Estate agents’ fees (which often feel excessive on top of all the other costs of moving house) have been largely accepted as a normal cost of selling your house. Or at least they used to be. However this may not be the case anymore with property owners increasingly using online agents that offer low-cost fixed fees to try and reduce the overall costs of selling a house. The rise of online agents over the years such as ‘Purple Bricks’ and ‘Emoov’ has eaten away at the market share of traditional high street estate agents.
The growth in property websites such as ‘Rightmove’ and ‘Zoopla’ is also adding to the online offering making it easier than ever for buyers to browse and view properties without an estate agent acting as an intermediary. In light of changing consumer demands and in an era where everything is just a click away, it seems that the property market is one (of many) industries that needs to adjust and adapt to online models to keep up with the competition. Estate agents with a traditional service may have to look at whether they can reduce overheads and review their costs to effectively compete in the current market.
In light of this it really is no surprise that the high street side of the industry is struggling. They are being squeezed at both ends; by the online market offering competitive rates and streamlining agents out of the process and on the ground by larger national businesses. Although not even the larger national businesses are safe; last week the UK’s largest estate agent Countrywide Properties issued its second profit warning in six months plunging its shares nearly 30% and earlier this year Foxton’s reported a 65% fall in profits, laying blame at the door of the Brexit- hit London property market.
Estate agents have certainly had a tough gig over the last decade. It has recently been reported in the Guardian that UK house prices have grown at the slowest rate in five years in June, with London remaining the weakest spot with economic uncertainty putting off prospective buyers. It seems uncertainty in the market and so a lack of consumer confidence is a common theme across many industries and the property market is not exempt from this. Planning applications are on the rise year on year as many homeowners are making the personal choice to extend current properties rather than step out into the market.
The accountancy firm Moore Stephens has reported that last year 150 estate agents entered into an insolvency process and they have estimated that nearly a fifth (19%) of estate agents in the UK are at risk of insolvency going forward. Chris Marsden of Moore Stephens reported that ‘insolvencies of high street estate agents are increasing as online competitors continue to chip away at their sales and undermine commission rates’.
Agents are being faced with a tough combination of online competition, a pessimistic property market and the government’s plan to ban letting fees. Taken together this may be enough to evict some agents, for good.