Following the significant shock of the mini-budget back in September, house prices have fallen as predicted, with the possibility of redundancies being made in the property sector.
The uncertainty for buyers created by the subsequent rise in inflation, combined with the increased cost of living, means that conveyancing firms need, more than ever, to process transactions as efficiently as possible. To ensure that any impact on their profitability, and cash flow, is minimised.
Fortunately, there are things you can do to help, but let's take a deeper dive first into what has been happening.
Kwasi Kwarteng's Mini-Budget
On 23rd September 2022, the Chancellor of the Exchequer outlined a series of measures the Government believed would boost growth, dubbed ‘The Growth Plan’. The main points for residential conveyancing firms were as follows:
- SDLT was permanently cut for residential property buyers in England and Northern Ireland, with the nil-rate band doubled to £250,000.
- In the case of first-time buyers, the nil-rate band increased from £300,000 to £425,000. The maximum price of the property the first-time buyer could purchase increased from £500,000 to £625,000.
- The government took the view that the plan would allow up to 29,000 more people to move per annum.
The changes were initially expected to lead to an average tax saving of £2,500 for all home buyers. With almost 50% of the cost, for all those who moved home in England and Northern Ireland, being tax-free. If your client was a first-time buyer in an area with high property prices, he or she could save a maximum of £11,250 in tax.
Nevertheless, analysts were alarmed that the boost to demand created by the cuts would not be enough to counteract the enormous affordability crunch hitting the market. As soaring inflation pushed the Bank of England to raise interest rates by a further 0.5% on the 22nd September to 2.25%. Resulting in mortgages becoming increasingly more expensive for buyers.
What The Experts Said
Economists took the view that the aftermath of the mini-budget could well mark the start of a number of drops in house prices. NatWest Group predicted that prices would drop by 7% in 2023. Martin Beck, of the EY Item Club, said he expected declines between 5% and 10%. Matthew Pointon of Capital Economics cited a 12% fall in house prices.
Kalyeena Makortoff reported in the Guardian newspaper on 1st December, that annual house price growth slowed sharply to 4.4% in November, from 7.2% a month earlier. Again attributing this to the ongoing impact of the mini-budget which: "spooked markets and increased home loan costs. While government borrowing rates have eased since then, average five-year fixed mortgage deals are still hovering at about 5% and the resulting higher costs have continued to weigh on demand."
Joseph Mullane reported in Today's Conveyancer on 2nd December that house prices had fallen by 1.4% from October, which was the largest reduction since June 2020. According to the previous Nationwide House Price Index, prices had also fallen by 0.9% in October. Whilst the average house price across the UK was £263,788.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, commented that the Zoopla figures showed demand for properties fell by 44% after the mini-budget and we still hadn't seen the full impact in the figures.
Affordability For Tenants
Soaring rents across the UK are now creating affordability problems for private tenants, according to Robert Booth in a Guardian newspaper article dated 1st December. Demands have been made for the government to freeze rents as an emergency measure, and increase housing benefits. Also to ban no-fault evictions, which it has been pledging to do since April 2019. The Renters' Reform Bill has still, however, to be introduced to Parliament, and tenants outside of Scotland may remain unprotected until late 2024.
No-fault eviction court hearings have tripled in the last 12 months after the pandemic eviction ban was lifted. With continuing rent rises and a dwindling supply of housing stock, being the main cause of this. According to Zoopla, the demand for privately rented housing has increased by 142% this year, compared with the five-year average. While the availability of this type of housing has fallen by 46%.
What Estate Agents Made Of This
Robert Gardner, Nationwide’s Chief Economist, said that despite the uncertainty "a relatively soft landing is still possible,” but a lot will now depend on how the wider economy performs.
Alex Lyle, Director of Richmond Estate Agency Anthony Roberts, thought that the New Year would show the importance of experience in dealing with difficult market conditions:
“The market has proved to be remarkably resilient, despite increasingly challenging conditions. This slowdown in price growth is not surprising as we are finding that sellers are being sensible and considering lower offers."
“We are likely to see a lot of soft marketing in the run-up to Christmas with agents and sellers testing the market to find the right level before launching new stock in the new year.
“Good agents will come into their own, while some of the less-experienced may well fall away.”
Tom Bill, Head of UK Residential Research at Knight Frank, said that mortgage rates would go down, and there is likely to be a 10% fall in house prices over the next two years. Mortgage offers made before the mini-budget would begin to lapse after Christmas, and increase the downward pressure on prices.
Director of Benham and Reeves, Marc von Grundherr, also took the view that a further market slowdown could be expected in the present political and economic climate. However, a gradual reduction in house price growth would help the market return to pre-pandemic levels.
Managing Director of Barrows and Forrester, James Forrester said that: "Fears of a property market crash should be put to bed as fixed rate mortgage costs now reduce as an early Christmas present for homeowners. With dwindling economic headwinds in 2023, we expect the property market to perform well.”
