Dr Doom and the man who broke the Bank of England were in bearish mood this week. Professor Nouriel Roubini, the economist who more than most predicted the financial crisis, and fund manager George Soros, were among a handful of commentators issuing separate warnings that the surprisingly sharp market recovery we’ve seen in recent weeks is too much, too soon.
Perhaps they are wrong. Let’s hope so. For now, though, let’s assume they are not. If the curve turns out, at best, to be more of a “u” than a “v”, then recessionary consequences will be with us for a while. And, in truth, we’ve yet to see many of the givens that are typically associated with recessions materialise.
Take, for instance, the accepted wisdom that too many businesses sleepwalk into recessions and lack the liquidity required to ensure a safe passage to the other side. We’ve seen few collapses in the property sector so far. That suggests the worst is still to come.
Equally, industries that fail to reshape during recessions often find, when better times return, that new players have moved on to their patch. Since we’ve yet to see substantial structural change among agents, that remains a danger. Without change, established firms will be left playing catch up, and weaker ones will no longer be in the game.
The same is true of consolidation. It’s most common during recessions and, again, it hasn’t happened in property this time round, so brace yourself.
If only this was all that agents had to concern themselves with right now. Unfortunately, it’s just the start of a long list. As banks become more influential as de facto landlords, how will agents work with what is effectively a new breed of client? And, with allegations of lowballing already flying around the market, how can those pricing for the bottom line compete with those pricing for the top?
Equally, as the inevitability of deep public sector spending cuts looms ever larger, will we see widespread property asset disposals by Whitehall and town halls alike? Already, a Treasury team is examining where the least damaging cuts can be made. An incoming Conservative administration would conduct a similar exercise. Agents that aren’t investing in lobbying should perhaps do so now.
Tough calls ahead
But the toughest calls that need to be made concern staffing. The recent slowdown in job cuts across the UK property industry came to an abrupt end in September, with 525 redundancies reported by EGi in the month. Still, firms need to ask themselves whether they have too many people.
And in that respect, agents need to learn from past mistakes. There needs to be an end to golden handshakes of such largesse that their value will never be recouped. In recent months we’ve seen talented individuals whose businesses have been acquired by larger firms flee the moment their tie-ins come to an end. Much more effort needs to go into understanding the motives of a lone ranger who joins a big firm.
And much more effort than we’ve seen in the past needs to go into integrating businesses – particularly if the agent community consolidates.
Even though the past few weeks have seen a level of confidence return to a market that has been starved of it for too long, don’t take the upswing for granted. In tough times, tough questions need to be asked – and answered.
