The Power of Intention
This is the most exciting message I have ever delivered, it is also the most challenging because we are at a time of great change and change can be a daunting thing. So I would like to start it by considering the meaning of the word 'Change' it's effects and the ways in which we deal with it.
There are two basic types of change, the first is gradual evolutionary change, leading to the survival of the fittest version of the dominant established model. The second is sudden dramatic change which creates a new order, like when we replaced the Dinosaurs as the rulers of this planet.
This second type of change is often called a 'Crisis' which in Chinese happens to translate as 'dangerous opportunity' or in more English terms into the saying 'it's an ill wind that blows nobody any good'
Applied to estate agency, the biggest and most dramatic change that occurred in recent times was in 1988 when the housing act of that year gave rise to the modern Lettings market. Prior to 1988 private rentals in this country had fallen to an all time low of less than 4% of households.
The reason why private rentals were so rare prior to 1988 was because of rent controls and security of tenure for tenants. These had been introduced in the 70s and meant that if you rented out a property you could never get it back and never increase the rent, it was no surprise that not many people wanted to be landlords under those conditions.
However, the 1988 housing act changed all that, it created the assured short-hold tenancy which survives to this day and allows a landlord to rent out a property in the knowledge that they can get the market rent and at the end of the agreement get their property back if they want to.
As a result private rentals have boomed and after 1995 when the first buy to let mortgages became available have grown to account for nearly 20% of households with over two million people choosing to become private landlords, often with the objective of using their properties as a pension to give them security and freedom in retirement.
Despite the mobility and flexibility a healthy rentals market has brought to the economy and the benefits it has brought to landlords there has been some underlying problems. The first and biggest problem has been a chronic shortage of property to supply the demand from a growing population. This imbalance between supply and demand has meant prices have spiralled in both the rental and sales markets.
The second problem is that it is very hard to regulate over two million private landlords in order to ensure decent standards for tenants. Equally the competition from private landlords has meant that home ownership has become an unreachable dream for many first time buyers, especially in London and the South East, the areas in which we operate.
So the Government has decided on a policy that it hopes will encourage building, evening the playing field between first time buyers and landlords and enabling a system of regulation to be imposed on the private rental market to guarantee minimum living standards for tenants.
In practice what this means is a series of changes aimed at squeezing individual amateur landlords out of the market and encouraging professional corporate landlords into it. So from April next year there will be an extra 3% stamp duty payable on all buy to let properties and second homes, which means first time buyers and home movers will have an advantage when competing against individual investors to buy property.
Then, from 2017 higher rate tax payers will see the gradual loss of higher rate tax relief on their mortgage interest, this will make it much more expensive for them to borrow money and again will lead to a reduction in the number of properties they buy.
Professional corporate landlords will however be exempt from these changes, they will also be given incentives and subsidies to build new property to let which the Government hopes will lead to more building and eventually to a solution to the chronic housing shortage.
As estate agents it doesn't really matter whether we agree with these changes or not. We may feel it's unfair and ironic to penalise private landlords in this way, especially as they are mainly the Conservative voters who put this government into power in the first place.
We may also feel that as estate agents these changes are going to negatively impact our businesses. Perhaps landlords and estate agents can comfort themselves with the thought that it would have been a lot worse if Labour had won the election.
The reason it doesn't really matter what we think of these changes is because we can't stop them, therefore all we can do is have a plan to react to them in the most positive way possible. In order to create a plan we must be able to predict what affect these changes will have in the market and then adapt our strategy accordingly.
Like all predictions, there is room for error but it is safe to say that between now and April there will be a boom in investment property sales as landlords try to make their purchases before the stamp duty deadline. Which means it is vital that we as a company get off to a fast start in 2016 and make hay while the sun shines.
After April it is equally predictable that there will be a dramatic reduction in sales with far less new Landlords entering the market. It is also likely that Landlords will be reluctant to trade up in the future because they will have to pay the extra stamp duty on their new purchase as well as capital gains tax on the property they sell.
