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Estate Agents and Services Market Assessment
Key Note Publications Ltd, Jan 2001
Changing focus of estate agents
How is the business of residential estate agency changing? This review looks at the trends affecting estate agency and examines how the leading chains are shaping up to the challenges of the future. By `estate agent', Key Note means a business primarily concerned with selling and/or letting residential property. Many estate agents have other business strands, such as selling mortgages and insurance, or property development, or property management, which are increasingly important. This report discusses these additional businesses, but the starting point is those businesses that were established to handle property transactions.
More people, little land, dearer property
Demographic trends point to an increase in retirement developments and greater use of equity release. More dwellings will be needed to keep pace with the population rise resulting from greater longevity and from the continuing trend towards smaller households. The current rate of construction of new dwellings is insufficient, both to accommodate new households and to replace the stock of unfit housing. This shortfall will push property values upwards. It is not a simple matter for housebuilders to complete more dwellings. Under-supply enables them to keep their prices up and, in any case, there is a dearth of land with planning permission for residential development.
Within the UK, there are just over 1,500 estate agency companies, excluding estate agency businesses that are divisions of larger companies in other sectors. Around 300 estate agents control 80% of the residential property market, which in England and Wales totals about 1.4 million transactions a year. Local authorities now build only one new home in every 500 and other registered social landlords are cutting back on construction. These trends should be positive for estate agents - the continued expansion of the private sector results in a larger and larger pool of properties to buy and sell.
Residential estate agents' revenues reached £4bn, in 2000. Eight of the ten largest estate agencies in the UK are owned by financial services companies - Countrywide, Cgnu, Royal and Sun Alliance, Halifax, Bradford and Bingley, Connell's, Legal and General, and Friends Provident. Their main thrust is now the cross-selling of financial products and advisory services.
Poor public perceptions
Key Note has commissioned new research, from NOP Solutions, on the public's attitudes to estate agents, their use of estate agents and their views on the housing market. The findings show that estate agents are not overwhelmingly popular. Fractionally over half of all adults would expect to find a home through an estate agent - suggesting that half would seek to bypass an agent, if they were thinking of buying a home. Only one in seven people think that staff in estate agents are knowledgeable and fewer than one in 20 think that estate agents' fees are good value for money. Key Note's survey finding, that people are not wildly enthusiastic about estate agents, fits in with previous research. The estate agency sector still has a big task ahead of it, to convince the public that staff are knowledgeable and efficient, and provide a service that is well worth the fees charged.
The Internet has quickly become a major force in property sales, catering for private sellers, agents and developers. Nearly a quarter of all our interviewees say that the Internet is a good place to look for a property. About one person in 50 is a private landlord, owning one or more properties let to tenants. Management of let property is a large market, which many agents are tapping into successfully.
Finance for the future
The agent selling the most homes in the UK is Countrywide. Cgnu and Royal and Sun Alliance Property Services vie for second place. The Halifax's property services are in fourth place, followed by Bradford and Bingley and then the fast-growing independent TMX Corporation (Spicer haart).
Web marketing is becoming integrated with branch sales, as stand-alone independent sites struggle in a crowded marketplace. The stress factor involved in property transactions is a big factor in favour of estate agents' branches. When people buy a home, they often need personal support. They are also in the market for all sorts of financial and household services - as the leading chains are well aware. Financial services are the way ahead.
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