A City investment consultancy says one leading private agency chain has slashed its fees to 0.5 per cent in order to build up instructions in what some fear will be a lean period between now and the EU referendum.
Jefferies made the reference while issuing a cautious note to investors following Countrywide’s bullish trading statement yesterday; Countrywide reported that its house sales were up 30 per cent in the first quarter of 2016.
Many agents have shown similarly strong sales growth benefitting - as Countrywide has already stated in its case - from an acceleration of buy to let transactions ahead of April's stamp duty tax changes.
However, in both Jefferies’ note to its investment clients and in Countrywide’s statement, there is concern at the unknown effect of economic uncertainty in the build-up to June’s EU referendum, or possibly after the vote.
In addition, Jefferies’ analyst Anthony Codling says: “Price competition remains strong and we are aware that one of the private majors has been cutting fee rates to around 0.5% in order to firm up a pipeline ahead of the EU referendum. Countrywide remains disciplined on fees.” There is no hint as to the identity of the agency.
Codling also notes that Countrywide’s trading statement to the City yesterday was shorter than usual - another sign, he says, that the second quarter of the year may be less promising than the first.
“We would not be surprised to learn that one of the reasons Countrywide has trimmed its trading update disclosures is to reduce the risks of analysts extrapolating Q1 performance across the full year” he suggests, adding: “We did find [the] trading update somewhat brief and somewhat short on numbers, although Countrywide disclosures are in-line with their peers (which we also find too brief for our liking...).”
Alison Platt, Countrywide’s chief executive, said she was “encouraged by the strong performance delivered in the first quarter” and remains on track to deliver the pilot project - previously revealed by Estate Agent Today - in three of the groups’ different agency brands during the second quarter of this year.
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NONSENSE NONSENSE NONSENSE! Another sign of weak, poorly trained, agents who simply don't have the skills, professionalism or confidence to defend their position on fees and view fee cutting as the easiest line of defence - even though it seldom works as a market share generator. It's simply cowardice in the face of an (wrongly-)assumed enemy. The public does not have a problem with fees in the UK (which are by far the cheapest in the world) - it's all in the mind of the weak agent who wrongly believes that people prefer cheap! They don't - they pay for the product or service they prefer. All the agent has to do is be preferable - and persuasive. And that's a training issue.
100%
Agreed Richard.
Richard is right about the fees and training issue. But it is also hard to see why the Referendum should provoke a difficult trading period. Regardless of the hype or the result (and I am deeply committed to remaining in, by the way) Britain will still be a country where under supply of houses leads to consistent demand. Equally, there are no pressures in the economy to increase interest rates or reduce the amount of available mortgage credit. The problem is, as we see every five years when the general election takes place, people use these events as an excuse to delay a sale or purchase not for good economic reasons but because they are worried/frightened/bored by the process of moving house. At the same time, agents use these events to explain away poor performance to their vendors.
The property market and the stock market are all much slower because of the Referendum because of uncertainty! Many deals have been put on ice, in both one's private life and in business everyone wants certainty. It's annoying but understandable. In the City M&A deals in which foreign buyers take over British companies are down by a third compared with 2015. For domestic deals the drop has been even greater. Spending by British companies has halved as UK companies put off their big decisions. BHS and Austin Reed in the past couple of days are a case in point. Prices are falling in Central London and anyone who recently bought before the new SDLT will not have saved money because prices will fall by more than any saving they have made by beating the deadline!
Best in class still sells however 90% of properties still remain overpriced and still on the market this situation will only get worse. I have been through all the up's and down's of the last 40 years and you ignore history at your peril.
Richard, you are totally right!
:)
Agreed- if you have to neg on fees your not offering/doing/impressing enough. However the London property market is in for a very tough 2016, largely due to an over-valued market. Once values re-adjust and London developers start building homes for regular income residents, the market wil right itself.
Richard is correct about fees and the service offered by agents - however there are a small minority of vendors who will go for the cheapest option - its the same in any business - you just have to accept that and walk away from those few - which is why the cheap online agents have a place (albeit small) in the market. As for the referendum apart from a small degree of uncertainty regarding foreign investors in the prime London market if you read all the reports carefully I agree with Adam there is very unlikely to be any real change in the market due to the referendum. There are much bigger forces at play such as the severe chronic shortage of housing and the governments unhelpful stamp duty changes and the sweeping changes imposed on landlords which will affect the market.
Agreed that fee cutting per say is weak, but just as many retailers have mid season sales, there is nothing wrong in having a brief fee cut period. Estate agents are retailers, after all. It will be those agents picking up instructions and filling their pipeline, whilst those digging their toes in and refusing to take a business view, will complain that the market is quiet. Cutting back advertising? Of course not, so better to have new stock and look proactive. Plenty of buyers around, chasing fewer homes, so sales are easy to come by, but instructions continue to be lean, due to factors mentioned above, but are more difficult during the quiet run up to the referendum. This is just like a general election, when sellers withdraw into their shells. Never understood that. All be over soon. Better in or out. That is the question.
Do you want the cheapest agent or the best agent?
What's more important turnover or profit?
A crap agent will do a low fee and high valuation - it's all about service and selling price.
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