Broken Estate Agency Market – The Property Chronicle
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Broken Estate Agency Market There are simply too many agents fishing in a pond that isn’t growing

Residential Investor

Who will be the winners in the “broken estate agency” market?

We know that the current and foreseeable UK macro property market position lacks stability with Brexit, affordability, supply and demand imbalance, knee jerk and short term Government policy all adding to the mix. However, people need somewhere to live and demand for accommodation means we are unlikely to see any huge price readjustments and transactional levels are set to continue at similar levels.

So why is the estate agency market broken too?

Quite simply, there are far too many estate agents and total fee revenues are not enough to support such numbers! No-one is able to say how many agents there are in the UK but there is currently estimated to be circa 25,000 sales and lettings “offices”.

There are simply too many agents fishing in a pond that isn’t growing and where new competition is winning business at lower fee levels and with new business models.

A cull is needed and is already underway, as agents lose volumes and pull the only lever they think they have – fees – to try and hold onto a share of the market.

With largely fixed cost business models involving High Street premises and salaried staff and with growing competitive pressures, technological and legislative change, it will only be those agents that are able to adopt, adapt and improve that will ultimately survive and thrive. Adopt, adapt, improve originates from a speech by, the then, Prince of Wales in 1927 – in my view it is just as relevant today.

Moving into lettings has enabled many estate agents to survive in recent years with annual growth rates in the private rental sector exceeding 20% and faster cash-flows than in sales. This market is now under pressure from increasing legislation and diminishing yields. The impending tenant fee ban will take some 15% of revenue away from the average agency and, alongside reduced sales transactions, could signal the end for many.

The appetite from investors for the new “online” agents has been staggering and growth in “online” and “hybrid” agency has been significant with latest reports suggesting that as much as 8% of the market is now under their control and this share is growing.

Residential Investor

About Michael Day

Michael Day

Michael S. Day MBA FRICS FNAEA FARLA is the Managing Director of Integra Property Service, Director of teclet, and a founder member of Agents Together.

Articles by Michael Day

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