Few people are likely to forget 2022.
It was the year we lost Her Majesty; The Queen and King Charles III took the throne. No 10 had three residents since September, inflation reached its highest level since 1982, and the base interest rate, which sat at under 2% since January 2009, rose to 3.5%. As for residential property prices, house prices fell for the fourth consecutive month in December, the worst run since 2008, according to Nationwide. The lender’s final House Price Index of 2022 showed average prices fell 0.1% on a monthly basis to £262,068.”
The biggest challenge facing the industry in 2022 was what could be considered the fifth horseman of the apocalypse – uncertainty. Loathed by consumers and businesses alike, uncertainty, especially in the chaotic month of October (remember that career-ending mini-budget) caused Zoopla to report a 40% transaction fall-through rate during the tenth month of the year.
We sat down with the Managing Director of OneSearch, Elizabeth Jarvis and Robin Wells, the Head of Sales Operations to discuss their thoughts on what lies ahead for the property market in 2023.
The economic outlook for 2023 – a protracted but shallow recession.
Although the UK narrowly avoided tipping into a recession in 2022, the latest report by KPMG (Dec 2022) estimates a lengthy downturn throughout 2023, but with the overall drop in economic activity being relatively modest when compared to previous recessions. Unemployment is expected to remain low, and inflation is set to fall to 4% by the end of the year and hit the target of 2% by mid-2024. As for interest rates, the Bank of England’s base rate is predicted to reach 4% by the end of Q1, dropping to 3.25% at the close of 2024.
What will higher interest rates mean for households? KPMG conclude that although mortgages are the largest component of household debt in the UK, two-thirds of mortgage debts are held by the top half of the wealth distribution, which is also where excess savings accumulated during the pandemic are concentrated:
“With households paying around £14bn in interest (on mortgages and other debt) every quarter, and the stock of excess savings around £86bn, it would in aggregate be enough to cover a doubling of interest payments over six quarters, effectively getting households through the recession. Unemployment is expected to peak at a relatively lower level during the current recession, meaning more households are likely to retain their main source of income. In addition, households are likely to be less leveraged due to more conservative lending criteria, which saw a fall in the share of high LTV mortgages (at a loan-to-value ratio of 90% and above) to 4.5% by 2022 Q3 compared to a peak of nearly 15% in 2007.”
Robin Wells added:
“The energy crisis plays a big part in the decision to move home. For some, it will practically wipe out the prospect of “up-sizing” and with energy bills set to increase again from April the cost of energy is as big a factor as interest rates when it comes to home buying and selling decisions.”
With the predictions for the overall economy set out above, let us examine what all this means for the property sector and Conveyancers.
A year of real estate market stability and confidence? – It is looking positive
The fact that despite 2022 being so traumatic in terms of uncertainty, as evidenced above, house prices still rose by 5.6% on the previous year. This confirms that there remains an appetite to buy and sell property. And according to our Residential Property Trends Report for Q4 2022, the market sat in a holding pattern at the end of last year whilst buyers and sellers waited to see what the New Year would bring in terms of interest rates and new mortgage products.
With interest rates peaking in the first quarter of 2023 and then stabilising, affordable mortgages will begin to return. In conjunction, house prices should continue to fall levelling up the playing field and bringing confidence to first-time buyers.
Commenting on how stakeholders in the property sector can successfully navigate the first few months of the year, Elizabeth Jarvis said:
“The biggest factor stalling the housing market right now is uncertainty. Interest rates must stabilise, and lenders must be clear about their intentions and lending strategies. Mortgage products need to be open to a wider range of the market and mortgage rates need to settle. House prices are consistently reducing and with all these factors I have no doubt the housing economy will become reinvigorated as the year progresses.”
Tips for successfully navigating a complex 2023 property market
Due to an ageing population and the post-pandemic trend of early retirement, almost every country in the developed world is suffering from severe skill shortages. Combine this with low birth rates and there is no escaping the fact that to compete effectively, law firms, along with many other industries, will need to continue to embrace technology. Research recently conducted and released by OneSearch’s parent company Landmark shows over 65% of senior property solicitors and conveyancers acknowledge task automation has made their business more profitable.
For Conveyancers and legal professionals, affordable and supported technology provides a path to speeding up the conveyancing process and thereby acquiring market share from competing practices. In addition, technology can mitigate risks associated with particular elements of the conveyancing transaction, for example, creating manual reports on title. In today’s marketplace, where dissatisfied clients are usually more than happy to leave harsh Google/Trustpilot reviews, ensuring your conveyancing department has access to the technology-based solutions it needs to provide swift, accurate, responsive client service must be a priority for all law firm managers in 2023.
We wanted to make you aware of some additional costs which can occasionally affect our Regulated DW searches.
Whilst Water Authorities are responsible for the vast majority of the water and sewerage infrastructure in England and Wales, there are five smaller private water companies who have the responsibility of maintaining the water and sewerage infrastructure in small pockets of developments.