Very few Landlords will consider selling because there is precious little they can do with the money, the stock market is precarious and the banks and building societies are paying virtually no interest, with no end in sight, so they will tend to do nothing.
It is a fact that we have never seen economic conditions like this, never, not in thousands of years! Gone are the days of boom and bust we are now living in an age of flat water where to make progress we need to generate our own momentum.
It is also very unlikely that first time buyers will take up the slack in sales. If supply remains limited then prices will remain high and may even go higher still. It will only be wealthy first time buyers and those with help from their parents that will be able to afford to buy.
This stagnation in buy to let and first time buyer activity will also have a knock on effect up the market with less and less property being put up for sale and with the costs of moving so high, more and more people will stay put and choose to improve the homes they already live in.
Added to these considerable headwinds, estate agents in 2016 will see ever increasing competition from the likes of Purple Bricks and Easy Property. These online agents probably won't take a significant market share because they have a flawed business model, in my view anyway. But every sale or let they make takes another bite out of the traditional estate agents market.
Ironically corporate funded Build To Let programs will boom as institutions take the Chancellors lead and plunge headlong into the private rented sector. Some of these corporates will be potential clients for high street management services but many will either do it themselves or give their business to their corporate buddies.
As a result, I foresee that after April next year many traditional high street estate agents will be facing the most difficult trading conditions for a generation and I predict that many of them will go out of business as they refuse to or unable to adapt to the new market conditions.
And yet, despite these stark and superficially frightening facts, I am more excited and more optimistic about our prospects now than ever before, let me explain why.
Over the past few years I have developed a plan that will see our unique ideas like the primary tenancy and our investments division literally revolutionise the industry.
I have also been researching and have already started implementing cutting edge technology and tools which will enable us to build our business by crushing our local competition as they wither in the face of change they neither understand or are equipped to handle. As you read on you will see my plan will also allow us to grow by creating winners in the areas we no not cover and turning some of our competitors into our allies.
The first tool I have identified to equip us to win the coming war is called Big Data. You may have heard the term used by the media but what is Big Data and what can it do for us?
To answer this question simply, let's look at what branches do to get sales and Lettings instructions, what we call prospecting activity. Prospecting activity is either passive or active. Passive activities are things like leaflet drops, adverts, emails and board presence.
Active prospecting is identifying potential landlords and sellers and calling them or knocking on their door! In the past this meant using the phone book and the electoral role but nowadays there are more high tech solutions that can supplement and enhance these vital activities, activities which still need to take place in the branches and have to be embedded in a way that they become habits like never before.
While on the subject of the branches, during 2016 we intend to focus on building our branch teams like never before. This will mean special attention being given to the leaders who we will empower as by teaching them how to recruit their own people using up to date tools and methods like LinkedIn, rather than remaining dependent on centralised recruitment as in the past.
We will also be introducing simpler, more conventional management and sales training, as well as recognition and remuneration systems aimed at attracting, managing, developing and rewarding the right kind of people in and to our business.
I also want to say something about customer service, this department has an affect on the whole company and as such I am committed to making it a best in class solution in 2016, one that takes full advantage of the changes in technology and automation that are now available and creates a service of which we can all be truly proud.
You will all be aware of 'The Hub' and what it has been doing to gain additional sales valuations for our branches. What has made 'The Hub' possible is the availability of large numbers of potential vendor details for any area we want to prospect into.
So we now have access to all the properties on the market with our competitors but also all the properties that have been identified as most likely to sell in the coming year. What this means is we have the chance to build a relationship with these potential sellers before our competitors even become aware of them.
What this means as far as sales is concerned is that as the market shrinks around our competitors, we have the ability to expand our market at the touch of a button. The more data we buy, the wider the area we cover the more cost effective we are.
This strategy will enable us to capitalise on the shrinking market and use our established brand image to break into new territories without the costs of opening new offices. We will become a hybrid agency combining all the benefits of traditional agency with the huge marketing reach of the new online offerings thus enabling us to outflank them both.
We can also apply the same Hub principles to both Lettings and Investments. In both these divisions we already have vast untapped databases and 'The Hub' will enable us to activate these databases and turn them into additional business opportunities.
