly impossible for a runner-up portal to overtake the leader. In fact, there is no evidence that the all-important traffic leadership metric between the top two portals can be budged even a small amount.

“Which begs the question: Why are upstart portals attempting to displace leading portals? OnTheMarket launched in 2015 to challenge the duopoly of Rightmove and Zoopla in the UK. It was founded by a broad consortium of traditional real estate agencies who didn’t appreciate the market and pricing power enjoyed by the existing portals.”

The analyst says there are similar scenarios in Australia and the United States.

He sums up his analysis this way: “Attempting to compete directly with a leading portal is at best expensive, and at worst futile.”

Where are BTL landlords most likely to buy property in the next 12 months?

Where are BTL landlords most likely to buy property in the next 12 months?

Buy to-to-let landlords across the Midlands are most likely to acquire new property over the next 12 months, new research show.

A survey of almost 800 landlords conducted by BVA BDRC, on behalf of Paragon, found that almost a quarter – 24% – of landlords in the East Midlands plan to purchase property in the next 12 months, with 22% of West Midlands landlords also looking to add to their portfolio.

Other regions that showed high demand for property from buy-to-let investors included the North East and Yorkshire & Humber, with 19% of landlords in both regions looking to purchase.

Landlords in the South West (8%) and central London (9%) were the least likely to purchase property over the period.

Overall, 14% of landlords plan to purchase property, with the average landlord acquiring three new properties.

More than half – 52% – of those looking to buy property are targeting terraced housing, followed by semi-detached property (32%) and flats (26%).

A quarter of landlords also intend to buy a HMO during the year, reflecting the growing popularity of this property type, particularly amongst professional, portfolio landlords.

% of landlords planning to increase portfolio in next 12 months
East of England 13
East Midlands 24
London (Central) 9
London (Outer) 17
North East 19
North West 13
South East 15
South West 8
Wales 10
West Midlands 22
Yorkshire and Humber 19

Those with larger portfolios expressed a greater desire to buy property, with the research showing that 8% of landlords with one property planning to purchase during the year, rising to 20% for those with 20 or more.

Meanwhile, 12% of landlords with between two-three properties said they will buy, whilst the proportion of landlords with between four-five (15%), six-ten (14%) and 11-19 (14%) properties looking to purchase was broadly balanced.

Richard Rowntree, Paragon’s managing director of mortgages, said: “The proportion of landlords looking to purchase new property has been largely consistent over the past two years, but we are seeing regional variations and also a greater propensity for portfolio landlords to invest in property.

“Portfolio landlords have adopted a number of strategies to adapt to the tax and regulatory changes of recent years and we’re seeing trends such as these landlords buying stock from smaller-scale participants as they exit the market, or targeting higher yielding properties, such as HMOs.”

The researched showed that nearly two thirds (63%) of landlords plan to fund their next purchase with a buy-to-let mortgage, whilst 17% will release equity from existing properties to generate purchase funds. Meanwhile, 18% said they would purchase property outright using previously invested funds.

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