As I sit down to write this article the arguments over Brexit continue to rage. My own view is that. But my opinion on this does not matter. What does matter is that as a business owner you need to be ready for anything and I don’t think that most businesses have spent nearly enough time preparing for the consequences of what may happen.
I have, of course. never dealt with a Brexit before but after 40 years in the property industry I have seen a fair few numbers of events that have impacted positively or negatively on the housing market and the strategies needed to survive a sudden change in market conditions are well understood. Previous downturns have all happened when the housing market was reaching its peak after a long spell of positive market conditions and the event that triggered the down turn was the catalyst not the underlying cause.
Previous downturns have been triggered by;
- The oil crisis of 1973
- The sudden withdrawal of the banks from the mortgage market
- The withdrawal of MIRAS (dual tax relief for couples)
- The near bankruptcy of Northern Rock
- The Brexit vote
Almost overnight a buyer’s market becomes a sellers market and different behaviour is required, but most business owners are far too slow to react. So what you should be doing right now to prepare? Well it all depends on what happens.
MANAGING THE ‘NO DEAL’
If we crash out of Brexit without a deal then there will be a sharp correction in the housing market. The Governor of the Bank of England has forecast a 35 per cent fall in house prices. I think that is unlikely but a 10-20 per cent fall is entirely conceivable. Many agents will be slow to respond to this and will continue to give prospective sellers over optimistic valuations in an attempt to win their business. However if you are too hard on pricing you may lose market share so it might be necessary to put some properties on to the market at prices that are above what you think can be achieved.
If we crash out of Europe there will be a sharp correction in the housing market. What will happen?
If you do so it is essential to put aside protected time each week for a senior member of staff to spend on getting price reductions. This is a skill which is often forgotten in a buoyant market but when the market turns an agent’s ability to get price reductions without losing the clients goodwill during the process is one of the most important ingredients of success.
The second thing you would need to do is to set aside protected time every week for negotiators to telephone applicants to encourage them to view the property that you have sent them. In a buoyant market you can afford to take more of a passive role but in a tough market there is no substitute for spending time ‘phoning people.
The third thing you must do is to spend more time on sales progressions. In a buoyant market most sales will go through to completion regardless but in a downturn, the slightest little problem can cause the sale to fall through. It is therefore essential to ensure that on an experienced member of staff monitors the progress of every sale so that problems can be reduced and resolved at an early stage.
The fourth thing that you need to do is to increase your fee levels. If prices fall by 10 per cent then you need to ensure your fee percentage by 10 per cent just to stand still. And if you are selling fewer houses then you will need to improve the amount you can earn from each one.
PREPARE FOR THE UPTURN
The most important thing of all however, is to be ready to take advantage of the upturn when it comes. The 1998 recession lasted four years. The 2007 recession only lasted one year in London and the Southeast (although it lasted much longer elsewhere). When the upturn comes you need to be ready to respond to it instantly. You will need to increase your marketing budget, start to value more optimistically and possibly increase staffing levels in order to increase revenue and market share at the beginning of the upturn.
Spotting the upturn will be particularly challenging this time around because it may be triggered by events outside of our control. A no deal exit could mean a long-term downturn. A chequers type deal involving a very mild Brexit could trigger a mini boom caused by people who have been postponing their move for 2 years, finally deciding to take action. And a decision to stay in the EU after all could trigger a very sudden recovery.
Whatever happens you need to be on your toes like a champion boxer – ready to respond to the various scenarios.