UK housing industry has improved tremendously over the last decade. The industry has expanded and increased its capacity, making home ownership affordable for a large segment of the population. Even though provision of housing facilities has risen in the past, high house prices continue to plunge individuals into huge debts (Lovell and Smith, 2010, p. 461). The housing price comparisons in the UK are based on a number of price features which consist of asking prices, the price at the approval of mortgage, the simple average prices, the seasonally adjusted figures, and the region where price figures are collected. The prices rose by 72 percent between 1977 and 1979. Also, in the late 1980s, the prices rose by 69 percent, covering the period from 1987 to 1989.
The rising prices of housing have forced buyers to save for more years to own their first home. New findings show that currently, one has to save for 19 years to get the first home. The same person could save for six years in 2000 and two years in the early 1990s. Furthermore, the affordability assessment indicates a huge variation between the renters and those aged between 20 and 39 years who have managed to secure a house for themselves. The decision by the United Kingdom to leave the European Union led to a huge slump in the housing market (Killip, 2013, p. 527). In 2016, the house prices growth decelerated at the rate of 3 percent and 1 percent in 2017.
Success/Failures Factors for Estate Agency Expansion in the UK
Despite the numerous challenges in the property markets, the UK housing industry continues to expand. The growing number of individuals owning more than one house has seen the industry increase the consumption levels (Lovell and Smith, 2010, p. 465). In the UK, there is an increasing urge to own more than one home in different locations and thus most of the houses are being taken up by second home owners.
The second success factor is that the stamp duty cuts by the UK government of the property markets costing up to 300000 Euros, saving first time buyers up to 5000 euros significantly encourages investment in the housing sector which further improves the supply rate and units sold (Collinson 2017, n.p.).
However, one of the failures for real estate agents in the UK is the increasing prices of houses which limit the release of houses to the market for sell, and low property development rates by investors. A study by Elbourne (2008, p. 65) indicates that price movement determined by shifts in interest rates, and the shocks in prices of houses contribute to a decline in the consumption level. Campbell and Cocco (2007, p. 591) indicate that the correlation between the price of a house in the UK and the consumption growth is predictable because of the financial market conditions such as inflation has a direct impact on the renters or homeowners. Therefore, it is difficult for the agencies in the property market to sell units, or build new houses. Other factors for the failure of the estate agency expansion include:
1. According to the CBRE report (2017, p.5) on the UK market outlook, the weak growth of the economy and currency yields to an increase on the inflation rate which slows down the rate of building new homes. Collinson (2017, n.p.) argues that though interests rates and mortgage prices will remain low, the rising inflation still makes the developers and consumers feel the burden of releasing money for property development or investment.
2. The Brexit politics affected the economic stability of the UK region leading to price shock which further affected the housing sector negatively by encouraging low consumption and supply of houses (CBRE 2017, p. 5).
Current Trends of Housing Market in the UK
Firstly, the housing market will continue to slow at a rate of 1-1.5% in 2018 which the English housing survey estimates at 62.9% of home ownership in 2016, same as in the mid-80s, and 71% in 2003 (Kollewe 2018, n.p.).
Secondly, the sales of houses in the capital London continue to fall in the last four years at a rate of 20% while some regions without prime land such as the North West of England increased its transaction by 13% within the same period (Pickford 2018, n.p.). The following figure shows the market trends in the last four years regarding the transaction levels per region
Figure 1: Residential transactions
Figure 1:Source: Pickford (2018, n.p.) adapted from the Financial Times
The price movement is also demonstrated by the following diagram up to the year 2016.
Figure 2: Price movement
Figure 2: Adapted from the PWC report (2016, p. 18)
Poland Housing Industry
Overview of the Housing Industry in Poland
The location of Poland in Europe makes it strategic to attract investors in the real estate market, especially in its capital Warsaw which records the highest prices. The property market is divided into three main sections which include the rentals, residential, and the state housing policy. The report by CBRE (2017, p. 1) indicates that the private owners have the largest market share, and together with the private developers they contribute to 90 % of the primary market. By the end of 2016, the rental stock contributed to 3-6% of the total housing based on the tax returns on income from the sector, which translates more than 2 million apartments (CBRE 2017, p. 5). The statistics do not include the office space which has significantly grown in the past totaling to 3.6 million square meters, where the major cities have 87% of the share (Harper 2016, n.p.). On the other hand, 2016 records the highest number of residential units totaling to more than 60000 new apartments in the Poland’s six biggest cities according to statistics by the central statistical office (CBRE 2017, p.21). The property developers in Poland have an umbrella organization which consists of 143 members as at 2017 which regulate the relationship with clients through the code of conduct framework (CBRE 2017, p. 30). The state also has an influence on the residential market expansion guided by the state housing policy and the legal frameworks on land governing on mortgages, taxes, and lease agreements.
