There is no business in the world which has not been impacted by the online revolution but it seems that the UK high street estate agent is threatened more than most. A recent study by accountancy firm Moore Stephens suggests that one in five UK estate agents is showing signs of “financial distress” due to increased competition. As online businesses continue to grow, with relatively low overheads, estate agent offices are struggling to compete.
Higher running costs
One of the main attractions of the online business arena is the significant reduction in property and staffing costs. This allows online property portals to offer low-cost, fixed fee online estate agent deals to which the high street estate agent companies have no answer. There have been calls for the UK government to protect the high street from the online revolution but so far this has had minimal, if any impact.
The ability to plough a large percentage of expenditure into advertising and online partnerships has seen some of the larger property portals reporting exponential growth in recent years. While there will always be a requirement to visit properties ahead of a purchase this part of the business can be handled by agents in various regions of the country. There is no need for the traditional estate agent window showing properties for sale as this can be replicated online for all to see 24/7.
Improvements in technology
While you can’t really beat viewing a property with your own eyes there have been significant improvements in technology which have been embraced by the estate agency sector. The use of video cameras, web cams and relatively inexpensive but highly effective drones has in many ways moved the goalposts for this industry. It is now possible to view a property online and feel as if you are actually “there”.
Independent estate agents squeezed
The report also shows that not only are independent estate agents being squeezed by property portals but larger high street estate agencies are also ramping up the pressure. The reason why 5000 high street estate agents are struggling is because quite simply they have been pushed into a situation where they either ramp up their advertising expenditure or close their doors. Each independent estate agent that falls by the wayside hands more power to the national operators who already hoover up the vast majority of off-line business.
Countrywide and Foxtons report reduced profits
Only last week we saw the UK’s largest listed estate agency Countrywide reporting profits of just £447,000 for the six months to June 2017, compared to £24.3 million during the same period last year. This was followed by Foxtons, a London focused estate agency, which reported revenues down by 15% and pre-tax profits down a whopping 64% to just £3.8 million. While it has to be said the UK property market is currently exposed to a number of one-off challenges such as Brexit and never ending political uncertainty, this is obviously a worrying time for the high street estate agent.
It is likely we will see consolidation in the UK estate agency sector although the days of paying up to takeover a competitor may have gone. Why would the larger estate agencies take on additional bricks, mortar and staffing costs when more business than ever is being carried out online?
Jenny Hammond is a presenter for Asset TV (partner of Bloomberg), hosting their masterclasses and news updates which are followed by a global community of 400,000 investment professionals. Considered a leading voice in financial media, Jenny also frequently appears on Tip TV’s Investment Show, This is Money’s property show and Property TV’s (Sky 198) Property Panorama. She was also one of the launch anchors at Russia Today, the first China correspondent for Press TV – where she created and directed the bureau and had her own daily lifestyle show on ICS, Levant TV and gbtimes.