In situations when a property falls within the boundary of a private water company, additional fees will apply to our Regulated DW searches to account for additional costs applied by these private water companies.
This volume of cases that this affects is extremely low and applies to less than 0.25% of our total Regulated DW searches.
Should any order containing a Regulated DW search fall within the boundary of a private water company, OneSearch will contact you in advance of progressing your order to advise of the additional costs and provide alternative DW products were applicable.
It may be advisable to include this in your client care letters to notify clients of any potential costs.
| Water Authority | Additional Cost |
|---|---|
| CON29DW Albion Water |
£74.40 |
| CON29DW ICOSA Water |
£65.00 |
| CON29DW Independent water Networks |
£65.00 |
| CON29DW Leep Networks (Water) Ltd |
£56.40 |
| CON29DW Veolia Water |
£66.00 |
For any immediate questions, please get in touch with our Customer Services team on 0800 052 0117 and we will be more than happy to assist you.
Please be advised our Christmas opening times are as follows:
We will be closing on Friday 23rd December at 12:30pm and reopening on Tuesday 3rd January at 8:30am.
We’d like to take this opportunity to wish our clients and industry partners a very Merry Christmas, and a Happy New Year!
We would like to draw your attention to a OneSearch product update.
We are making a modification to the way we display detailed highways information on our OneSearch Prime, OneSearch Prime Commercial, and OneSearch Duo products.
Previously, the adoption status for highways would be displayed showing carriageway, footway, footpath, and verge status.
Going forward, we will be displaying highways status information in a more simplified manner.
These changes are effective immediately. For any immediate questions, please get in touch with our Customer Services team on 0800 052 0117 and we will be more than happy to assist you.
Happy New Year to you all; we at OneSearch hope you were able to rest and recuperate over the festive break, especially after such a hectic year for the industry, and a turbulent twelve months across the wider world.
As we ring out the old and ring in the new, we can look forward with some positivity to the coming year – the UK housing market continues its upward climb, with 2021 ending as the strongest calendar year for annual house price growth since 2006.
There is some caution, however, brought about by the latest coronavirus variant Omicron, and what effects it may have on the housing market, viewings, and restrictions for conveyancers.
We recently caught up with OneSearch Managing Director, Elizabeth Jarvis, for her thoughts on the year ahead:
“When asked to consider the outlook for 2022, I think we all have an inkling that the year may well start a little slower than we would like it to, driven by a gentler-than-desired supply of properties to the residential market, plus overall concerns relating to the continuation of restrictions driven by the pandemic.
I believe new build property and the commercial market will however start with more of a steady momentum, yet residential may take a while to catch-up. I don’t however believe this will be long-lived and in the late springtime believe we will start to emerge from the colder months with a renewed vigour, and people wanting more normality and to get moving once again.
It will be interesting to see if lenders introduce new products to help entice more people to market their homes in the first half of the new year. If this is combined with new build activities, we should see the residential space open up more as we move through the year.
What impact do I think this may have on our customer-base? I believe competition will remain strong with home buyers and sellers likely to shop around to find a legal professional that meets their needs and can offer the assurances of a speedy and certain completion.
In 2022, a recalibration of the market has got to happen and, as the market finds its new normal, I’m certain we will have more wind behind us as we enter the spring of 2022.”
What are your predictions on the coming year? We’d love to hear them! Email us at digitalmarketing@onesearchdirect.co.uk or message us on our social channels and let us know.
As ever, we look forward to helping you and your firm prosper in 2022.
We’ve made it to the final instalment in our Risk Series, a series in which we have examined the top five conveyancing risks in more detail.
Over the past few months we have taken a deep dive into a different risk, be it flood, ground stability, planning or coal. Today our focus is on Energy & Infrastructure, written by Mark Taylor, Channel Manager at Landmark Information and environmental auditor with the Institute of Environmental Management and Assessment.
The rebirth of infrastructure
Whilst other topics have been at the forefront of UK politics since 2016, one issue that has remained in the background – recently moving back into the spotlight – is large scale infrastructure projects. It isn’t just topical in the UK; in the United States, President Biden is also targeting massive national investment into its infrastructure.
Whilst not on the financial scale of the US, the UK Government is planning significant expenditure into infrastructure and the creation of a new National Infrastructure Bank. The hope is to not just improve travel services and access; the investment principles look to support wider objectives including regional and local economic growth and helping tackle climate change through clean energy projects (HM Treasury, 2021).
Infrastructure and Property
With most infrastructure plans, especially those of national significance and size, there are always likely to be two sides to the discussion.
Constructed over three phases, High Speed 2 will initially connect London to the West Midlands, the West Midlands to Crewe and finally to the north-west and north-east. Throughout the network, HS2 is expected to increase access and speed up commuter times while increasing the overall rail networks capacity. HS2 report that once fully operational, it is expected that 300,000 passengers will use the network daily (HS2, 2021).