Success Factors for Estate Agency Expansion in Poland
In the commercial rental market, Harper (2016, n.p.) argues that the office sector contributes significantly to the demand for new properties to be developed. The factors that influence the growth in demand, especially in major cities such as Warsaw that contribute 55% of the share, include ICT application to processes of sourcing clients, research and development, increased SME activities, and outsourcing knowledge management from international corporations (Harper 2016, n.p.). The existing competition to create vacant space in response to the property development of the prime areas to fill the demand of office space by investors who prefer the region as an emerging stable economy contributes to the growth of housing sector.
The second factor is low interest rates before and after the recession period in which most mortgage loans by clients in foreign currency were defaulted leading to the shrink of the market (EY 2017, n.p.). Based on the data by the Polish Bank Association, the stability of the rental market encourages banks to advance credit to investors as well as mortgages at an interest rate of 3.54-4.03% and commission of 1.8-2.9% in a one off payment (CBRE 2017, p. 9). The rationale is that the income projected in the property development can be in surplus after settling the monthly payments of the mortgage indicting stability of the country’s property market and forecast of its growth as of 2017. Other success factors include:
1. The average returns of 4.7-5.0% per annum on the rented residential market encourage the investors to access funds from bonds, and bank deposits and redirect it to the development of rentals (CBRE 2017, p. 9).
2. The regulatory framework provided by the polish government such as a flat rate of 8.5% on the income contributes to a growth in the development of property in the country since investors can cut cost of depreciation, operational and current expenditures (CBRE 2017, p. 9).
Current Trends of Housing Market in Poland
One of the trending is that stability of housing prices and mortgage acceptability drives the growth of the rental sector after the recession. The following figures adapted from the CBRE report (2017, p. 9) indicates a sharp and stable rise of the profitability of the rental market which encourages investors, property developers and local banks to stimulate the growth of the housing sector.
Figure 3: Rental Profitability
Figure 3: Source: Adapted from CBRE report (2017, p. 9)
The following figure compares the stability of prices in the Polish housing sector against other countries in Europe.
Figure 4: Average price per market segment
Figure 4: Source: Adapted from CBRE report (2017, p. 27)
Secondly, the growth of globalization rates, incorporation of technology into business, as well as shifts in demographics and environmental protection will increase the demand of the office, warehouse space, and residential market (EY 2017, n.p.). The reason is that most businesses are expanding their operations to e-commerce and development of a supply chain for the commodities globally. Poland’s stable economic growth, therefore, makes the country ideal for investors as a base of operation which increases the demand for space to build offices, as well as warehouses to store supplies which stimulates development of the properties and expansion of the housing sector in the coming years.
Research Methodology
Research Design
The study entails a qualitative analysis of existing literature and reports regarding the estate agencies of the UK and Poland to determine the factors which contribute to their success or expansion. The finding will be determined basing on the previous studies on the topic from secondary resources. The comparison will yield into the development of the inferences and recommendation of this study to contribute to existing literature and a guide for real estate developers in the UK and Poland. The research also uses analytical tools to establish the trends of the housing market which can contribute to future outlook of investment options by the estate agents.
Objectives of the Study
The research aims are to establish three critical facts about the housing industry in the European market which include:
1. To establish the current trends in the housing industry regarding price volatility and developmental levels in both prime and rural lands
2. To determine the factors behind the expansion of estate agencies and analyze them using the growth vector matrix to enhance forecasting of the opportunities in the next decade
3. To critically evaluate the variations of the success factors between the UK and Poland
Sources of the Data
The researcher will utilize secondary materials to complete the study through literature from books, reports, journal articles, online databases for UK and Poland housing such as Elsevier, and statistical data regarding the trends of the industry and real estate agencies performance over time. The data will be critical in assessing the change in the housing sector in the two regions and help in establishing the current trends based on price volatility and the developmental levels. Also, past data will help in assessing the challenges and opportunities in the housing sector. The data offers better forecasting techniques which help in projecting the next levels for the housing sector.
