Self-employed estate agents prep for change in 2022
PROPERTY SPECIAL REPORT
Property market specialists share their expectations over what shape the UK property market will take in 2022 now that there’s talk of The Bank of England loosening mortgage criteria. Plus the latest on the Better.com Zoom call fiasco and the Purple Bricks class action suit involving self-employed estate agents.
“We wrote the book on homebuying.” That is one of the statements on Better.com, a slick US website providing digital mortgage lending services. Arguably, the company’s CEO, Vishal Garg, may have also written the book on how not to handle mass company lay-offs in the property sector.
According to news accounts, about 15% of the company’s employees in the US and India were laid off via a pre-recorded Zoom call as part of a cost-cutting exercise. According to reports, Vishal Garg, the CEO of Better.com, can be heard saying in the video call:
“If you’re on this call, you are part of the unlucky group that is being laid off. Your employment here is terminated, effective immediately.”
Terminating the 900 employees comes just weeks before Christmas and Better’s upcoming SPAC listing on NASDAQ (NASDAQ: AURC).
Since the clips of the Zoom call went viral, the digital mortgage sector’s reputation as trusted employers and lenders could become tarnished on both sides of the Atlantic. Not to mention backlash from back-office support staff in India.
In the age of cancel culture and social governance, the Zoom call’s international attention is unlikely to go down well with Better.com’s target customers, potential retail investors or institutional investors linked to Better’s special purpose acquisition company (SPAC) listing.
Garg, who has experienced unfortunate past allegations by former business partners in the past, has since made an apology to affected Better staff via a statement.
Team – I want to apologize for the way I handled the layoffs last week. I failed to show the appropriate amount of respect and appreciation for the individuals who were affected and for their contributions to Better. I own the decision to do the layoffs, but in communicating it I blundered the execution. In doing so, I embarrassed you.Vishal Garg
The online mortgage lender is still hiring, according to its careers section.
What’s happening to US property prices and lending levels?
The Better.com layoffs come at a time when The US Federal Housing Finance Agency just announced new limits to how much buyers can borrow in a conforming loan, according to a Better article on its website.
“These limits are based around national average home prices and differ from county to county. The loan limit for a single-family home used to start at $548,250 and now starts at $647,200. In more expensive markets, it peaked at $822,375, but will now jump to $970,800—more than $100,000 higher.”
What is expected to happen to house prices in Britain in 2022?
On the other side of the pond in Great Britain, the housing market is still showing signs of strength, according to Halifax’s November House Price Index.
However, with interest rates and inflation set to rise on both sides of the Atlantic, estate agents can expect to remain busy until home buyers have to re-think their financial position and ability to afford house prices. With talk of the Bank of England loosening mortgage criteria, such as getting rid of reversion rates after an initial deal ends, self-employed estate agents could see a very active 2022 indeed.
Yet not everyone is as optimistic. Graham Cox, founder of the Bristol-based Self-Employed Mortgage Hub says: “The highest quarterly rise for 15 years should be a reason to celebrate, but the reality is that house price rises may reverse very soon.”
Cox says that when the Bank of England meets on December 16th we could likely see a rise in interest rates to put a lid on soaring inflation.
“Throw in the uncertainty around Omicron and there’s every chance of a severe hit to consumer confidence. The property market of 2022 could be the polar opposite of 2021,” says Cox.
House prices v. buyer confidence
Some have concerns about whether the rise in property prices is sustainable. Jonathan Hopper, CEO of Garrington Property Finders, says of the recent housing data that parts of the economy may have been cooling but the housing market “didn’t get the memo.”
“Instead,” says Hopper, “it has turned up the heat, with quarterly price inflation now resembling a pressure cooker at a 15-year high.
“It’s more than two months since the stimulus provided by the Stamp Duty holiday finally ended, but you would scarcely know it.
“Estate agents remain busy and there are still thousands of would-be buyers looking for homes. But with the supply of homes for sale simply not keeping up with demand, the collision of these two forces is relentlessly pushing up prices.
“The Halifax’s data reveals that in November alone the average home rose in value by more than the average Briton’s net monthly salary. It now stands at a record high, nearly £34,000 above its pre-pandemic level.”
Buyer confidence remains robust thanks to the strength of the jobs market and the ultra-low cost of borrowing, even with a pending interest rate hike.
“Nevertheless this is not a free-flowing market,” says Hopper. “Transaction numbers have dipped since the end of the Stamp Duty holiday, as despite the shortage of supply, buyers become more tactical in their buying behaviour.”
The property map is changing shape
Hopper sees more people looking for homes outside the area they live in, and as a result, house prices are becoming ever more decoupled from local salaries.
“While the Halifax suggests the ‘race for space’ may have eased as demand for flats begins to recover, the great redrawing of the property map that began when the first lockdown lifted is still in full swing,” he says.
While many homeowners can sit back and enjoy the increasing value of their primary asset, those dreaming to buy are experiencing an increasingly vivid nightmare, according to Scott Taylor-Barr of Shropshire-based Carl Summers Financial Services.
“Recent data from the Yorkshire Building Society indicated that first-time buyers could now be looking at nine years to save the 5% deposit they would need to buy a property at the UK’s average house price, with only serious sacrifices made to reduce this timeframe,” says Summers.
Lewis Shaw, the founder of Mansfield-based Shaw Financial Services, was not surprised about the latest HPI since it tells us roughly the same as they all do, namely that house prices are going up due to a lack of stock.
“We’re not building enough new homes to keep up with demand and the government doesn’t have a credible strategy to fix the broken housing market,” says Shaw.
Each time a new HPI is released, I feel like Sisyphus atop the hill watching on as the boulder rolls down again. But change is coming. We’ve got an interest rate rise to look forward to in a couple of weeks’ time along with a possible recession in 2022, so buckle up buttercup.Lewis Shaw
GLO against Purplebricks
Contractors for Justice (C4J) is pursuing a proposed Group Litigation Order (GLO) against Purplebricks, on behalf of former agents that were hired as self-employed estate agents by the company, it has been reported.
According to Property Industry Eye, the background of the claim is that, in law, these self-employed agents were in effect employed for the purposes of holiday pay and pension contributions being owed by the company to the individual. The claim is for as much as 20.7% of each person’s total earnings.
Purplebricks told EYE: “We have always taken legal advice in regards to our model – and the advice is very clear that there is no legal basis for this potential action. The service we offer our customers is completely unaffected.”
C4J claims that it now has enough claimants with which to trigger the legal process against Purplebricks. Claimants now number in the hundreds and the current cohort will be ‘sealed’ and pre-action papers submitted to the courts from 14 December.
Any self-employed estate agents that want to make such as claim, if they believe they had a similar experience at Purplebricks or another company, should get in contact with C4J so that their arguments can be heard and submitted. The Twitter post below has the numbers to call.