The national papers and the trade press have been full of articles recently about whether estate agents should still be allowed to stay open during the lockdown. I am firmly of the opinion that they should but with restrictions.
The housing market is of huge importance to the economy. The total revenue earned by estate agents, letting agents, surveyors and mortgage brokers is estimated to be well over £10 billion per annum. But the true value of the housing market to the economy is far more than this.
If we factor in removal firms, builders, furniture suppliers and all the other things that people spend money on after they have moved house, the value to the economy is many times this amount.
In addition, at a time when people are spending far more time at home than usual, we need to consider the non-financial benefits of allowing people to move home. Some want to get access to a garden, some need a home office, some need to reduce their living costs following redundancy, some need to escape an unhappy relationship. Maintaining a functional housing market is therefore of enormous importance.
This is not to say however that agents should be allowed to take unnecessary risks at a time of huge danger. Most of my clients have done everything in their power to operate their businesses responsibly. One of my big clients is operating with just one member of staff in each branch all of whom work behind closed doors. The public are not allowed into their offices under any circumstances and contractors are asked to collect keys from a lock box located outside the office door. All the rest of the staff are working from home.
The negotiators insist that all prospective buyers and tenants arrange their viewings by telephone and email. They also insist that all prospective buyers and tenants have a virtual viewing before they are allowed to see a property in person. The current residents of the properties are asked to go out before each viewing and the negotiators usually open the door and wait outside in the fresh air.
This system is far from ideal. There are some security concerns, applicants do not get the benefit of the agent’s sales pitch and a lot of the usual team camaraderie is lost. However, they feel that these policies strike the right balance between continuing with their business and minimising risk in the current climate.
We are all praying that the vaccine will work and that the lockdown will soon end. We long for the moment when this terrible pandemic is behind us when everyday life and the housing market can return to normal. The buyers of estate agency and letting businesses certainly seem to be very confident that the housing market will continue to perform well and that the pandemic will be over soon. We currently have more than five times the usual number of businesses under offer. However, once Covid is finally over, there will be new threats to the housing market which will emerge.
The biggest threat that I see to the sales market is an increase in Capital Gains Tax. At the moment, higher rate tax payers pay 28% Capital Gains Tax on the profit that they make from selling a second home or an investment property. If this is increased to 40 or 45% as has been threatened, it could kill the housing market stone dead. Faced with a 40-45% tax bill, many investors will just hold on to their property assets forever more and the number of transactions will fall dramatically.
The biggest threat that I see to the letting market is that ever-increasing compliance regulation will frighten landlords into selling. Council licensing schemes, mandatory electrical checks, the new Fitness for Human Habitation legislation, the new minimum energy efficiency standards. The cumulative cost of complying with all this legislation is huge and the fines for not doing so are even greater.
The government has made a conscious decision to allow the housing market to continue to operate through this lockdown because of its huge importance to both the economy and to people’s emotional wellbeing. I pray that they will not forget just how important the housing market is later in the year when they are considering their tax policy and the next raft of compliance legislation. Either of these things could do far more damage to the housing market than Covid itself.
Adam Walker is a management consultant and business transfer agent who has specialised in the property sector for more than thirty years.