Data Collection Techniques
Data collection process in qualitative research involves the generation of large amounts of data. First, the current study draws its data from several sources including journals, reports and statistical data sources. The nature of sources selected for the study contains a lot of information which requires a series of assessment and validation of the information obtained from the sources. Data collection will involve screening of all the data sources to ascertain their suitability and ability to provide critical answers to the research questions. All the sources to be included in the study must bear information required for comparison of the two regions.
All previous reports made about housing in UK and Poland need to be assessed to ascertain for any similarity and variation in results. The statistical data from journals will be coded in the vector matrix for further analysis and interpretation. Also, specific folders will be created to keep reports from the different sources. A comparative study will be carried out on the reports which lead to the development of common themes regarding housing in the UK and Poland. Field reports are critical in explaining the true nature of the housing sector and thus a specific section for analysis of reports is important.
Data Analysis
The selection of the appropriate sources of information required for the study serves as the basis for data analysis. However, before analyzing any data, all the information must be verified and validated. The data needs to be cross-checked to ascertain their accuracy and precision. All the reports will be complied to provide one comprehensive reports which is the culmination of the information from other sources. Also, all the findings from journal articles will be factored in during the reports to support the findings from the statistical analysis. The interpretation of the analyzed data will be based on the theoretical grounding taken by the researchers. Also, the research journals and online databases will be classified according to the specific area of housing in the UK and Poland.
Data Interpretation
The complexity and cumbersome nature of qualitative data requires careful consideration during analysis. First, al the classified reports will be assessed to check for similarities such as price volatility. All the statistical analysis arising from the past research data will be interpreted based on the vector matrix. Also, summary statistics will help in assessing the mean prices for the two regions over a given period of time. Also, the difference in housing between the two regions will be assessed basing on the factors affecting the development and expansion of estate agencies. The reports from journals will be put together and certain themes developed to give a better understanding of the structure of the housing sector in the UK and Poland. The synthesis of the reports helps in developing a good representation. All the conclusions drawn by the researchers will also be combined and a comprehensive report given based on the conclusions.
Findings
Recovery measures after the 2007/2008 recession period also influenced the performance of the housing sector in the two countries differently
The housing sector in the UK has continued to grow over the years despite the unpredictable economic times. The analysis below shows the trends in the UK housing market in the past years.
Figure 5: Source: Adapted from Office for National Statistics, UK (2017, n.p)
The above graph shows the average prices of house prices in the UK since January 2005. The graph indicates that between 2007 and 2009, there was a surge in the growth of housing prices. The reason behind the trend as a result the economic recession that affected several sectors of the global economy. From 2010, the housing prices have been rising steadily and they are still expected to rise based on the time series data provided for the last 10 years. During the economic recession period, prices dropped drastically and later rose from 2009. As UK embarked on recovery measures such as reducing interest rates for loans, the demand for housing began rising steadily.
Housing Price Change in Poland
Figure 6: Adapted from Global Property Guide, Poland (2015, n.p)
The same trend is also evident in Poland. During the 2008/2009 economic recession, the housing prices dropped drastically and later picked up in 2010.From 2011 all through to 2013, the housing sector in Poland has been experiencing difficulties with annual percentages trailing on the negative. However, 2013 to 2015 has been promising with an upward trend in the housing price change.
Brexit (Political Forces) Can Affect the Market Outcomes for The Housing Sector
The UK had a referendum in 2016 to quit from the European Union. The move had significant impact on the entire economy including the housing sector.
Figure 7: Adapted from the PWC report (2016, p. 21)
From the above graph, it is evident that the referendum affected the market negatively. The second half of 2016 was marked by a soft end moving downwards. The graph implies that there was low demand for housing property after the Brexit thus resulting in low inflation rates. The slowdown suggests that there was a slow momentum in the housing market and people could hardly purchase new homes. The increasing fears of economic backlash triggered the downward movement in the demand for housing across the country. Even though there was a slump in the market in 2016, it cannot be compared to the horrific times of the 2008/2009 economic recession that nearly brought down the entire housing sector. The table below further illustrates the effect of the Brexit on the country’s housing markets.
Figure 8: Adapted from the PWC report (2016, p. 22)
The evidence from the above table indicates that the UK experienced a negative economic growth in the entire year of 2016. The negative growth was due to the stamp duty reforms which were effected in January and later followed by the Brexit. The combination of the two events took the entire market to its knees, with its annual growth dropping drastically.
Poland’s Stable Economy Drives Housing Sector
Poland has one of the most vibrant economies in the entire Europe. Despite numerous economic downturns in the region, it remains adamant to strong market waves. The table below shows its economic performance pre-crisis and post-crisis in Europe.
