Market Update

As I write, it is now some two months since the Brexit referendum result and there remains more questions than answers as to what this means in the immediate future. A change of Prime Minister and turmoil in the official opposition has left much of the political and economic landscape laying fallow and in need of some clear direction.

The Bank of England, worried at possible inflationary pressures, reduced the base rate to 0.25% in August. Good news for borrowers but bad news for savers and primarily bad news in that it came about because of concerns  about the UK economy moving forward.

Typically in the property market, estate agents like to put on a “brave face” and many have been saying “it’s business as usual” (which it is) but ignoring the changes that are undoubtedly around them.

The closer to Central London one operates, the more challenging the market is becoming with those much further afield seeing less impact.

A recent survey also showed that those areas that voted to leave the EU seem to be operating more normally and buoyantly than those where people voted to remain. This is a further indicator that markets are always largely built on consumer sentiment and confidence. The superb Team GB results at the Olympics may help generate some “feel good” factor in the weeks ahead.

Irrespective of Brexit, the market was showing signs of “overheating” and “affordability” was growing as an issue. This continues and we are definitely seeing some adjustment downwards in prices (again more noticeable in London but expected to “ripple out” over the coming weeks).

Another challenge facing all estate agents is the growth in “online” and hybrid” agents who are growing market share in virtually every location. Most operate on low fees and it remains to be seen if their current business models are sustainable but they are certainly “disturbing” the market and, unless “traditional” agents alter their approach and attitudes to ensure that they demonstrate and deliver “added value”, we may well be seeing a huge sea change underway.

As I have said in my Integra activity article, visits to several agents in recent weeks has left me horrified at the inept and casual approach undertaken by many to handling applicant enquiries. In one business, I calculated that it was effectively costing £200 to obtain every applicant (simply divide the monthly running costs by the number of applicants registered that month) and yet many were being registered without full names, addresses, contact info and certainly without any understanding of their buying or renting motives, ability to transact etc.

At £200 an enquiry, the business soon came to the conclusion that it needed to do better!

A combination of lax management plus over reliance on software and the internet has seen many agents simply stop communicating properly with customers, customers who have seemingly, in many cases, just become an anonymous number in a system.

Agents are often registering applicants looking for properties based on "what they want" and not "why they want it" This means that someone who says they want three bedrooms (because they work from home and want to use one as a study) perhaps doesn't get offered a two bedroom house with a ground floor study because the computer software is unable to recognise this variant whereas a negotiator can, if he or she asks!

Back in the days before computers we had card indexes. Computer software replaces these wonderfully but, back in the day, to contact someone, you then had to pick the phone up not just hit the send button and hope for a reply. Every time an agent speaks with a customer they should be ascertaining more information, building knowledge and trust and moving closer to doing some business. A blanket email will not achieve this.

This complacency is a huge threat to a business and, with the growth of cheaper alternatives in the market, the need to demonstrate and provide added value has never been greater.

Some basic sales skills development wouldn’t go amiss in many organisations.

Overall the market is adjusting, sales volumes are down and prices are also reducing. However, even in tough conditions there will still likely be 750,000+transactions a year. The question is, can an agent grow their slice of a smaller cake by identifying the motivated customers and working with them or will their slice get eaten away by others who do?

Now is the time for cream to rise to the surface but it will still require a fresh approach. Cream can go sour very quickly. 

Michael S Day MBA FRICS FNAEA
Managing Director