The Conveyancing Industry 2017 – Is the Glass Half Full?
2016 was very much a year of two halves for the conveyancing industry. The Stamp Duty Land Tax changes imposed for additional properties created an unprecedented upsurge in transaction volumes prior to the 31st March 2016 deadline with the majority of companies recording record numbers of completions during March 2016. This was counteracted by a cautious summer and end to the year as notwithstanding the subsequent affect that the Stamp Duty Land Tax changes had on the Buy to Let market, the European Football Championships and the Olympics dominated the thoughts of many consumers and coupled with the EU Referendum and the US Presidential Vote, led to a disappointing end to 2016 for most companies. Although, that said, the decision to shelve the privatisation of the Land Registry was seen by many as a welcome highlight at the end of the year.
The number of people buying homes is expected to fall in 2017. The continued Stamp Duty Land Tax increases on additional properties, the embargoes on landlord’s tax relief and the reduction in buy to let mortgage interest relief has had a negative impact on the conveyancing industry with Landlords, Buy to Let and cash purchasers representing approximately one third of property transactions in the UK. It was hoped that the government would have helped redress the balance in this respect in the Autumn Statement, but unfortunately, the hopes of many Conveyancers were dashed and although hopes remain that the government will reconsider their position to boost the industry in 2017, it is believed that the demands of Brexit will be too consuming
So, we are left to wonder what is in store for the industry in 2017 and if 2016 taught us nothing else, we should expect the unexpected and embrace change. That said, it is not all doom and gloom and there are encouraging signs for 2017:-
During December 2016, NAEA research confirmed that sales for both first time and home buyers went against the usual seasonal trends. Key points from the Housing Market Report include:-
- During December, the highest number of prospective buyers registered per branch was the highest in 13 years.
- Sales to first time buyers being the highest recorded since 2001.
- The number of houses available to purchase marginally increased.
- The number of people looking to buy a home in December rose to the highest level observed since 2003 with branches registering a 12% increase on November average figures.
Consumer confidence would appear to have grown towards the end of 2016. Interest rates are low and employment levels are high, which is an ideal situation for a healthy housing market and the buy to let market’s loss has been the owner-occupier’s gain as first time buyers and those looking to ‘move up the housing ladder’ are left with less competition for the properties they want to buy.
According to new research, 2016 saw more first time buyers than at any point since the recession. The Halifax estimated that 2016 saw the number of first time buyers grow to 335,750, the largest amount since 2007’s figure of 359,000. This increase has been attributed to low mortgage rates and high employment levels. In addition, Government schemes such as Help to Buy have improved affordability, enabling more first time buyers to buy their first homes with over 180,000 first time buyer households having been helped on to the housing ladder using the Help to Buy Scheme.
The Government have stated that thousands of first time buyer homes will be built this year. Throughout England, thirty areas are due to receive funding from the £1.2 billion ‘Starter Homes Land Fund’ for the new brownfield site developments. Buyers will receive a minimum discount of 20% below market value and must be aged between 23 and 40 in order to be eligible. The properties are predicted to go on sale in 2018.
Data from the Council of Mortgage Lenders indicated that lending grew during November and December 2016 with £11 billion being borrowed by home owners for the purpose of buying a house during November. This represents a monthly rise of 5% when compared with October 2016 and an annual increase of 2%. For first time buyers, the amount borrowed increased by 4% since October with an annual rise of 9% showing that first time buyers benefitted as the value and volume of loans rose annually, despite the political and economic uncertainty.
Rightmove have recently reported that since Boxing Day, there has been an increase in traffic of 5% providing an early indicator that housing demand seems robust. The current search activity growth is interesting to note as that which occurred in 2016 may have been unusually high due to the second home Stamp Duty Land Tax amendments announced in November 2015.
Conveyancers should look to 2017 with optimism and take the opportunity to review their business’ practices, processes and products to meet the ever increasing demands of the consumer client.
In an age where you can now buy your weekly shop from the comfort of your bed at 3:00am (if you wish) and have your goods delivered within a few hours, clients expect the same level of commitment from their lawyer when making the biggest financial commitment of their lives. Conveyancers need to look at how they are communicating with their clients in order to enhance the home buying experience and create positivity. If not, the ease of social media will mean that the world and their dog will hear of a client’s ‘negative’ experience. Communication is key in order to manage the expectations of our clients and the use of technology is essential in order to elevate the standard. Whilst online case tracking tools represent an industry staple, developed over the last few years, Conveyancers should look to embrace technology and social media as an exciting opportunity to innovate and to bring them closer to their clients.
There is a firm commitment within the industry, by the key stakeholders, to improve the home buying process. The Society for Licensed Conveyancers together with the Conveyancing Association are driving the necessary changes in this respect, with the support of the Council for Licensed Conveyancers, the Law Society, mortgage lenders and estate agents who are committed to modernising the conveyancing process. The Conveyancing Association’s White Paper ‘Modernising the Home Moving Process’ outlines how a future, more certain and transparent conveyancing process could operate. The White Paper focuses particularly on the benefits to be gained from creating greater certainty far earlier in the home moving process. It suggests a number of ways in which this can be achieved including:
- Centralising the identity verification of the parties to reduce the risk of fraud and money laundering.
- Collating the Property Information and Title Information on the marketing of a property.
- Requiring a legal commitment on offer to reduce transaction failures.
- Requiring completion monies to be sent through the day before completion.
- Amending the Commonhold & Leasehold Reform Act 2002 to resolve the unreasonable cost and delay now associated with the leasehold sales process.
- Providing a reliable lending decision-in-principle based on a ‘hard’ credit report without impacting on the applicant’s credit score.
- Reviewing the CML Handbook to remove anomalies and ambiguous entries which generate post-valuation enquiries.
Cyber Crime is seen by many as the most dangerous risk to Conveyancers that there has ever been and again, companies need to ensure that they are doing all they can to protect themselves and their clients against the risk of Cyber Crime and ‘Friday Afternoon Fraud’. Research shows that one in ten people will be affected by Cyber Crime and over the last two years, over £10.5 million was lost by homeowners through Cyber Fraud. In addition, Law Society research shows that one in five law firms were targeted by fraudsters in the past year.
We are all aware of the horror stories of unsuspecting purchasers losing many thousands of pounds from Phishing, Spear Phishing and Vishing scams, which emphasise the need for us to educate our clients of the very real risk of Cyber Fraud to ensure that they protect themselves and their assets in a robust manner. Clients need to be assured that when they are transferring huge deposit sums that they are doing so safely and do not make themselves an easy target for fraudsters, i.e. registering for the Land Registry’s free Property Alert Service, not using free wifi facilities to make online banking payments or posting updates about what colour curtains they will be putting in their new bedroom on Facebook or Twitter!
In addition to the education of clients, it is vital to ensure that Conveyancers implement and maintain robust systems and procedures for their internal protection, e.g. the Cyber Essentials Scheme and by verifying the identity of the other lawyer. In addition, staff should be appropriately trained biannually to ensure the maximum level of protection.
In conclusion, whilst 2017 may be a challenging year for Conveyancers, we must embrace change as there are exciting times ahead – the glass is most definitely half full!!