Figure 9: Adapted from McKinsey & Company report (2015, p. 2)
Among the EU countries, Poland has been doing reasonably well before the global economic crisis, coming third based on its GDP per capita which covers the period between 1991 and 2008. The country remained strong during the crisis and the period between 2008 and 2014 saw the country rise to the top position in GDP per capita. The above figures show the overall performance of the nation economically. The economic index for the country has remained high for an extended period. Furthermore, the graph indicates that the Polish economy has been stronger than that of the UK even before the Brexit.
In Comparison to The UK, Poland Estate Agencies Are More Stable
The strong economy portrayed by Poland has made it easier for estate agencies to establish themselves and enhance their reliability in the provision of housing property at affordable prices. The assessment of the Polish housing sector indicates that residents are going further to own more than one house. The continuous provision of discounts to investors by the Polish government has reduced the housing prices significantly. Also, the stability in the financial markets has made it possible for the estate agencies to access finances to fund housing projects. The political and economic stability in the country has attracted a large pool of estate agencies to invest in the industry. The balance in the market has also been activated by the young Polish couples who prefer to buy a small house where they live for about five years before buying a bigger home. The move has increased the demand for housing thus boosting growth in the sector. Also, the shifting of young Polish couples to the major cities has led to a sharp increase in demand for housing in the urban areas.
Results/Discussions
Current Trends in Housing Sector
The housing sector in entire Europe has grown over the past two decades as a result of an increasing demand mainly from the young population. Despite the costs associated with the purchase of a new home, the need remains significantly high and estate agencies have been unable to meet the targets. In the recent past, the housing sector has undergone a lot of changes, and there is a significant shift in the entire market. First, for the case of Poland, the estate agencies are focusing on the needs of the younger population who want smaller houses to start their lives and later relocate to bigger houses when the family expands. Secondly, the Polish economy is currently doing very well, and the state offers incentives through the financial institutions to support the estate agents in financing construction to meet the gap in the housing market. Furthermore, the state offers discounts to investors thus attracting them to invest in the Polish housing sector.
On the other hand, the UK is struggling to sustain its stagnating housing market. The sector is still grappling with the effects of Brexit which has caused inflation resulting in a massive decline in housing demand. Also, the recent changes to stamp duty have worsened the woes of the housing sector by increasing economic uncertainty. Furthermore, there has been a major structural shift in the UK’s housing market as the growth of housing prices moves out of London. The unaffordability of housing in the capital has shifted the entire market to the outside regions while the central UK experience slow growth.
Drivers of Estate Agencies Business Expansion
One of the major drivers of estate agency business expansion is the increasing demand. As the population grows, families increase, and the need for bigger houses arises. Also, young couples are opting for smaller homes during their early lives and later buy big houses. The shift has resulted in overwhelming housing demand, particularly in Poland. Also, globalization is one of the factors leading to the enhanced housing market. Young people are relocating to big cities to look for jobs, and whenever they get them, they choose to live in the town thus increasing the demand for housing.
Also, a vibrant economy remains a robust key indicator in the assessment of housing sector. A stable economy with sound housing policies sets the foundation for investors to bring in more resources. The Polish housing sector is performing well as a result of a strong economic performance which attracts more investors. However, in the case of the UK, the economy is becoming quite unpredictable after stamp duty took effect followed by the Brexit which ended badly, hurting the economy.
Thirdly, policies formulated by the states have a significant impact on the entire sector. The provision of incentives and discounts by the Polish government to the investors supplements the huge costs they incur in construction. The investor is willing to invest in an environment where there is a many-back guarantee.
Critical Success Factors and the Differences between the UK and Poland
Despite the fact that the two states are from the same region, there is a significant difference in the housing sector. First, while the Polish economy is doing well, the UK has experienced difficult economic times in the recent past mainly after the Brexit. The economic status of the countries affects the housing market directly since the financial performance influence the decisions of investors in the sector. Estate agencies are not willing to operate in an economically unstable environment as they risk losing their funds as a result of inflation. Secondly, the housing prices in the UK are incredibly high compared to Poland. As a result, the demand for houses in the UK is relatively lower than that of the Polish housing market. Also, UK has a huge disparity in the performance of the sub-regional housing markets since the recession. The growth of the regions outside the capital has increased significantly as people move out of the city due to rising cost of living. The East and the Southern parts of UK continues to experience growth while the housing markets in the Northern regions stagnate.
