The Long Read:
The future of the property market - and what this means for your brand or agency
By Stuart Ducker, 28 January 2020
I’m sure that we have all heard so much talk recently about the potential for a 'Boris bounce', yet few commentators will have the same forward view that we have from our data at TwentyCi. Having analysed the data, here's our view on how the property market looks set to develop in 2020 and beyond, and crucially, how this will impact your brand or agency.
History of property sale and rental transactions
In order to understand the future, we have to first understand the past. This requires a look in the rear view mirror at property market transaction history.
The two government organisations that track property sales in the UK are:
- HM Revenue & Customs - a department of the UK government who record residential property transaction completions through the payment of stamp duty. Stamp duty land tax records properties in England and Northern Ireland which are sold for £125,000 and above, or for more than £40,000 for second homes
- UK House Price Index - a joint production by HM Land Registry, Land and Property Services Northern Ireland, Office for National Statistics and Registers of Scotland. This records transfers of most (but not all) title deeds
The following graph measures the volume of property transactions recorded by both of these organisations from 2006 to 2019. The first thing to state is that both organisations report a broadly similar pattern, with the UK House Price Index consistently stating slightly less volume than HM Revenue & Customs.
Further observations include:
- The effect of the credit crunch in 2008 was to halve the number of annual property transactions, which the market has still not recovered from today;
- We are currently experiencing a flat “normal” UK market for transactions, which has remained pretty much at the same level for the last 6 years;
- Finally, we know that both organisations tend to underestimate recent transactions. As such, the property market was pretty much flat in 2018 and 2019, following a similar trend seen since 2014
In addition to volume of property sales, we have also looked at property rental volumes since January 2016. This is illustrated in the following graph.
The key learnings from this are that new rental properties coming to the market are rising (new instructions) and agreements between landlords and tenants to let a property (let agreed) are also rising.
Let’s stop looking in the rear view mirror and next look at what is happening now.
In the last week, many newspapers have reported on the increase in house prices at the “fastest rate on record” or the “best month…since 2007”. The Evening Standard even suggested that the “housing market was back with a bang as buyers flood back after election”.
Further, many estate agents are now starting to talk up the prospects for 2020 (although still cautiously), using phrases like:
- “benefiting from a 'Boris bounce'”
- “considerable unsatisfied demand which has built up over several years”
- “considerable amount of pent up demand”
- “rush on and prices will rise as confidence returns”
In fact, there were a few early signs that some estate agents – for example, Leaders Romans Group, Connells, Hunters and Humberts – displayed their intentions to invest ahead of a market upturn in the second half of 2019.
All markets need stability to operate. And in terms of the government, we have not since the Tony Blair days of 2004-2007 experienced stability. If we look at the historic view of property transactions that we have already seen, and map these against the parliamentary majorities across the years, there are definitely similarities between the long recovery from the credit crunch in 2008 and the flat market since 2014.
However, Boris has a majority of 80, which is very large and has not been seen since the time of Blair's Labour government. Whatever you think of Boris, this size of majority definitely promotes stability.
Furthermore, we often look to new house builders as a bellwether for what’s happening in the property market. They seem to have the knack of getting out fast when they need to and investing ahead of the curve on growth. Over 170,000 new homes were built for the year ending June 2019. This was highest number built over the same period in the last 11 years.
The 'Boris bounce'
There is now a 'Boris bounce'!
The election occurred in week 50 of 2019, and looking at week 51 and beyond, comparing with a like-for-like with the prior year, we see that whilst properties coming to the market (new Instructions) are down by 7%, sales agreed (sold subject to contract) are up by 6% and exchanges are up by 3%.
Week 51 to latest week
So the market is up now since Boris won the election.
Furthermore, if we look at the same statistics for properties valued at more than £500,000, we see no downturn in property coming to the market. There is also an even larger increase in in sales agreed (sold subject to contract) of 10% and exchanges are up by 12%.
In the £1million plus market, we know that property coming to the market has increased by 17% and both sales agreed and exchanges are up by 11%.
Whilst we are not expressing a political opinion, government stability has been lacking for some time and this has not been good for the property market.
So what does this mean for your brand or agency?
Government stability in turn makes for a more stable economy, which creates an environment of greater consumer confidence.
As GfK’s Client Strategy Director, Joe Staton puts it: “There’s a clear sense of change in consumer sentiment this month. The picture for the year to come is much stronger with a two-point improvement in how consumers view their personal financial prospects and a very healthy seven-point jump on how they see the wider economy next year.
"We haven’t seen such a robust increase in confidence about our economic future since the summer of 2016. Despite official warning signs about the flat-lining of Britain’s economy, we know that record high employment and below target levels of inflation are helping to boost consumers’ expectations for the year ahead. Importantly, for the retail sector, we also have an upwards revision in our Major Purchase Index.
"The Overall Index Score has failed to break into positive territory for the past four years due to confusion and uncertainty about the future direction of the UK. A great many people will be gazing into their crystal balls right now; ours indicates a rebound in confidence in 2020 based on renewed optimism and energy for a post-Brexit Britain.”
This is significant news for industry sectors where homemovers represent a high value consumer audience.
Take for example, the retail sector. We know that for retail brands aligned to a home move, (think home furnishing and home improvement businesses, kitchen and bathroom retailers, bed and sofa brands…) homemover average order values are typically 50% greater than the average UK household.
We also know that likelihood to purchase is on average 20-40% greater for a homemover across these sectors.
Our data analysis and marketing programme insights also allow us to be forensic in selecting both the optimum timing and best channel execution for marketing communications.
When we bring all of this together, it's possible for brands to reach homemovers during the perfect window of opportunity, when this high value audience is in the market and ready to buy.
Homemovers from the rental sector also represent a significant opportunity to brands and agencies operating across a similarly wide range of industry verticals, including but not limited to: automotive, financial services, FMCG, leisure, property, retail and utilities.
- We (finally) have government stability
- Brexit will start to happen, but will be a very gradual process
- The indigenous population is wealthy enough to sustain a prosperous housing market
- New house builders are investing
- Estate agents are beginning to invest
- The GfK Consumer Confidence Index increased by 3 points in December 2019
- Industry sectors where homemovers represent a high value audience face a significant financial opportunity
It is our opinion therefore, that there are enough indicators in both our data and the wider market to suggest that the number of property transactions in 2020 will grow by greater than 5%. The prospects for the future of the property market - and in turn the wider UK economy - are bright and by and large, will not be impacted by the (very) gradual Brexit process.
Talk to us today about how to achieve better results for your next marketing programme.