The times they are a changing
As wider demographics age and first time buyers get older too, we’ve been seeing a shift in the industry towards a burgeoning PRS or build to rent sector, as well as a greater emphasis on housing for equity rich retirees. A skills shortage and rising production costs has also seen the need for developers to explore other methods of construction, including modular and this has its own challenges regarding perceptions on quality relating to ‘prefab’ housing.
Shared ownership as a model has also lost its stigma in London as the chances of first time buyers owning their own home gets further from reach, yet in other parts of the country where affordability is not as much of an issue as perhaps supply, this way of stair casing to ownership is still perceived by some as second best.
Lawrence set out his stall by looking at sentiment and confidence and actually painting a rosier picture than some of the doom and gloom within the supposedly apocalyptic Brexit landscape. Interest rates are still at almost historic lows, as are mortgage rates, which are the lowest for a decade. For those in a position to move, it’s arguably a buyers market.
However… he speculated that interest rates would rise this year, with mortgage rates duly following suit, making the affordability of first time buyers in particular even more stretched. In fact he saw affordability as being the key barrier to entry for the market as a whole in 2019. Be it first time buyers struggling to get onto the ladder, or second steppers bridging the gap with the perceived cost of moving being comparatively too great to enable that leap with no real marked price inflation aiding their equity.
He predicted continued slow growth following Brexit, but certainly not the 10-18% drops predicted by the Bank of England. Transaction levels would be 7% lower, but perversely first time buyer transactions should still be upwards of 11% due to Help to Buy, Stamp Duty exemptions and the continued support of the Bank of Mum and Dad that helps to fund the average deposit in London of £96,000.
Mortgaged home movers are 3% down year on year, whilst private investors have also shied away due to the additional surcharge. Lawrence predicted London price falls, but this region only would experience slower growth of just 4.5% over 5 years, with the Prime market holding up due to increased foreign investment cashing in on a weak pound.
Elsewhere in the country a bullish 14.8% price growth is predicted over the next 5 years and so bouncing back from 2020 after a slow 2019 (There would also be the usual dip in election year 2022). This faster growth would be experienced in the regions, such as the North West and Manchester.
Transaction numbers will stay at similar levels, but buy to let landlords are mooted to sell up due to rising costs, so PRS can bounce on this release of stock to the open market once again. This explains the 140,000 PRS units in the pipeline nationally, with diversification to now include family housing.
The wider conversation
It was discussed about how the wider table were using or thinking of embracing customised modular houses in the future, whereby one day, the process may and very well should allow the facility to order a new precision built home online! It was agreed that education on the perception of modular is required to show that they do deliver on promises of lower bills and flexibility of design. Marketing would form the backbone of this education.
The panel felt that Prop Tech is a broad brush term and really it’s just tech in construction and marketing and could be used to allow the developer to engage with local communities to inform planning for example so NIMBYs could input via tech to allow public buy in and inform what latent demand is.
Long-term reasons to buy should be community focused and putting in facilities such as a resident’s lounge in private developments for live/work facilitation would be the next step and not just confined to PRS apartment blocks. It is no fluke the rising demand for ‘WE Work’ type environments, home working and flexibility of where people put in their hours. As such there is a whole marketing and education work stream around this subject that housebuilders would need to latch onto in terms of creating value for their customers and not just see it as a cost.
Consumers also care about sustainability and the costs to run their homes, they are socially conscious and do want to know how hard their prospective home is working for them. Again this is something that is often belittled or sidelined completely in marketing of new homes.
The Customer is still King
Finally it was discussed that customer service is key. Consumers want professionals not shoddy landlords and with 45% of landlords only have portfolio of one, they are arguably not customer centric in their approach and so not well versed in service.
In terms of marketing, there is much to do in a changing ploictical and ageing landscape, so exciting times ahead for consumers, marketers and developers alike! To speak to the team about our roundtable lunches or how a changing market might affect your marketing, call us today!