The housing market is renowned for its cyclical nature, and house prices in general are seen as a barometer for the wider economy. In the last year, the market has faced distinctive challenges, ranging from inflation, mortgage rate increases and wider economic uncertainty to shifts in buyer preferences and government policies. Despite the unpredictability, the housing sector has consistently demonstrated its remarkable adaptability and resilience.
The fundamentals are strong growing
While challenges undoubtedly persist, it’s imperative to acknowledge that there is a silver lining. The residential and housing market continues to demonstrate opportunity, drawing interest and investments from various new forms of capital.
To gain insights into how leaders can thrive in uncertain markets, we speak with two senior executives who we successfully introduced into their current roles – David Mawson, CEO of Placefirst, and Iain McPherson, Chief Operating Officer of Sage Homes – who share their experiences, strategies and the initiatives that have helped their businesses navigate through recent market conditions.
Adapting to market conditions
Organisations have learned to pivot and adapt to shifting market conditions. Collaboration between registered providers, Build to Rent (BTR) investors and house builders, for instance, has proven to be a win-win-win strategy. This has been highlighted by Vistry Group’s announcement of a change in strategy to exclusively deliver partnership housing.
Iain echoes this sentiment, stating, “We have provided additional support with financial wellbeing to help tenants and owner occupiers in our homes, alongside looking to make more homes available through partnership working with developers.”
As leaders prepare for more market volatility in the year ahead, they need to take proactive steps to navigate. David offers valuable advice to leaders, highlighting the importance of business efficiency, cash management, and a clear plan. However, he also stresses the need to remain flexible and ready to make adjustments as market conditions fluctuate.
Forming partnerships with house builders who are experiencing declining sales has been part of the strategy at Placefirst. These collaborations have meant that the housebuilders can maintain operational outputs and retain staff while also addressing, and embracing the growing rental market. An example of this was Barratt’s recent deal with Citra Living, a Lloyds Banking Group backed rental investor and operator.
The key to success lies in embracing change rather than resisting it. Despite the challenges, the housing market continues to offer significant investment opportunities. With a growing population and urbanisation, the demand for housing remains robust. Investors recognise the potential for stable returns in the long term, and this optimism is a testament to the resilience of the sector.
The role of alternative investment
Iain, in his previous role as Group Chief Executive Officer of Countryside Properties, was a pioneer in inviting alternative investment to the sector. He emphasises the role of alternative investment models, such as BTR and sustainable housing solutions, in tackling the housing crisis. These models not only provide housing but also align with changing societal values and environmental consciousness.
David points out that housing, like any other industry, is market-driven. As challenges such as increased mortgage rates, inflation, the end of Help to Buy, and higher deposit requirements impact the private sales market, alternative investments become essential to satisfy housing demand. He echoes the sentiment that investors are increasingly recognising opportunities in BTR, especially as other sub-sectors face setbacks. “We will need to look at new investment models and different ways of providing housing. We must take examples from other sectors and explore,” highlights David.
Effective strategies for success
Innovation is thriving in the housing market. Organisations are implementing forward-thinking projects and initiatives, leveraging technology, and optimising processes. These innovations not only enhance efficiency but also contribute to the sector’s adaptability. Sage Homes has been particularly innovative with their approach to how they support developers, shares Iain. This is reflected in the recent announcement of Vistry, Leaf and Sage teaming up for landmark 2,900-home agreement.
Consistently reviewing and improving every aspect of the business is key during economic uncertainties. Focusing on areas that have a significant impact and reducing time spent on less impactful projects, is an approach Placefirst have taken to enhance performance. “Businesses have a tendency to get a little lethargic when the market is performing well and returns are easier to achieve. Review every part of the business look for the odd percentage of improvement in efficiency, in cost control, and in output in every area of the business. Make sure your people are the right people with the right skill set and they are engaged and working as a team”, highlights David.
Assessing risks and opportunities
Both leaders stress the importance of understanding the risks and opportunities associated with market changes, and having a sustainable business model is key, advises Iain McPherson.
In the BTR sector, where Placefirst operates, opportunities are abundant, but successful execution requires a deep understanding of costs, risks, and policy dynamics. Organisations must ensure they have the right people on board and the necessary capabilities to deliver on those opportunities.
Organisational culture’s role
An inclusive culture ensures that everyone feels valued and empowered to contribute. Placefirst’s strong cultural ethos prioritises staff development and values the contributions of those on the frontlines. David emphasises the importance of listening to and appreciating employees, encouraging their input, and looking after their well-being. He states, “Give people a voice as some of the best ideas come from the people delivering the work.”
Iain McPherson echoes this, saying, “This is critical as it’s the people who implement our plans and strategies. We need highly motivated and skilled teams, so ensuring people are regularly kept up to date, have achievable targets and the right level of support is essential.”
It’s not doom and gloom
As we navigate the uncertainties of the future, the housing market remains a beacon of hope, attracting investors and offering the promise of a brighter tomorrow for all involved.
As 2023 comes to a close, the housing market remains dynamic, and leaders who embrace adaptability and resilience will be better equipped to thrive.
Embracing change is key and those that do so will steal a march on the competition when the market fully recovers.