With virtual viewing opportunities/property management portals/maintenance apps etc having increasingly cropped up throughout the pandemic, would you consider that the huge number of technological alternatives the property sector has seen during the pandemic are here to stay? What does the future have in store for proptech?

Chris:

I certainly believe the pandemic has introduced technology (both to the world and estate agency) that probably would’ve taken years to introduce otherwise.

The important thing to remember is that technology is here to help us as human beings. What I would really say to proptech firms is that whilst there may well be tenants out there who might think that you have created a solution that’s going to change the world of lettings and estate agency; if it’s not a problem for letting and estate agents, you’re creating solutions to problems that agents don’t have: and it’s agents who buy the tech. Unless the tech is demanded by landlords, then agents won’t buy it. Speak to the agents that might take on your services as a proptech supplier and find out what problems they have.

Simon:

Wise words from Chris. Time and again I have been approached by proptech companies who have regaled me with their latest revolutionary game-changing market disruptors, only for me to have to point out that in reality – their idea is not rooted in how buyers, sellers, landlords, tenants and agents actually behave.

A recent one is the ViewRabbit platform that got a lot of publicity for their idea to charge for viewings. I have refrained from commenting about this idea until now, because the guy who runs the site is so nice. But now that the agent community has delivered its verdict; I can come out and say that it is a terrible idea, in my opinion: because neither agents or buyers want it.

In my opinion; the most important changes the market will undergo will be ones that make the whole buying and renting process more joined up, more transparent; and above all – more efficient. For this to happen we need technology that all the players in the game have visibility on. Once this is in place, we will see massive changes to the market; with agents and lawyers having to demonstrate their ability to really add value to the transaction.

I read an interesting article recently in relation to Google Trends which revealed the most commonly searched property terms in the last 12 months. What do you make of the below top 3 significant search increases shown?

1. Gazumping (more than 1,500 % increase)
2. Buy-to-let (more than 1,500 % increase)
3. Power of attorney (more than 450% increase)

Chris:

I’m certainly not surprised at the word gazumping being on the increase as a search term, since in most locations (excluding London), there are only around 40% to 50% of the long-term 14-year average of the number of properties for sale in any one location. Interestingly, in London there are (depending on the location) between 20 and 40% more apartments for sale than the long-term average.

I am, however, surprised that buy-to-let has increased to that extent over the last year, because it’s been a hot topic since 2002.

Simon:

I agree with Chris about the increased prevalence of ‘gazumping’ as a search term given the supercharged market (outside of London that is). However, I think buy-to-let has increased in popularity simply because people have been at home with more time to think about their financial future. For most people, property has been (and continues to be) the only really viable way for them to achieve financial freedom and independence.

Since buy-to-let started to become popular in the mid 90s; it has changed considerably, with people now buying way beyond their back yard. In particular there has been a migration of capital to the South East, where prices are high and yields low, compared to other areas of the country with cheaper prices and higher yields. This change in behaviour has widened the appeal of buy-to-let even further. Despite increased regulation and a less favourable tax treatment; buy-to-let continues to be the first choice for many people when it comes to financial planning.

The increase in people searching ‘power of attorney’ is a bit more mysterious. I guess Covid-19 has led to an increase in older people getting sick and perhaps resulting in their children having to make decisions for them. It also may be partly driven by people being at home and having the time to deal with difficult family decisions.

There seems to be a consensus among property professionals that there is no need to panic about a house price crash in the immediate future. What do you think will happen to house prices in 2021?

Chris:

The reason we had a house price crash in 2008 was because lenders cut credit lines; forcing the number of sellers to rise. People were also losing their jobs; meaning that they had to sell their house to reduce their outgoings.

What will happen this time? My biggest fear is inflation. Because if that rises, then what will happen is interest rates at some point will have to rise (which will make mortgages more expensive). Thankfully, this time over; 9 out of 10 people taking on a new mortgage are fixing it (and 70% of all mortgages in the UK are fixed). So I don’t think interest rates going up will be so much of an issue in the short term.

Simon:

I’ve already gone on record as having said the post Covid-19 recovery will be the biggest economic boom in human history. So far I am being proved right. But Chris is also right to be concerned about inflation, which of course has the capacity to cause a wheel to fall off the juggernaut. I was pretty dismissive about the idea that systemic inflation could be reintroduced into the economy by the vast aid packages unleashed to shore us up during the pandemic. However, what we are seeing now isn’t just supply lines getting going again. There are very real staff shortages which are causing wage inflation in some sectors. The cause of these shortages is not Covid-19; but Brexit. It’s just that Covid-19 has disguised the problem, which particularly affects retail businesses, hotels and restaurants (which have in the past relied heavily on low paid European workers).

It remains to be seen how this plays out. But if there are significant rises in interest rates on the way: then prices will crash. I’m not sure what the tipping point is. Probably less than is comfortable. Having recognised the danger, I think a more likely scenario will be modest rises in interest rates; with property prices holding steady as the economy rebalances itself.

First time buyers seem to be facing a lot of problems currently in relation to deposit requirements and mortgage affordability. And now, according to the Financial Times, there is another group struggling. The property owners who are already in the market and looking to upgrade (for reasons such as starting a family, for example). The troubles faced by both groups is reportedly due to the current market being dominated by affluent buyers; and the competition this presents. Where do you see this heading: and what advice would you have for either group?

Chris:

My heart certainly does go out to first-time buyers in this property market; but I would question whether those affluent buyers that the newspapers talk about do exist in the droves that they say they do.

The simple fact is that there are (in most locations) too many buyers and not enough properties to buy. This drives up the price. One might suggest that buying a property is a long-term venture and that they should wait for the market to ease back. But the question is: will it? Who knows?

My message to existing homeowners is not to look at what the price of your property is in isolation (or the one you want to buy in isolation); but the difference between the two. Only then can you decide if it is worth the move.

Simon:

Once again, wise words from Chris here. I think it’s very easy to confuse cause with effect when it comes to property prices. Prices go up when demand exceeds supply; despite the relatively small number of second home owners taking some properties out of the reach of aspiring home owners. The real cause of this crisis is the failure of successive governments to address the vast and increasing under-supply of property needed to cater for a growing population.

Actually, first time buyers have been given an edge over landlords who pay higher rates of stamp duty, and are being penalised for being landlords by a tax system that will tax them even if they make a loss. However, these measures don’t create more property; they just fiddle around with what’s already there. What we need is less words and more building. Then prices will stabilise and more people will be able to have somewhere decent to live.