With respect to progress factors, one critical boost for the Polish housing market is a lively economy. The approach created by Poland bolsters financial development using present day innovation in construction. Besides, the motivations through incentives pull in more assets and capital into the housing sector. In spite of challenging monetary circumstances, investors in the UK are concentrating on the developing markets outside the capital where the lodging market is rapidly developing.
PESTLE Analysis of the Housing Industry in
Political Factors
United Kingdom
Several constructing companies in the United Kingdom still hold onto large pieces of land without proper planning permissions to commence constructions on these plots. In different countries and at different levels including the local and national levels, successive governments have attempted to kindle construction activities in order to address the house shortages against increasing demand from the growing populations and improved living standards. The governments have provided incentives that encourage building to cater for low cost accommodations as well as ease restrictions on planning. For instance, in 2015, the mortgage tax relief, the capital gains tax relief, and a regressive tax relief system were introduced to encourage home ownership by reducing the related costs of credit (Coelho, et al., 2017).
Poland
Unlike the English government, which is partly governed by a monarchial and parliamentary systems, the Polish government is based on a parliamentary democracy. In the country, building permits are issued by the local governments to reduce the bureaucracies that would have otherwise been involved. Currently, there are limited building plots due to the lack of zoning plans (Cellmer & Jasiński, 2015). Nevertheless, this has reduced the urban sprawl since investors are seeking sites within the available urban settings. The local governments in municipalities have insufficient infrastructural developments, which discourage construction, thereby increasing the price of houses in these locations since the costs of construction are relatively high.
Economic Factors
United Kingdom
Poor mortgage systems and levels of economic growth are some of the determinant factors that have significant impacts on the housing market in different countries. For instance, in the United Kingdom, several people, especially people working and living within the major cities aspire to own their houses instead of renting apartments. Most of these buyers rely on credit financing in which they deposit a small amount and rely on credit facilities to pay the bulk at competitive interest rates, which is proportionate to their income. The Central bank is responsible for controlling interest rates in order to control inflation rates. Following the 2016 vote on the Brexit, the economic backlash triggered a downward trend in the demand for housing. Similarly, the horrific economic times of the 2008/2009 nearly bought down the housing sector.
Poland
Poland is considered to be one of the most vibrant economies in the Entire Europe. Despite the numerous economic challenges of the 2008/2009 economic recession in the region, Poland has remained adamant to the strong market waves. Therefore, the housing sector in the country has also kept pace with the strengthening of the economic system. Demand for housing has increased despite insufficient supply, which the government is working with other agencies to make available and affordable to the citizens.
Social/Cultural Factors
United Kingdom
The brown-field development in England is central to several regression ambitions since it stimulates the development of depressed areas. In order to avoid and reduce future problems, other developers are lobbying for the development of suitable and sustainable communities that aim at providing a balance of housing and other social services such as education and healthcare. In the country, many people are using their houses as security for loans. Alternatively, others are topping up their loans or borrowing further to move to more expensive and luxurious homes. In the medium and long term, the mortgage interest rates are significantly aligned to the prevailing national interest rates governed by the central bank and related to the economic conditions such as inflation.
Poland
The lifestyles in the major cities such as Warsaw and Sopot have conformed to improving and stable economic conditions in the country. The growing middle class and the upper income economy over the past two decades has facilitated the growth of the housing industry. The country has realized this potential and upgraded the infrastructure to facilitate constructions from the EU funds and national income earning of the nation. The different classes of people strive to own different properties including homes in a bid to match to their classes. The culture has since become common in the country resulting into increased demand for properties.
Technological Factors
United Kingdom
Technology has become a buzzer in the world’s economy today. At a recent property technological meeting in Manchester city organized by Edwards &Co and Telcom Networks to discuss the future of property and technology in the city, the main focus was the value that tech-ready buildings were adding to tenants and owners (Vlemmiks, 2017). Apart from the technology used to improve machine operations at construction sites, in plants to produce building materials, and the research into better buildings, the technology installed into houses have improved the value of homes because people seem to rely more on technology to perform their day-to-day activities.
Poland
Similarly, Poland has invested into technology in order to keep pace with other developed nations in the region. Major efforts have been made to ensure that people get established houses installed with current technologies that come handy with the requirements of the current world. The country has invested heavily in telecommunication technology to improve this infrastructure and its accessibility into homes.
Legal Factors
United Kingdom
With the increasing interest rates in the United Kingdom, mortgages are becoming expensive by the day, thereby deterring several prospective buyers from purchasing more expensive properties. Government legislations, however, st
