Property lawyers should prepare for 2008-style crash, regulator says
Property law firms should ready themselves for a “significant fall” in work as a result of a downturn in the UK’s real estate sector, the industry regulator has said.
The Council for Licensed Conveyancers (CLC), which regulates conveyancers and property solicitors, said firms should prepare for a reversal of the past decade’s boom as economic pressures set in.
The regulator called on firms to “stress test” their businesses for a slump in work similar to the one seen during the 2008 financial crash, which saw a 40 per cent drop in conveyancing transactions year-on-year.
The drop in work as a result of the 2008 crash in turn saw the turnover of CLC member firms plummet 27 per cent, before largely recovering the following year.
The CLC said rising interest rates, a drop in the availability of mortgage products, a tightening of the housing market, and wider economic pressures could lead to similar decline.
It called on member firms to plan costs cuts “or other steps that the managers and owners believe necessary and effective” ahead of any drop in transactions.
“Preparing for the worst is vital for the resilience of the legal services sector and for the sustainable provision of conveyancing and probate services to the public,” the CLC said.
The warning comes as the revenues of CLC regulated firms has more than tripled over the past decade, from £85m in 2009/10 to £277m in 2020.
The recent boom in property transactions on the back of Covid-19 further bolstered the sector’s turnovers in seeing its revenues jump 26 per cent to £349m in the financial year ending in April 2021.