As the lockdown restrictions started to be lifted last week the government placed estate agency and lettings agency business owners at the front of the queue of industry leaders who have been given the opportunity to revitalise their businesses and get back to work. Sounds great, that is after all what they had been crying out for. However, the new normal as it is being called is a far more difficult place to exist in than the one first considered maybe a few weeks ago when the lockdown started. I get the impression that a lot of businesses were thinking of the challenges in a far more black and white cinematography of the world than the thousands of hues of grey that actually exist today. Virus spreads, lockdown happens, lockdown ends, we all go back to work. We know now that even if by some miracle we avoid a second or third wave and lockdowns, that we have this virus to live with for many months to come, in fact not having a new surge in cases will ultimately mean that whilst there may be less deaths over the long term, businesses and society in general are going to be walking on eggshells for some time. It would be far easier to march straight to our destination and be done with it, instead we have to pick out path slowly and carefully, often pausing for reflection, doubling back, changing direction and moving very very slowly on tip toes.
At first sight, it is this conundrum that has immediately forced many of these businesses to pause for thought. The penny has dropped finally, life has changed immeasurably. After all, there has been weeks of furious lobbying, demanding that the property industry be the first to open, complaints that the government wasn’t listening so you would have thought that all estate agents and lettings agents involved in these rallying cries would now be open, yet most still remain closed. The CEO of Countrywide announced on Friday that his branches would be remaining closed for now whilst they considered how to reopen safely and how much to reopen. This is the same CEO who wrote to Robert Jenrick a couple of weeks ago and unashamedly begged him to allow them to open their offices. Ten days later, Robert said, “Alright then, you can reopen”. Countrywide said in reply, “We are actually not sure we want to open just yet”.
Measurement though is exactly what businesses need to do in order to unpick the riddle, but measure what? Firstly, safety seems to be a first important consideration, however, that is not a one-off item on a checklist that can be ticked off as complete. Many businesses have produced guides and checklists of all the things that need to be considered, but these lists will evolve as new circumstances unfold and people will make mistakes. When they do people will become infected, many will die, and confidence will continue to be eroded in everyone’s ability to remain safe. So, the first consideration in our grey new world is the Rate of Infection or ROI 1.
A second consideration then safety aside, is how much do I reopen? The furlough scheme has been extended until October which means firms don’t have to pay salaries until then, but at the same time they are not seeing the benefit of having these people at work. After all, it would make far more sense to have to pay all these salaries and have these people at work selling and letting property, creating turnover, making profit. This brings us to the $64 million question, which is what I suspect many of these businesses are also trying to work out this week whilst buying all their PPE. Will it be busy? Does anyone want to buy or sell a property at the moment? There has been much talking up of the market and this pent-up demand that exists, but now it’s time to hit the dance floor, businesses are naturally worried that it may not. What is the appetite of the public for moving? How many have lost their jobs? How many are concerned they may still do? Will lenders prevent them moving with eye watering underwriting? Are people just going to be too scared to come out for anything more than they have been doing during lockdown? A recent survey said 60% of adults would be changing very little in their routines in the coming weeks. So how many of everything will there be? How many sellers, buyers, and how will they behave? The press is widely reporting a likely house price correction of 10-20%. Is this likely? Could this mean there will be activity, but every offer is going to be way off the mark? One question leads to another, there are many many more that need to be thought through before any conclusions can be drawn and decisions made. More importantly, this conundrum is a fluid, forever shifting and changing shape, speed and volume. What may be the answers one week may not be the following one.
I can’t remember who I should credit with the quote, but I was once told that Estate Agents have 2 ears and one mouth for a reason and should use them in that proportion. Listening is the greatest skill of an agent, not talking, and if ever there was a need to keep your ear to the ground, monitor your KPI like a hawk, train your staff which new questions to ask, check in with your teams constantly to test the mood of the market, speak to peers and colleagues, it is now. The old sales funnel that was being used in early March to run the business, can go in the bottom drawer until at least next year, a new one needs to be made, and perhaps then refined each month as more data and sentiment becomes available. The valuation to instruction conversion will not be at 50%, the instruction to gross sales ratio, the viewing to offer, the fall through rate, all will have a new normal until such time as we can say this pandemic is over. Over by the way doesn’t mean when we have a vaccine either, the economic shockwaves of this crisis will be felt for at least a year or two afterwards, some are saying maybe even ten years, but let’s try and remain positive. The new funnel, will have to have some assumptions made about the number of valuations and buyers registering, but without doing this exercise, there will be no way of being able to forecast how quickly pipelines will be rebuilt, revenue will return, and cash will hit the bank. Based on an average 24-week instruction to completion, many agents are not going to see any cash from new sales before end of the year.
Then there are the practicalities of the size of the offices and how many can be safely brought back if social distancing is to be applied. How many appointments can now be done safely in a day? How much less capacity can be handled now we have to do things differently. So, the second consideration in our grey new world is ROI 2, the traditional Return On Investment. How much of my business am I going to reopen that means I can take advantage of the opportunities that may exist, but at the same time does not make the business very quickly loss making or it runs out of cash?
ROI 2 always needs to be considered in conjunction with ROI 1 for the next few months, no different to monitoring the stock market. Traders spend more time looking for new stories to determine what stocks they buy or sell, hunting for good and bad news to determining which are likely to rise and fall. Businesses should be making these investment decisions with one eye on the Rate Of Infection in the same way. A huge second wave will lead to a new lockdown. Confidence and pipelines will once again be shattered. Predicting when it will happen is tough, I know but relying on the government press briefings is waste of time as we covered in another blog, so rely on the raw data. We know how many infections triggered the lockdown last time, it will be no different if there is a second one, and trends are what they will be looking for. It is one eye on this that can help to determine how much cost is safe to turn back on in marketing in particular. If ROI 1 is low and stable, consumer confidence is more likely to return and remain, as will it with banks, making the likelihood of some value coming from any marketing more tangible. If ROI 1 is rising, more prudence might be more appropriate.
The housing market is never an easy one to predict. Whilst every business should have re done their business plan, sales and activity funnels, finfors, and cash projections, they have to be reviewed and rereviewed in context of what is likely to affect them, which is why reviewing the SWOT in context of threats frequently is all the more important now. Traditional threats are rises in interest rates, or government legislation, Brexit and general elections but they are easier to monitor and see, happen less frequently, and we are all familiar to some extent as to what normally happens during these events. COVID 19 is an unknown quantity and has far reaching implications for just about every stakeholder in the property industry which is unusual for any more traditional threat that normally affects the confidence of one set of actors. If that wasn’t complicated enough, there is then the safety of everyone involved at the same time driving these decisions, and ultimately it is attention to safety that is the solution that solves both riddles.
The only route back to seeing all businesses Return On Investment rise is for everyone to grasp the nettle of their own responsibilities of monitoring and keeping the Rate Of Infection as low as possible. It is about deaths yes, but it is also a weather bell for confidence. In spite of what sounded like criticism earlier, I applaud those Agencies that are reflecting and preparing to wrestle these conundrums for a few days or weeks in advance of reopening. More fool the agencies that rushed to open their doors at 9am on day one. I have heard of one agency who did this whose idea of PPE was later that day to drop hand towels and soap to its offices, nothing else, such was their desperation and lack of consideration of their part to play. Every business and every individual has a critical part to play in trying to keep the Rate Of Infection down. It will make it a far safer, more predictable, more stable environment to continue working in where profits and prosperity return for all, where the world will become more black and white once more.
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