Conveyancing Rates Are Set To Rise

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RESOURCES - Conveyancing Rates:
Ever since the turn of the millennium and the start of the house price boom, conveyancing rates have been steadily falling. This was because such a sudden and sharp increase in available conveyancing work led to hundreds, even thousands of new firms springing up to take advantage of the “gold rush”. This in turn of course led to increased competition. Much of the work was (and still is) controlled by large estate agencies who would panel work to a chosen few firms, often the lowest bidder.
As the large conveyancing firms grew and streamlined their operations, and took on higher volumes of work, they were able to adjust their conveyancing rates ever downward. As with any price war however there has to be a tipping point, and it seems that regarding conveyancing rates that has now been reached and the trend may be upward. So what will cause conveyancing rates to rise?
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Decreased Competition In the Conveyancing Market

The number and size of conveyancing firms that existed during the housing boom was never going to be sustainable even ordinary times, let alone in the slump we now find ourselves in. Inevitably therefore over the past few years a great many firms have either had to close or have withdrawn from the conveyancing market.

There are two main reasons for this. First, the level of work needed to support many firms is simply not available - people are not moving house so they don't need conveyancers, whatever the conveyancing rates. Second, As will happen in any recession there has been an increase in repossessions. As house prices are falling, lenders are not recovering the full amount of their debt and are scrutinising files to see if the conveyancer has done anything in breach of the lender's instructions, for which the lender can sue to recover some more of its loss. This in turn leads to an increase in the cost of professional indemnity insurance for firm who act for lenders in conveyancing and the increase has for many proved too much to absorb. Without insurance they cannot continue to practice conveyancing.

Just as increased competition forced conveyancing rates down, so decreased competition allows them to rise.

The Effect of Economies of Scale

One of the reasons that lawyers were able to set their conveyancing rates so low was that they had such a high volume of work and operated economies of scale. Making a profit of L50 per transaction can be acceptable if you are completing 500 transactions per month. The problem is that if you are only completing 50, it becomes unsustainable. Imagine if a supermarket started to sell the same amount of goods per month as a local shop? It would not cover its overheads. It would have to scale back the size of its operation and increase prices.

This is exactly what those conveyancers who have so far survived the slump have had to do. Rising insurance costs and falling trade equals increase conveyancing rates or cease to trade.

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