What does the current housing climate mean for conveyancers?

Imagine this. You’re holding a hypothetical balloon in your hand. You decide to blow into it with two big puffs of air. You blow and although it isn’t blown-up all the way, it’s a good-sized balloon and you’re okay with that. But then, someone else takes that hypothetical balloon from you and then also gives it two big puffs of air. This is fine, the balloon itself is bigger but not close to bursting. But then you realise that the balloon is being passed around, everyone adding to the ever-growing size of the balloon and then – interest rates go up.

If you hadn’t guessed, this hypothetical balloon is the current housing market in the UK. You are the UK economy and everyone else is the various initiatives designed by governments, associations, and lobby groups to prop up housing market.

With interest rates now set to increase to historically “normal” levels, what does this mean for the housing market? But more importantly, since this is in “Today’s Conveyancer”, what does this mean for conveyancers?

A slow-down in business

Let’s cut straight to the point. Interest rates are predicted to continue to rise, as per the established economic doctrine of today’s world. With more money in circulation, you raise the interest rates, thus reducing the incentive to spend, leading to more people saving therefore reducing demand and supply with it. As demand continues to fall so will prices. There’s a bit more cleaver stuff to it, but for this article that explains it sufficiently.

But what does this mean? Well, simply put, as interest rates go up, mortgage repayments also go up since the two are intrinsically linked. As mortgages go up, consumers must spend more money to afford a similar sized house they would have easily afforded with a lower interest rate. So instead, they don’t buy for fear of over commitment to higher repayments that will affect their lifestyle. Rather, they stay put in their existing house and maybe create an extension.

But then their next-door neighbour does this to, and the fifth house across the street also decided to stay put, and so on and so on and as a conveyancer, or owner of a conveyancing firm, you quickly realise your matters are coming in slower. Less quotes are going out, but your bills are staying the same. The market is no longer buoyant but is instead becoming less “hot”.

A potential increase in fees?

So business might slow down just a little. Conveyancing teams have survived worse and they will continue to survive, albeit some teams might be slightly “slimmer”. But as more and more conveyancing teams begin to see less and less business come in through the door, many will quickly realise that cut price unaffordable or even survivable. So conveyancing fees will have to increase!

Fee increases are rarely good for consumers, especially with the high level of inflation we currently have. But fee increases are good for conveyancers because as prices increase quality of service must also increase.

As fees increase, clients will demand a better “experience” from their conveyancer. Each conveyancer will either have to deliver on this increased quality of service, or risk losing the lesser number of clients who are in the market.

Soon we’ll see a re-adjustment of fees away from “low-cost, high-volume” work to more selective work at a higher price. This might lead to a reinvigoration within the conveyancing field as reward is once more aligned with professional effort.

Will lawyers move to developing other areas of the business?

Now, if you’re a “conveyancing factory” you might be slightly worried about the way the market may turn. Most predictions expect a downturn but there are so many varying stats that some are predicting anywhere from 5% to 30%.

But if you’re a fully-fledged multi-service high-street law firm, you might be thinking you have wiggle room. If conveyancing slows down, you still have room to manoeuvre and focus on other services that might still be as profitable, if not more so. In these instances, we might see a doubling down of work in wills & probate and other private client work.

As firms invest more into other departments, we will see less investment in the conveyancing teams. Maybe that residential conveyancing paralegal you were expecting to come to help you is now on hold because there is a new legal assistant in the private client team.

With a push to areas which tend to remain stable and profitable in recessions, conveyancing teams might need to weather the storm in the short term until we get back to a place where the government of the time decides to come up with some sort of property buying incentive scheme to prop up the market.

Is it all doom and gloom?

No. Of course not.

As mentioned, conveyancing teams have weathered a lot worse than what is expected over the next few years. With major banks and building societies stating that most mortgage holders have sufficient capital to survive any immediate interest rates rises, there isn’t going to be a mass of foreclosures.

There will be a slowdown in buying and selling, but this downturn is more of a “normalisation” of the market than a collapse.

This is also true for the conveyancing profession. This could be the start of a normalisation back to a point where young, energetic legal professionals at the start of their careers see conveyancing as a genuine career path where they can carve out a fulfilling and rewarding career.

Article written by:

Mevludin Dzihic
Director
Verify 365 | verify365.app

This article was submitted to be published by Verify 365 as part of their advertising agreement with Today’s Conveyancer. The views expressed in this article are those of the submitter and not those of Today’s Conveyancer.