Anthony Codling, CEO of Twindig, stated that average house prices were still around £47,000 higher than they were at the start of the pandemic, and it was unlikely these gains would be completely reversed by the cost of living crisis: "We are already starting to see wage growth in some sectors and mortgage capacity (and therefore house prices) are linked to wages. It will no doubt be a challenging year ahead for the housing market but whilst it is starting to take a hit, it has not been knocked out.”
Nathan Emerson, chief executive of Propertymark, indicated that their members were reporting a rebalance in the market, as the competition for properties slowed down. The growth of house prices was slowing in line with this. We need: "A return to a more realistic and sustainable market. However, prices remain higher than last year, and with the Stamp Duty threshold raised, it remains a good time to buy or sell a property.”
Property Transaction Efficiencies
In order to help conveyancers keep on top of their workload in an unpredictable market, there are a number of statistics on the commercial benefits of processing property transactions more quickly. Including a revenue increase of 232% by reducing the transaction time from 18 to eight weeks, plus the improvement in your profit margin by reducing fall-throughs and the estimated two hours of providing progress reports after eight weeks.
Thankfully the average time taken from first instructing a conveyancer to moving into your new property/completing the sale was reported on 29th September as being between 8 and 12 weeks, rather than 18.
But what if you could reduce your firm’s completion time by one or two weeks across your entire caseload?
During the Covid-19 lockdowns, we shared several articles on utilising innovative legal technology that can help you and your firm achieve optimum efficiency, whilst also maintaining cost-effectiveness. Including on 10 February 2021, Improving efficiency through legal technology in Lockdown 3.0.
We offer our inCase mobile app, as a way to enable conveyancers to deliver valuable reductions in transaction times. The app features include:
- Integration with all commonly used legal case management systems.
- Electronic signatures for 99% of documents.
- ID checks are done automatically and securely. Also to check proof of funds with the client's bank.
- Secure messaging for emails and attachments.
- Process flows, so clients know where their particular case is at during all the transaction stages - with minimum effort.
- Forms can be sent from a case management system to a client, to complete within minutes on his or her mobile phone.
- Push notifications allow proactive client communication.
- Multiple case files are handled inside one app.
The inCase mobile app can also be tailored to your firm’s specific branding.
You'll discover a lot more reasons on the inCase website for using the app; but here are the top three facts about the potential increased efficiency and workload reduction that inCase can deliver:
- 51% increase in lawyer capacity.
- 81% reduction in telephone calls, and emails.
- Savings of between 2 to 3 weeks on average in transaction times.
What Firms Say About inCase, to Combat Market Volatility
There are several case studies on the inCase website, including what Adam Forshaw, Managing Director of O'Neil Patient, said about the features he particularly liked. He confirmed that using the inCase app had reduced transaction times on a purchase "by a staggering 42%, and on a re-mortgage transaction by 19%."
Dave Briggs, Marketing Manager at Nash & Co Solicitors, talks about the benefits they have seen in using the app, including the 81% reduction in calls and emails highlighted above. Due to this and other benefits, their staff have become its biggest advocate. The firm's Head of IT worked with the inCase development team, and said "the integration with their case management system works seamlessly."
In Conclusion
The current situation is also of concern to your conveyancing employees. Monidipa Fouzder reported in an article dated 1st December, 2022 that Simplify, a leading UK independent conveyancing and property services group, recently announced possible redundancies within its central, support, and management teams.
This will affect six of the largest conveyancing firms in the UK: Advantage Property Lawyers, Cook Taylor Woodhouse, DC Law, Gordon Brown Law, JS Law and Premier Property Lawyers. Handling a quarter of a million transactions a year.
As the uncertainty which surrounds the conveyancing sector seems to be far from over, it is vital that Managers take as much control as possible over what is happening now; whilst also keeping an eye on the future. Especially when you take into account how the present uncertainty here and abroad might well be affecting the mental health of your conveyancers, and clients!
We are living in volatile times; rapid changes in our Government; death, and funeral of Queen Elizabeth II, and the ongoing war in Ukraine. Apart from the cut in basic rate income tax and the abolition of the proposed increase in National Insurance, which was also part of the mini-budget, your employees and clients may be struggling with the rising cost of living and the effect of this on their mortgages, and finances.
Managers need to offer as much certainty as they can in the workplace, to clients and as industry leaders. Providing this extra support can be greatly helped by using a trusted piece of legal technology or software. Getting rid of mundane administrative jobs like checking identification during the onboarding process can save precious time, and using electronic signatures to speed up the execution of a transfer can also help with this aim. Being able to deal with the conveyancing transaction on a mobile phone is a game changer!
Making what might seem to be the smallest change in a procedure, can make a huge difference in someone else's day. Not only helping your lawyers get through an uncertain, and possibly stressful time, but also increasing efficiency and profitability. All of which the inCase app has the potential to do, and more.
Why not book a demo today, and see how inCase can drive efficiencies in your firm?