Slowing recession could be a good time to reset the real estate market – Rudolf

In 2013, when former Bank of England Governor Mark Carney was appointed, there was a lot of ‘noise’ about his ambition to give the market a ‘forward guidance’ when it came to changes. bank base rate (BBR). .

If you recall, Carney was trying to provide some kind of certainty and assurance that, for example, BBR would not move until unemployment reached a certain level or other measures were met . The agreement being that we would thus obtain a much more effective monetary policy.

Unfortunately, the policy of “forward guidance” could not hold because of the significant economic and political changes which hit the United Kingdom, in particular the vote in favor of leaving the EU, which precipitated the cuts in the BBR, and the pandemic. The forward guidance concerning at least the rates was no more, if it had existed.

Recession warning

Fast forward to this month and we have a return to Bank of England forward guidance, but in another form. This time it’s a warning that the UK will fall into recession in the fourth quarter of this year and it’s set to last all of 2023. There’s nothing like good news , and that’s nothing like good news.

I don’t know if such a warning is unprecedented, but it certainly feels like it, and the fact that it was issued on the same day that the Monetary Policy Committee raised the BBR by 0.5% and that ‘a recession appears to be so long and deep, will undoubtedly cause serious concern.

Housing market players are not likely to be immune to a recession, and we may already be starting to see the impact of increases in the cost of living, interest rates, etc. decline, lenders price themselves out of the market and demand begins to fall.

However, could this warning and potential downturn in activity give our industry a chance to reset, prepare for what’s to come, and put our home buying and selling process in the best possible shape in order to potentially process fewer transactions?

This would certainly be a policy worth pursuing by whoever takes over next month, as it has been clear for some time that many companies in the housing market have struggled into 2022, particularly in finding the human resources needed to cope with the levels of activity generated.

I know this has been a major source of frustration for advisors and their clients, but I fear this is not an issue that only affects lenders or grantors.

Labor shortage problem

What was interesting about the series of interviews that BoE Governor Andrew Bailey gave, when the rate decision and recession forecast were announced earlier this month, is that he s is focused on internal labor shortages in so many UK businesses which have been a significant problem.

He said that when he talks to companies, the first thing they often tell him is that they can’t hire enough people fast enough. This is why we have high employment rates, but still hundreds of thousands of jobs that are not filled in many sectors of the economy.

For what it’s worth, I know that many member companies of the Conveyancing Association (CA) have been running permanent recruiting drives over the past six months to a year, and I have a feeling it won’t stop not even if demand and activity dip.

Of course, what will help us all prepare for a potential downturn is to make every case count, or at least ensure that the number of falls is kept to an absolute minimum.

What’s worse in our industry than seeing the work that goes into a deal go unrewarded because it fails?

And given the large number of chains we have, we are all well aware that if one falls, the domino effect can be significant.

Initial data could resolve failures

This is why the CA is in favor of providing advance information to ensure that the client and his transfer agent know from the outset everything that is important to them about the property and that he does not There are no surprises later in the process that would cause someone to change their mind and fire.

Currently, about one in three transactions are abandoned before completion. In other territories where they have advance information, that number is reduced to single-digit percentages, and we could significantly speed up the process, which means pipelines run faster, payment is received faster, and that profitability can be improved without wasting time, resources and investment on failed business.

With a recession seemingly inescapable for the end of 2022 and all of next year, it is clearly in our interest to push for a process that ensures that all of our work counts almost every time. Every transaction will be necessary and of great value over the next 18 months – we need them all to create a positive moving process for everyone.

Beth Rudolf, Director of Delivery at the Conveyancing Association (CA)