Recent news for those operating in the property market has generally been negative with the effects of weak transactional volumes, falling house prices, lack of consumer confidence and increasing regulation all causing businesses to reappraise their operations in order to find a successful way forward.
A recent report showed that High Street estate agency offices are closing at a rate of knots, beaten only by the rate of closure of public houses. The report does not however clarify if these are businesses that are closing or simply that agents are exiting the High Street and adopting new ways of working. My view from inside the industry is that it is a combination of both.
The share prices of major agency groups and the property portals have seen billions of pounds of value removed from the sector. Some of this has been self-inflicted – Countrywide has seen its share price fall by over 90% in the last six months to around 10p per share – in part due to a truly disastrous foray into the online arena that simply ‘cannibalised’ its existing ‘traditional’ operations. Some of it has been the contagion effect of reduced confidence in the sector and markets.
The emergence in recent years of ‘online’ and ‘hybrid’ estate agents has been a disrupter with many ‘traditional’ operators failing to find sufficient points of differentiation and therefore losing out to the new low fee, execution only type services that have emerged.
The ability of these new business models to raise funds on the back of future expectations has been nothing short of spectacular with many observers describing this as a case of the ‘Emperor’s new clothes’ as none have yet shown an ability to produce sensible or sustainable returns on investment whilst spending fortunes on building brand awareness and customer acquisition.
The current market is one of change, of innovation and of new developing business models. It is inevitable therefore that there will be casualties, consolidation and remodelled offerings as operators seek to find the right path for a profitable future.