As we enter the last third of the year, the pace of change in the property market looks set to hot up further with the seemingly endless growth in the number of “online” agents offering services ranging from “stick it on the internet and hope” through to “full service but without the High Street premises” offerings.
Many of these operations are being seriously backed financially and many of the larger “traditional” agents have invested and are developing their own “online” models, usually at low and fixed fees irrespective of result and in direct competition with their own “no move, no fee” models.
I have long advocated the use of a powerful online approach. Whether I was a visionary or not, my 30,000 word dissertation for my MBA in 2000 was entitled “E-Commerce: Opportunity or Threat? Research into the future implications for residential estate agency in England & Wales”
It makes interesting reading and much of what my research concluded is now reality.
I must admit that I thought change would come quicker than it has. I opened a “hybrid” agency business in 2003 but was probably a little ahead of time and, when the financial crisis hit in 2007 I bailed out and sold to a bigger competitor.
I still maintain that there is room for a range of players in the market, albeit many less than currently operate. The need to differentiate business offerings and be truly “world class” at whatever is being offered is crucial, irrespective of agency type, if one is going to succeed in the new order of things.
The online and technology driven challenges will continue and agents involved in lettings will shortly be facing another challenge that will result in being a threat to some and an opportunity to others as a ban on charging tenants any form of fees becomes law and is implemented.
For many years, many letting agents have been able to operate sub-standard operations, winning business based on low fees to landlords rather than on demonstrating quality and value, knowing that they could make up the shortfall in income by charging tenants who, largely, had no choice but to pay in order to secure a property.
As so often is the case, the few spoiled it for the many and now the Government is about to remove the ability to charge tenants anything. This will leave agents with the choice of either justifying higher fees to landlords or seeing significant reductions in income with its associated business threats.
Top agents will develop innovative strategies and offerings to win market share and maximise profits. Technology will undoubtedly play a huge part in both driving income and reducing costs. I expect the cream to rise to the surface but the blood on the carpet amongst the lower ranking and reactive operators seems inevitable.
I expect the Government to push the legislation through Parliament this autumn - it will largely go unopposed – and I feel it could be in place almost immediately and certainly by the early part of 2018.
The property market itself is OK but no better. Transactional volumes however, particularly in London and the South East, are down and there are too many agents chasing too little stock.
Affordability is a major issue in London and the South East and sellers are having to adjust expectations in order to secure buyers as are landlords with tenants. Where this takes place, there remains good activity and deals are resulting.
Mortgage interest rates look set to stay low for some time to come and, as wages rise, with a lack of stock coming to the market, prices look unlikely to crash. New home build numbers are up but only slightly and so the balance of demand vs supply still weighs in favour of the seller or landlord.
I have never believed in “bad markets” – just “bad estate agents.” Those that embrace change, and concentrate on understanding their customers and clients and delivering high quality service will reap the rewards whilst the others fade away into obscurity.
Michael S Day MBA FRICS FNAEA