It’s no surprise that the pandemic has put the property market in a tough spot. Mobility and personal engagement are key elements agents need to successfully operate in their field, and the pandemic has been a clear hindrance on such. Where the post-COVID real estate market is headed is a question on everyone’s mind.
However all is not lost, the sun still rises every morning, and shines over London as life slowly settles to the new norm. This past month, the real estate industry has been getting ready to open back up to a post-outbreak market.
Our London team has been working remotely for 4 months now, with agencies opening up in May I saw this as an opportunity to discuss with our Account Managers about how the market has changed. I jumped on a call with them and here’s what they had to say.
Q: Where do you see the overall market headed?
A: It’s an interesting question, traditionally in downturns, people expect prices within London to go down, and interest shifts to the rest of the UK. Obviously luxury or prime real estate in London is expected to keep its value, with a minor adjustment.
What we’ve realized at XChange/houzen, is that even in a full blown pandemic, there are certain areas within London which have preserved their rental values, areas like Hampstead and Primrose. Where we’ve seen a bigger cut on rental prices is in parts of the city, like Angel, Old Street, Clerkenwell or even Shoreditch where the typical tenants are communities of professionals that work around the city in services.
We ran a due diligence looking at these postcodes and noticed that these places showed an depreciation of 15% on rental values, for example in E1 a 2 bedroom flat that was turning in £2,100 a month is now getting offers around £1,800.
Interestingly, Central London has become more appealing for a certain tenant profile who are looking for a deal in a flat closer to the city.
To sum it up, I think the London market will start to stabilise, and the biggest shift we’ll see is that London is turning into a buyer’s market as opposed to a seller’s market, and this obviously affects the way real estate is transacted right now.
Q: Are there going to be any permanent changes to the real estate market?
A: It’s hard to say, I feel pretty strongly about the fact that we aren’t going back to the way things were before. One thing to understand is how the consumer behaviour is shifting and what is becoming important to them. Landlords of all sizes are going to be looking at what they’re offering, testing it out to see if the same things are still working? Or is the market looking for something different?
It comes down to what consumers are willing to pay a premium for, previously this was communal spaces, gyms, shared workspaces etc… It could be that such amenities will go back to being desired by consumers, or there could be a shift where consumers would prefer an extra room in their flat to turn into a home office. The way we understand the market right now, changes in consumer behaviour will be the main driver in terms of premiumisation of assets.
In the long run, the UK property market will be just fine, but I would expect to go through a correction in the next 12 months as the market tries to determine the new norm.
Q: How have agencies adapted to the use of tech during this time ?
A: In terms of viewings we definitely saw a shift in video and virtual viewings, due to the government restrictions that were set back in March, but now as the government eases its restrictions, we’re seeing physical viewings take priority again.
In terms of tech, this outbreak seems to have made agents more prone to adopt new tech, and at XChange we’ve seen more agents open to experimenting with tech in order to get that competitive edge in a market that has changed the way it operates.
We’ve noticed that there’s a certain category of agents, especially younger agents who really believe in scalability and want to close deals, and then use some of that to hire more people, scale the business. Agents have adopted tech for its benefits, however they can be heavily reliant on portals, which are oversaturated.
The agents that believe in scalability are the ones looking for a new venue on the frontline of tech, to help them scale their operation and to gain that competitive edge. This is what Houzen & XChange are here to realise.
Q: How do you think Houzen and XChange will help agents in times like these?
A: We use a lot of tech here, but this shouldn’t be cause for trepidation. Yes we have our own platform, yes we make use of analytics and historical data, and lots of information we collect from clients to build a customer profile.
I can see how this might seem intimidating, but it’s really not. Think of us as an invisible hand that can assist you on the way to back to success. If your “tried and tested” methods aren’t working, it usually means that it’s time to try something else. By the time you’ve innovated and taken on these new principles, you can then apply them to old principles and make your framework a bit more watertight.
Property portals have shown weaknesses during this pandemic, and produced less than desirable results for agents who solely relied on them.
The agents that have used a combination of new tactics, analytics and algorithms and data with Houzen, alongside the more traditional tactics have established a guaranteed formula for success by covering all their fronts and capitalising every opportunity.
Q: What are rental prices looking like and what are the “hot” areas?
A: For the past 10 years, London’s rent prices have been in a bull race.
However, things have started to change, as economic conditions are shifting, and the pandemic is changing the needs of tenants.
Tenants are now eager to find the perfect deal, and coincidedly, landlords seem to be desperate to get a contract in. What we’ve noticed about the lettings market post-pandemic is that properties could be receiving upward of 20 viewings without receiving an offer.
The applicants are taking their time to find the right deal, and are becoming more and more conservative with their offers.
For example, we used to get a lot of applicants for Canary Wharf, but now the demand has shifted towards Vauxhall because there are more deals in those areas. Notably, the same trend happened with demand from E1, Aldgate, where these applicants are shifting their attention to areas like E15, Stratford, where they can get the same standard of living with a price cut.
It’s been an eventful start to the year, with many changes to the way we operate our businesses and live our lives. But we are now seeing things evolve and adapt, and we at Houzen & XChange have been eagerly preparing for this.
In times of significant change, it is only the firms that are prepared to grow with and adapt to the evolving demands of their clients who will weather the storm. We are here to help with that. To learn more, you can register here.
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