The Global Real Estate Industry: Porter's Five Forces Analysis (UK)

This report provides a comprehensive analysis of the UK real estate industry, focusing on the application of Porter's Five Forces model. It begins with an introduction to the UK real estate sector, highlighting its significance to the UK's GDP and key players. The report then delves into each of Porter's Five Forces: the threat of new entrants, the threat of substitutes, the bargaining power of suppliers, the bargaining power of buyers, and the rivalry among competitors. Each force is examined in the context of the UK real estate market, with specific examples and data points. The report also addresses key issues impacting the industry, such as stamp duty, residential property transactions, and interest rates. Furthermore, it includes illustrations depicting changes in property sales and rental market values. Finally, the report discusses the future direction of the industry, including the expected rise in new housing properties and potential impacts of economic factors like rising interest rates and stamp duty deductions. The analysis provides insights into the competitive landscape and strategic considerations for businesses operating in the UK real estate sector.

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THE GLOBAL REAL ESTATE INDUSTRY
REAL ESTATE SECTOR
• Real estate as a business point of view is the profession that deals in buying,
selling, or renting of various types of properties like building, housing, land,
etc. It is a legal term that is used in jurisdiction which is obtained from English
common law. The majority of building structures in UK are private housing
buildings. However, the prime concentration of the industry in UK is on
commercial estate as it has a value of £1,662 billion
• Real estate is one of the important sector in UK business. It contributes almost
1% to the GDP of UK. This sector is one of the essential part of life which
include, residential buildings, commercial building and non-domestic building.
There are a lot of rivals also in this field such as Savills, Ability Group,
Cushman and Wakefield, Collier's, Fox tons etc. Porters five forces model is
helpful in identifying the rivalry among above competitors. .
• Threat of new market entrants- The real estate market is one of the unique
market which is comprises of high investment, high yield, and high risk. It is
different from construction industry and is developing really fast.
• Threat of Substitutes- Currently, the real estate market of UK is still
emerging. The target customers are always changing due to change in the
consumption pattern of the customers.
• Bargaining Power of Supplier- The suppliers of the real estate are building
material, lands and buildings, and equipment's.
• Bargaining Power of Buyers- The buyers in the real estate sectors are
individuals, organisations, families or the government departments.
• Rivalry Among the Competitors- The main competitors in this field are the
agencies which are providing similar properties to the customers in the same
location.
• Key Issues-
• The increased stamp duty has resulted in a fall in residential properties
transactions.
• The decreased number of residential properties business will lead to a certain
fall in the total revenue.
• The interest rate is expected to rise near by 0.25% in late spring, which
concludes that the base rate would be 0.75% (Key issues that impact property
rates, 2019).
• As per some reports views it has been identified that increasing rates
exacerbate the affordability crisis and has stakeholders concerned about a
potential recession in 2019-2020, which would impact jobs in real state sector.
Category 1 Category 2 Category 3 Category 4
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2.5
3.5
4.5
Series 1
Series 1
Illustration 2: Change in rental market value in United Kingdom, 2019
(Source: Change in rental market value in United Kingdom, 2019)
• Direction-
• The supply of new housing properties is expected to raise in the next 5 years to
meet the future demand
• The stamp duty should be deducted to promote the retail business transactions.
• A stable and competitive tax should be provided along with a stable regulatory
system.
• Enabling investment for lands and helping in attaining funds.
PORTER FIVE FORCESINTRODUCTION
• Real estate is one of the important sector in UK business. It contributes almost
1% to the GDP of UK. This sector is one of the essential part of life which
include, residential buildings, commercial building and non-domestic building.
There are a lot of rivals also in this field such as Savills, Ability Group,
Cushman and Wakefield, Collier's, Fox tons etc. Porters five forces model is
helpful in identifying the rivalry among above competitors. .
• The industry has been growing since last 5 years, though the revenue is tensed.
The revenue of the industry is expected to grow at an annual rate of 1% over
the 5 years from 2018 and is expected to reach £11.1 billion. The revenue has
increased since 2015-16 because of various government reforms and initiatives
(Size and structure of UK property market, 2019). The total number of
businesses dealing in the real estates are 20,823 which had lead to increase in
the employment rate. The number of employment created by this field is
1,58,619 .
Market Size
Illustration 1: Change in property sales from 2014 to 2017, 2019
(Source: Change in property sales from 2014 to 2017, 2019)