Given the scale of the project across the country, inevitably some communities will be negatively impacted, with links to the potential reduction in some house prices. In response, HS2 have set up several schemes including rural support zones, homeowner payment zones as well as a ‘Need to Sell Scheme’ to compensate those affected. While these schemes look to help those affected by the proximity of the rail link route, they also acknowledge that infrastructure projects can have an impact on property value.
It is important to highlight that improved, modern and faster public infrastructure is also an enabler. It can improve social mobility, increase access to green open spaces and other amenities, but also speed up commutes allowing people to spend more time on the important things in life.
Crossrail 2 is an example where house prices have prospered. According to a 2017 report by Knight Frank, house prices along the route within in a 10-15min walk to a station from the period of 2008-2016 out-performed the market by 7% (Knight Frank, 2017).
Green Investment
One of the key elements of infrastructure spending across the next decade will likely be on sources of renewable energy.
The Paris Agreement, a legally binding international treaty on climate change was adopted by 196 Parties at COP 21 in 2015 (UNCC, 2021). Coming into force in 2016, the Agreement’s central aim is to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2 degrees Celsius above pre-industrial levels.
On the 27th June 2019, the UK became the first major economy in the world to pass laws to end its contribution to global warming by 2050. The target will require the UK to bring all greenhouse gas emissions to net zero by 2050, compared with the previous target of at least 80% reduction from 1990 levels (Gov.uk, 2019). To reach net zero by 2050 significant action will be required across a whole range of industries from construction to food waste, transport to energy production.
At the end of last year, the government announced its ten-point plan for a green industrial revolution, totalling a £12billion public investment (Gov.uk, 2020). A large focus of this will be on wind energy generation as the Government hopes to quadruple the output of offshore wind. However, the expansion of the wider renewable energy sector will likely be inevitable to meet the legally binding target.
Whilst some would argue as fickle, what a potential property purchaser sees as ‘value’ can vary from person to person. There is precedent for linking wind turbines to a reduction in property value; in 2014, research undertaken by the London School of Economics concluded that large windfarms can impact property prices by up to 12% (Guardian, 2014).
Our value of space
Whether you agree or not, it does prove the value in providing full transparency into the potential changes in the property surroundings during a property transaction, especially if that value is being based on a view that could be fragile and changeable. Our value of local green space has increased as a result of lockdown and the restrictions placed on movement. Lockdown has made us appreciate and reengage with the green spaces near to us and the value they bring to the places we live. If we don’t have it, one property trend suggests we’re now more willing to move for it.
Whether it’s a short-term response to the pandemic is yet to be seen, however, fuelled by the stamp duty holiday, it has been reported that homeowners have started leaving our urban centres in search of individual open space and the rural idyll. The last 18 months has left many rethinking what is important to us and the value we hold for having access to more space, the countryside and nature.
What is being reported and is it reasonable?
Whether looking at energy or infrastructure projects, during conveyancing what is reported should be grounded and reasonable. Therefore, if something is going to be identified or alerted during a transaction, it needs to be for a good reason.
Crucially, Landmark environmental reports have fine-tuned the search radius of what they identify in the property surrounds for a conveyancer to raise to their clients. Intelligently, an alert is not just based on the potential physical impact of a feature on an area, but also the subject property’s location. For instance, as rural properties are likely to be more sensitive to changes in the surrounding environment when compared to urban (especially as there may be perceived value in a view or open space), we treat these differently.
From a conveyancer standpoint, there is a lot of value in this as you will have confidence that projects are not being identified in environmental reports over cautiously, while also providing robust information for your client.
Both Landmark’s Energy & Infrastructure report and their market leading All-in-One environmental report, RiskView Residential reacts to this, searching to a shorter radius in urban centres so not to identify an unlikely issue.
References
(CNN, 2021) https://edition.cnn.com/2021/03/31/politics/infrastructure-proposal-biden-explainer/index.html
(HM Treasury, 2021) https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/994437/UK_Infrastructure_Bank_Framework_Document.pdf
(City AM, 2021) https://www.cityam.com/budget-2021-sunak-pledges-22bn-for-new-infrastructure-bank/
(HS2, 2021) https://www.hs2.org.uk/why/capacity/
(Guardian, 2020) https://www.theguardian.com/uk-news/2020/aug/21/crossrail-delayed-again-until-2022-and-another-450m-over-budget-tfl-covid-19
(Knight Frank, 2017) https://content.knightfrank.com/research/520/documents/en/2017-4695.pdf
(GOV.UK, 2021) https://www.gov.uk/claim-compensation-if-affected-by-hs2
(UN, 2019) https://www.un.org/press/en/2019/ga12131.doc.htm
(Gov.uk, 2019) https://www.gov.uk/government/news/uk-becomes-first-major-economy-to-pass-net-zero-emissions-law
(Gov.uk, 2020) https://www.gov.uk/government/news/pm-outlines-his-ten-point-plan-for-a-green-industrial-revolution-for-250000-jobs