With somewhere in the region of 1.2 million property sales transactions being completed each year, and 16,500 estate agents actively vying to manage those transactions, it doesn’t require a maths genius to conclude that there simply aren’t enough properties being sold to allow all agents to remain viable.
The fact, therefore, that we regularly read of another agent – whether they’re operating online, as a hybrid or on the high street - entering administration or being at threat of doing so, should come as no surprise.
This is a simple case of basic arithmetic where things no longer add up.
So, where does that leave the market as it looks to the future?
It would be easy to blame Brexit, but that would be misplaced. No, this is simply symptomatic of the cyclical nature of the housing market, where boom is followed by bust.
The length of each of these periods and the overall duration of the cycle, of course, varies. Now though, potentially for the first time that I remember, we may need to consider that this is the ‘new normal’; that transactions are lower and that there simply isn’t the need for the same number of agents as there once was.
Does this mean though that we sit back and await our fate? That survival in this ‘new normal’ is a matter of luck or chance? No, it absolutely does not – unless you want to fail?
The impact of reduced transactions is not only an issue for those agents who miss out. Alongside a fall in sales transactions, we’re also witnessing an ever-decreasing number of landlords (thanks to government interference).
Combined, these two factors place increased pressure on the market and raise questions as to where demand will be met are raised. Where will people live and how will prices be managed so that they don’t spiral out of control?
The knock-on effect this creates reaches far wider than simply the property sector. DIY retailers, skilled tradesmen and those operating within home furnishings all feel the impact too. Of course, fewer transactions means that the government has seemingly shot itself in the foot as it receives lower stamp duty receipts.
So, what is the answer? As we teeter on an unknown political future, we need to prepare ourselves now to focus on the demands that we must place on our future leaders.
Simply, we need to call for greater levels of mixed housing choices for customers and for any future government to refrain from over-meddling in the property sector, whether that is via restrictive rental policies (Section 21 is a whole debate in itself) or prohibitive levels of stamp duty.
We need a sustainable long-term housing policy that provides flexibility and choice for our customers. Businesses can then adapt and invest with certainty. 10-year boom and bust cycles hinders everyone in the housing process.
Alongside these demands, of course, must be an acceptance of the need to adapt. If this really is the new normal and transaction levels are to remain low, then we must become agile and flexible.
Doing so successfully will, I believe, prepare the strongest players to survive and thrive as the property cycle rotates once more.
*David Westgate is group chief executive of Andrews Property Group
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Hi David, I’m really surprised you haven’t mentioned either of the two main inhibitors in Sales, stamp duty and restrictive mortgages. I’m also surprised you haven’t connected Sales to Lettings more clearly as they are now interdependent. Government policy will determine the future of the market, hopefully Boris will reverse the Osborne social meddling and we can return to a real normal not a new normal. It’s looking less likely now but a Corbyn Government would effectively decimate the industry and I’m also concerned about what the Lib Dem’s would do if they held the balance of power. Being agile and flexible in the face of change is essential but you still need a plan. Interestingly, I could show you how to provide a better more secure Lettings service to your landlords and tenants, one that is safer, more versatile and would also earn you more money, I’m waiting by the phone :)
All very insightful posts etc.
Consolidation is required.
Also there needs to be barriers to entry to become EA and LA.
The industry can really do without the Johnny come latelies who just jump on the bandwagon of rising markets.
We need qualified EA and LA not a load of flash Harry's!
The direction of travel in sales and lettings markets is for fewer transactions caused by Govt meddling.
This is unlikely to change as housing has now assumed a political importance which hasn't been the case for decades.
Due to demographic changes mostly caused by past Labour Govts housing is now a rather live political issue.
Kicking LL now appears to have become a political football.
It seems to LL that politicians believe they can kick LL around as much as they like with impunity.
I suggest they are in for a rather rude awakening.
Many leveraged LL do not need to be LL.
Continually kicking them will result at some point in them determining enough is enough and they will exit the PRS or substantially reduce their exposure to it.
As regards housing transactions more homeowners who would have once moved are now just improving.
Whilst that might be good news for jobbing builders it does not produce the more beneficial economic activity of people moving houses.
The sales and lettings market must accept that in future there will be fewer transactions and therefore need to downsize EA and LA.
There simply ISN'T the market to support the current incumbents as so cogently stated by the lead article writer.
We are I believe already starting to see a cull of EA and LA but this process has only just started.
There is a lot further to go!!!
There is always one - and usually it is me but if the article is a simple case of arithmetic, then let's start by getting the figures correct. UK completions do fluctuate annually between 1 million to 1.2 million, so correct. The number of agents 16,500, I think that a little low, but close enough, and of course 5,000 pure rental agents who from time to time sell the odd property. But, 10% of property that completes each year does so with no agent involved, so David Westgate's main thrust is in fact even more pertinent, lots of agents chasing 900,000 completions.
Where will it end? - Well they always say that what happens in America, comes across the pond, and did you know 75% of realtors only sell 2 or less properties a month, and only the top 5% of realtors earn over 300,000 dollars. So pretty slim pickings (not the cowboy). This then could be the future - in the UK. As could the American multi-listing system …
I fully agree that there is more competition - Since 1985, when I first became an agent, there has been a 500% increase in estate agents and only a 74% increase in housing stock.
In answer to how many how many estate agents are trading within a 10 mile radius of large town, which I use when discussing with my clients the need to sharpen their approach to getting new stock, in say a town of 180,000 inhabitants, I tell my awe inspired clients that there are 221 Estate & Letting Agents, 71 Letting Agents only, 71 Estate agents only 363 agencies in total – trading in a 460 sqm radius which is an agency every 1.25 miles. (Plus online agents.)
But, I am not sure that in the future there will be less agents, I think there may well be more, and these will be single individuals 'property people' who list and sell and are at the core of a geographical area, the property specialist, low overheads, hi tec, but also available, knowledgeable and charging a fee that covers costs and a margin on top to make it worth while to do the job. Vendors and Landlords do not want cheap fees, they want service and value for money, perhaps Proptech can be the salvation of the industry after all.
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