Jeremy's Blog 17th December 2021: Housing Market
This article by Jeremy Moody first appeared in the CAAV e-Briefing of 16th December 2021
The housing market is a market for people. A house sale or purchase is the largest transaction many make while a house may be home, with a sense of place as well as a potential financial assurance. A home-owning democracy was a mainstay of 20th century politics but tight supply and loose money have made housing unaffordable for many. The functioning of this market is a key political issue – often also a factor in financial crises.
With estate agency’s reputation, commentators saw it as an obvious early casualty of the internet with IT enabling the “disintermediation” of house selling, removing the traditional estate agent. To some, it is remarkable that this has not happened.
Yet the “disruptors” came later than expected and have taken less trade than expected. Purplebricks, seen by some as an advertising medium not a sales method, with its operating model challenged and failing to meet tenancy deposit regulations, has lost market share and share value. The first financial analyst to criticise it in 2018, Anthony Codling, argues that if the model could work
“it should work in a hot, stamp-duty-holiday fuelled, market. The fact that it did not speaks volumes”
and adds
“The fact that they have lost market share adds weight to my argument that the model isn’t the game changer it claims to be and that traditional agents add more value to process than Purple Bricks gives them credit for.” (The Times, 14th December)
The market proves to value the human factor.
In the US, Zillow went further, using its automated valuation mechanisms indicating property values to buy and sell houses directly and lost $500 million. Its rivals only escaped that by the human intervention of offering less than algorithms suggested, limiting take-up and exposure.
With fees well below those in many foreign markets, property agency has not been replaced by new technology but adopted it, illustrating how new technology can improve business practice more often than substitute for it.
With present markets, housing is a politically potent subject. The Government is reviewing how its planning policy should navigate between the 300,000 houses wanted annually for its future voters and its present voters’ resistance to new housing. Tenancy law tightens across the UK, now waiting on England ending no-fault notices to quit and regulating agents while wondering how much corporate build-to-let might really deliver.
The Irish Republic illustrates the challenge with Sinn Fein, focusing on the severe housing issues there, now polling 35 per cent, well ahead of the traditional parties.