Staying with Lettings and Investments, there is great synergy between these two divisions and in 2016 we will be placing a property investment Advisor in all our bigger branches in order to make our wider investment proposition available to our local landlords.
I would also like to say something specific about Investments. Towards the end of 2015 we have begun a transition process which will see Investments turn from a product driven boutique business with limited growth prospects, to a fully scaleable advisor led business with unlimited potential. If you don't work in investments and want to know more about these exciting changes feel free to speak to one of our Advisors, they will be delighted to tell you more.
I would like to conclude by telling you all about my wider plans, plans that will see our investments division go truly nationwide and our Primary tenancy become the new standard model for the Lettings industry.
Ever since I started Choices in 1989 I had ideas which I wanted to change and improve the industry, there have been many ups and downs since then but I have never lost my passion to make a positive difference and finally I believe we are in a position to make a start.
I said earlier that in 2016 we would see the start of a process whereby our unique ideas like Investments and the Primary Tenancy would literally change the face of the industry, well let me explain how this is going to happen.
Some of you will know of the close relationship I have developed with Zoopla and of my involvement with Angels Media, the publishers of Estate Agent Today and Letting Agent Today.
Before Zoopla came on the scene I had a great relationship with Findaproperty and it was Findaproperty who agreed to allow us to advertise our Investments proposition to a wide audience which enabled us to build such a large database of investors.
This relationship carried on with Zoopla and 2016 will see them launch what we are comparing to the 'Secret Escapes' of estate agency through our Investments division. Effectively what this will mean is that participating agents will be able to send out details of a reduced price investment property direct to our Investments database, without reducing the headline price on Zoopla.
Because we are act as buyers agents in Investments, if we make a sale for the participant agent our client gets a good discount, the vendor makes a sale and it costs the agent nothing, a win win outcome for everyone.
If this pilot succeeds it is intended to extend the service by putting into place the technology whereby participating agents will also be able to sell the investment properties of other agents by becoming representatives of ours thus giving Investments immediate nationwide coverage.
This is a truly innovative initiative and will bring property investment into the mainstream with us at its centre. We will be providing our representative agents with training and support as well as services such as central asset management including our Primary Tenancy and our rent guarantee.
Thus, for the first time agents all round the country will be able to offer their investor clients a comprehensive property investment service even if there are no suitable investment properties in the local area and even if they don't have a Lettings and management department of their own.
In addition to becoming representatives of Investments, Angels Media will be offering member agents a range of additional added value services including the ability to licence the Primary Tenancy for their own use in return for a monthly subscription. Thus Angels will be acting as a distribution channel for our unique ideas.
So there you have it, my plan to deal with change is to supercharge our prospecting using big data, supercharge our recruitment using LinkedIn, supercharge our customer services using cutting edge technology, supercharge Investment with a new business model and nationwide distribution and supercharge the branches by empowering our leaders and embedding active and passive prospecting habits once and for all. Oh yes and let's not forget this, to create a vast network of agents paying us subscriptions to use our unique ideas and changing the whole industry for the better in the process!
I was once told that if you want to be a gun fighter you need to learn to pull out your gun aim and fire without moving your hand, if you can't learn to do this never take up gun fighting because you will get shot.
It may seem obvious but the moral of this story is you have to learn to win in your head before you even start, that's what I do, so in my mind we have already achieved the plan, it's now just a question of the formality of acting it out in real life!
I realise that this is a lot to take in and you may be justifiably asking yourself 'what does all this have to do with me, where do I fit in'? Well, the answer is it has everything to do with you, provided that is you want to be part of a dynamic growing company, one whose mission includes ensuring we offer our people the chance to earn what they are truly worth and reach their full potential, then you will fit in very well!
By sharing my plans with you I hope you will be inspired to come with me on this journey and together make the changes we are all facing into the biggest opportunity of our careers.
Thanks for everything you have done in 2015 and for everything you will achieve in the coming year
Happy Christmas
Simon Shinerock
