Building on experience: our response to a changing market
As we enter the final quarter of the year, the property market is showing some signs of a potential slow down. 2023 is set to be a very different year to the wholly unforeseen success of the post-lockdown property boom that we’ve witnessed.
So now is the time to review, take stock and plan ahead. With rumblings of a recession and with forward sales positions starting to falter, what are the key things that property clients need to be considering?
State of the nation
The UK property market has proved to be remarkably resilient since it re-established itself in July 2020. Low mortgage rates, a robust employment market and a lack of available properties has stimulated growth, meaning demand has massively outstripped supply over the past two years, with house prices increasing and sales going through the roof. But can the market remain impervious to the effects of the current cost of living crisis – especially when consumer confidence is at its lowest point since the start of the pandemic?
From a developer perspective, many housebuilders are currently facing pressure from rising material and energy prices, which are being exacerbated by the war in Ukraine and by a historically weak sterling. New housing material prices in April 2022 were 22% higher than a year ago, while all new work prices have increased by 25%. Glenigan predict that new housing starts will fall by 5% in 2022, however, renewed recovery in the housing market should help projects bounce back by 14% in 2023.
Space & Time’s proprietary New Homes Index data is based on anonymised UK developer performance metrics, and allows us to look at overall appetite in the new build sector over time and establish trends, and we can see the gradual decline across the year to date with session volume sitting currently at about 88% of what it was this time last year. Google data also shows that searches for big ticket items like new homes and new cars are declining.
These facts – coupled with increased pressures on consumer finances – all point to sales becoming much more difficult to achieve. So, what do we do?
Lessons From history
Luckily, there is a wealth of research and insight into what brands can do in this situation. This, coupled with bespoke property insights based on our unparalleled expertise in the sector, puts Space & Time in a uniquely strengthened position to aid future proofing and plans for tougher times ahead.
The most important thing brands can do is establish the metrics that matter and monitor them correctly. Data is of no use if we do not capture or leverage it effectively, or consider it in the right context. Working closely with data teams/ agencies in an open and upfront manner will allow for better outcomes.
Mark Ritson’s marketing playbook offers some very clear and well-founded learnings to factor into our planning. The overarching message being one of focusing on the long term and not getting lost in short-termism. Pivoting from a lead-orientated strategy to one protecting brand health and inciting brand trust is inevitably what will result in a strong recovery post-recession. IPA research also demonstrates the importance of maintaining spend and remaining present in the eyes of your potential audience, as a downturn does present a genuine opportunity to enhance brand perceptions and create a dialogue with potential customers.
It’s also worth remembering that, during the 2008 recession, only 2% of adults changed their property plans as a result of the recession and 70% of people still maintained that buying property was a worthwhile investment*. The audience is still going to be there, but we need to assess how we communicate with them, remain authentic and gain their trust.
S&T scenario planning
Space & Time have outlined some clear scenarios and action plans to help guide our clients through what is potentially to come. We have established three potential scenarios; level, slump and recession.
Before approaching any changes, it is vital that we review, consider and, only then, act.
Review all data sources to understand the scale of the issue and assess performance metrics over a longer period of time. The main metrics to consider are sales, web traffic and goals, database health, cancellation rates, stock plot rates, email engagement, portal data and asking prices.
Consider the wider business performance where possible and think about other factors such as seasonality, availability, open database numbers and local market factors that might have an impact on performance.
If at that point it’s clear that performance is being negatively impacted by the market at large, consider implementing a plan of action based on an identified scenario.
SLUMP: Gradual decline in metrics and slightly tougher sales market where supply is starting to overtake demand.
RECESSION: Consistent decline across wider business where targets are being missed entirely and supply is significantly overtaking demand.
This approach gives us a starting point to build on and tailor accordingly. But, most importantly, it allows us to think rationally about the best next steps before any panic sets in. Preparation is key in ensuring that we are in the best position for future success.
If you want to learn more about how Space & Time can help grow your business in what continue to be unprecedented times, please contact us at [email protected]
*Source: Ipsos Mori/Mintel, Mortgages March 2010, Base: 1,115 homeowners aged 18+.