James Sherwood-Rogers, Chairman of COPSO discusses the implications of Brexit and privatisation of Land Registry on the housing market.
One of the first things that the new chancellor Phillip Hammond will have to make a huge decision about is the future sovereignty of the UK.
He will be doing so without knowing what the real ramifications on the economy will be, based on advice from people who don’t know if their ideas will work.
Supporters say it will be fine, and refer to the Norway or Canada model. It is an irreversible decision and there will be no going back.
I am writing of course, about the Land Registry (LR) privatisation. Is the government in or out of the LR business?
Like Brexit, the result of the consultation on LR was a surprise to Osbourne (remember him?). The second highest response to any consultation, ever, and most of it negative. And again like Brexit, it’s his successor who has to clean up the mess.
Perhaps one of the good things – in fact the only good thing – to come out of Brexit for the property market will be the delay to privatisation and the focus instead on the Homebuying Call For Evidence. Not because I am against privatisation but because I am pro joined-up thinking.
It always seemed odd to make a major decision over the LR just a few months before the full scale, no-holds-barred, radical rethink that has been promised by BEIS (previously BIS) of the end-to-end homebuying process.
Those who witnessed the panel on which I sat for one of the pre-launch events alongside BEIS may have noticed my response to yet another review was less than warm. Like Bill Murray in Groundhog Day who finds himself repeatedly living the same 24 hours in Punxsatawney, some of us have been through this before and the outcome of government meddling in the property process is rarely pretty – the HIPs debacle springs to mind.
But like Bill I am beginning to warm to the idea this time around. For once, the government may have got something right – albeit by complete accident rather than design. Despite being announced before the unexpected outcome of the referendum, the timing of the CFE seem uncannily prescient given a range of factors – recent tax changes and home-owning incentives, the significant impact of technology on the sector since the last review, and of course Brexit.
And by Brexit, I don’t mean the current flurry of uncertainty in the housing market. There are three much more fundamental impacts of Brexit on the CFE:
First, Political; moving key ministers around is going to change the thinking. The privatisation was an Osbourne project. Some reform was being driven by Letwin, tasked by Cameron on trying to improve the UK’s position on the international competitiveness index by changing the homebuying process. (Unfortunately his team failed to recognise that the example used in the Global Competitiveness report was a single commercial transaction – leading to some extremely wrong-headed thinking in recent times). With the three of them gone, there is potential to use the CFE to develop a properly coordinated cross-government plan.
Second, Structural; the Land Registry sell-off delay provides breathing space to rethink how the government wants the market to be structured. There is a risk that an unfettered private Land Registry would create a monopoly data and conveyancing empire for its owners, unless significant controls were in place. Most people both in private and public sector would prefer an efficient state run LR that supports a thriving entrepreneurial market around it, rather than a single commercial monster that cannot be controlled. A serious and considered long term plan for the development of the market in the post-digital age and the role of the LR in it is essential before any privatisation.
Third, Economic; Putting aside the government misunderstanding of how to move the UK on the competitiveness index, we must ensure that the housing transaction market thrives following Brexit. If BEIS can take a longer and wider view, and connect the property ownership and tax thinking with the data and legal framework, it may be able to identify reforms which will make the UK property transaction market quicker, smoother and more robust, helping to keep international investment coming in to the UK. Land and Property are like bank accounts and investments for many, and need to be as assured, straightforward and secure.
On that note, it may be worth considering that, in banking, the most secure cutting edge services were developed not in London or New York, but in Africa. Likewise, future models for Land Registration might not be Canada and Norway, but places like Honduras and Georgia. The review needs to look ten years ahead, not ten years behind.
And looking ahead it is hard to see a process that won’t be completely reinvented by the continuing exponential growth in applications of technology and information especially to process driven and data dependent activities such as conveyancing. The public and private datasets, and increasingly sophisticated platforms that make transactions possible are seamlessly knitting together. A few more tweaks and a bit more co-operation, and the full end-to-end property transaction will be visible in real time to everyone moving home.
There is a possibility that what will come out of the review will be a realisation that industry is developing and delivering answers that old stakeholders don’t even know the questions for, and more quickly than the wheels of legislation can turn. As the Law Society have discovered, imposing top down changes to a fast moving industry for the sake of self-interest, doesn’t work.
Which brings us back to Brexit. When you ask a question, you don’t always get the answer you want. What if the findings are that the best thing would be to reduce taxes and charges for land registration, or make more data available for less cost? If the call for Evidence provides Evidence you don’t like, are you bound by the outcome?
Of course, now that the CFE looks like a good idea, it will probably be cancelled or delayed. It would be a shame because the timing is right to see if Government can support the industry through this period of technological transformation. So let’s hope that if the Call For Evidence does go ahead, and it doesn’t turn out to be just another stormy day in Punxsutawney.
About the author
James Sherwood-Rogers is Chairman of COPSO. He is also a strategy and innovation consultant for tech and data businesses, sits on the Land Registry Advisory Council and EA Data Advisory Group, and has been MD or Chairman of several businesses in the property technology sector.
