The conveyancing sector continues to set records against past years as new trends emerge in the housing market, and law firms adapt and compete with the rising demand.
The housing market has shown its resilience over the past few years, staying surprisingly strong throughout the Covid pandemic. This was particularly helped by the exodus of people moving away from cities in the “race for space”, as working from home became the norm in many people’s lives. Pair this with the stamp duty holiday and the new mortgage guarantee introduced last year to enable first-time buyers with smaller deposits to access mortgage products, and the result led to a sharp jump in average deposits for first-time buyers during 2020 as property demand soared. The uptick in demand meant that conveyancers completed 1.26 million transactions during the 2021/22 financial year, according to the latest analysis of Land Registry data. This record figure indicates the pressure that solicitors have been working under as the housing market recovered from Covid.
While people escaped cities for more space, the demand for conveyancing services also migrated. At Taylor Rose MW, we have adapted to the shifting property purchasing patterns by ensuring we have a presence where there is significant market demand. The opening of our new office in Cardiff – announced in June 2022 – represents just that, our first Welsh office adding to our 30 across England.
With demand increasing in the conveyancing market during the post-lockdown period, the pressure to hire talent has also risen, creating a resourcing challenge in the industry. At the same time, the highly fragmented conveyancing market, made up a large number of predominantly smaller firms, each with a tiny market share, continues to consolidate as smaller firms struggle to cope with inflationary pressures and the need to modernise to keep up with a shifting post-Covid market. Consequently, as the number of transactions climbs upwards, the number of firms servicing them is simultaneously reducing.
Employers are therefore becoming increasingly pressurised to meet shifting employee demands in order to attract and retain conveyancing talent. As the pandemic led many workers to re-evaluate their work-life balance and seek remote working flexibility, conveyancing firms who are set up to enable this have benefited. We have seen a consistent stream of conveyancers joining our consultancy division, often seeking the flexibility the model can offer. The legal consultant business model offers lawyers a central service platform, brand, and management infrastructure from which to operate, in return for a percentage of the lawyer’s revenue. The lawyers themselves are self-employed consultants, who retain an average of 70% of their earnings, with the remainder taken by the consultancy firm. Taylor Rose currently has over 450 consultant lawyers – and the hiring momentum remains as strong as ever.
The ability to attract and keep good people is vital. It is what is enabling us to continue to win market share and be bullish about the future, despite the uncertainties in the property market.
But while the pandemic fundamentally changed geographical trends in the property market, it is now being altered again due to the cost-of-living crisis. Following the surge in property demand – and in turn, demand for conveyancers – the property market is now facing a hard reset. Inflation levels are spiralling, and the cost-of-living crisis is set to hit even harder in Autumn as the energy price cap substantially increases bills. As a result, household budgets are being squeezed tighter and tighter.
While the last year saw property prices soar beyond expectations, interest rate rises are beginning to bring house prices back down to a sustainable price pattern. Rightmove recently published figures which show that the average house price coming on the market has fallen for the first time this year, dropping by nearly £5,000 during August. Property in London was most susceptible to this fall, reporting a 3.5% month-on-month fall in asking prices. Falls in house prices are normal during the summer and average house prices are still eight per cent higher year-on-year. However, a longer-term downtrend is expected in 2023, with prices falling by 4%.
There is little question that the conveyancing market as a whole will suffer from a prolonged cost-of-living crisis as interest rates rise and transactions more than likely slow down. But by no means will everyone lose. The market is so fragmented, with so much to play for, that there will be a huge disparity between the winners and the losers in conveyancing. I expect to see many more small players disappear as they struggle with their own costs at the same time as losing business and lawyers to more modern firms. In this market, the firms that win will be those that can provide strong local connections, forward-thinking technology, and the kind of people-centric culture and model that can attract and retain the best people.
