Challenges conveyancers are facing in 2019

Unsurprisingly, a lack of clarity surrounding Brexit and how the UK political and economic landscape will look following the UK’s departure in October, has led to a lack of confidence permeating throughout the sector.

As a result, the majority of stakeholders have adopted a ‘wait and see’ approach which has led to a clear stalling and flattening of progression. From the construction sector at the beginning of the process all the way to buyers and sellers, all have been affected.

The Construction Outlook – UK Struggling to Build Confidence

The construction sector is a vital cog in determining the Government’s ability to hit their target of 300,000 new homes per year by the middle of the next decade.

Unfortunately, construction has slowed in 2019 and the information from the first half of the year would suggest that further construction contractions are a likely consequence of the present climate before things begin to improve.

The Ministry of Housing, Communities and Local Government recently published data on the construction and transactions of new build property in the opening quarter of 2019.

Residential dwellings starting construction in the opening quarter of 2019 decreased by 9% when compared with the final quarter of 2018. Whilst the 36,630 starts represented a 1% increase when compared with the opening quarter of 2018, the current output suggests a flattening in the market.

Similarly, the 42,870 completed new build developments in the opening quarter represent a 1% fall from the final quarter of 2018.

Construction output in the second quarter of the year also suggests a continued slowdown in building. According to the seasonally adjusted IHS Markit/CIPS UK Construction Total Activity Index for May, construction started contracting for the first time since the unseasonable frozen conditions during March 2018.

Although economists were confident that construction would remain stable with March’s index figure of 50.5, output actually moved below the no change point of 50 to 48.6 (signaling a reduction in construction in the UK.)

Figures for June slipped further below the neutral index figure of 50. Instead of regrouping, construction dwindled further to 43.1, the lowest index figure in over a decade (June 2009) when the market was recovering from the financial crisis.

Following twenty-three months of positive growth for small to medium sized developers, A recent ‘state of Trade for Q1 2019’ survey from the Federation of Master Builders (FMB) found a 29% decline in workloads.

88% of builders believe that material prices and 71% are certain wages will rise significantly in the future. As fewer specialists enter the UK from the continent, around two thirds (64%) of respondents anticipate a skills shortage.

Sentiment is likely to persist in the short term. The report also found that 53% of respondents were anxious that a no-deal Brexit scenario would reduce available materials and experienced construction workers, put pressure on construction costs and potentially lead to fewer building works.

The Residential Outlook: Buyers and Sellers Waiting Game

Sentiment amongst the majority of industry market reports suggested that buyers and sellers were hibernating, waiting for a less hostile environment before committing their time and effort to buying and selling property.

Although Brexit is far from resolved, industry reports suggest the frosty atmosphere created in the opening half of 2019 is beginning to thaw and the market is becoming a lot more buoyant moving into the H2

For many, the reduction in instructions to market property has resulted in a significant housing stock depletion making the market less appealing to possible buyers. According to the NAEA Propertymark Housing report for March, the average 37 available properties per estate agent branch was the lowest figure for March since 2013. This fell to 35 in April. However, May’s figures indicate improved confidence as the 41 available properties represent the highest level since December 2018.

The average number of registered house hunters for March reached 296, a 17% increase on February’s figures and a return to January’s levels. However, April represented the bleakest month for house hunters who fled by 10%, reducing to 265 registers house hunters per branch. May enjoyed a 16% increase to 307 potential buyers registered per branch.

The Royal Institution of Chartered Surveyors (RICS) UK Residential Market Survey for June suggests that chartered surveyors operating in the residential sales and lettings market feel as though difficult conditions are abating slightly as the mid-point in the year.

Both new buyer enquiries and new instructions indicators posted positive net balance results in 2019. +10% of respondents were confident that buyers and returning to the property market. This equates to a 37% positive swing when compared to the –27% reading posted between March and May.

In terms of surveys completed for new instructions and stock entering the market, the June report found the market to have shrunk by around a quarter (24%) when compared with the year previously.

However, overall, as the market moves into the second half of the year and has come to terms with a delayed Brexit outcome, the sentiment is a lot more positive. Newly agreed transactions for June had entered the positive net balance of +2% for the first time in over 10 months.

The Commercial Outlook: Waning Political Confidence Stifles Growth

Non-residential property developments have struggled in 2019 as businesses and organisations are reluctant to green light expensive projects until the impact on the economy becomes clear.

The IHS Markit/CIPS UK Construction Total Activity Index for June found commercial work to fall for the sixth consecutive month and the steepest decline since December 2009.

Public infrastructure works have struggled to gain traction in the opening quarter of the year. The State of Trade survey reported that public new builds had fallen by almost a quarter (23%) and public repair and maintenance dwindled by 27%.

Commercial and industrial construction have also fallen to -27% in the opening quarter of the year. This represents a decrease of –43% from the +16% from the final quarter of 2018. Overall, non-residential property output decreased by a third (32%) between Q4 2018 and the opening quarter of 2019.

Where will the market head next?

The property market has always been volatile and the first to respond to any slight downturns in the economy. The same can be said when there is an upturn. There has been much speculation around changes to SDLT and while these having come to fruition it is good to see that a boost to the property market is on the government’s agenda.

“We are facing less than favourable market compounded by political uncertainty but I’m confident it will rebound as it has done before. We’ve seen a lot of ups and downs during our 30 years serving the legal sector in the UK and our approach has always been to innovative and improve ourselves during these times to ensure we come out stronger on the other side.” Mark Allwood, GlobalX CEO

In such uncertain market conditions, it is imperative that your firm is able to offer a seamless service. GlobalX are proud to offer unrivalled conveyancing and specialist conveyancing software

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