Among the first businesses to feel the effects of the crisis were estate agencies and by December 2008 an estimated 40,000 employees had lost their jobs while around 4,000 estate agency offices -approximately one in four – had closed, according to research undertaken for The Daily Telegraph. Research by The Local Data Company revealed that 142 estate agencies closed between October 2008 and October 2009, representing 15.8% of the total market.
The big chains like Bairstow and Savills were able to carry on by cutting the numbers of their branches and shedding staff and those agencies worst affected were the smaller ones, of perhaps four or five branches or less, particularly if they depended solely on property sales.
So is the worst over now for the estate agency business? Not if the most recent information on the housing market is any indication.
According to the Council of Mortgage Lenders (CML) gross mortgage lending declined to an estimated 9.8 billion in April 2011, down 14% from 11.4 billion in March and down 5% from 10.3 billion in April 2010.
Bank of England figures also show the number of mortgages approved for house purchases hit a new low in April, at 45,166, the lowest April figure since its records began in 1992.
CML figures also show repossessions continuing to rise. Out of the 11.3 million outstanding first-charge mortgages in the UK at the end of March 2011, a total of 9,100 properties were repossessed in January to March 2011, a rise of 15% from 7,900 in Q4 of 2010 and equal to the average quarterly number of repossessions throughout 2010. The CML predicts that the numbers of homes repossessed will rise from 36,000 in 2010 to 40,000 in 2011 and 45,000 in 2012.
Average unsold housing stock also increased in May, despite the summer being the time of year when most housing is sold in the UK. According to the online housing company Rightmove average unsold stock rose from 74 to 76 properties per branch, reaching the highest ever level for May.
Rightmove says that the property market varies dramatically across the UK with the North suffering the worst decline in house values and sales while London is booming thanks to a shortage of property for sale. The Home Counties and parts of East Anglia have suffered less from declining prices than elsewhere.
New seller numbers are up by 21% in London compared with this time a year ago and there has been a 4.2% jump in asking prices raises the average asking price to 413,259.
Given the stagnation in the property market the Royal Institute of Chartered Surveyors (RICS) predicts that demand for lettings will continue to rise, rents will rise at the fastest pace in survey history with rental growth strongest in London and the South East The RICS Residential Lettings Survey January 2011 reveals that the combination of falling supply of properties to let and very strong tenant demand are resulting in sharp increases in rents and rental yields at the national level. Buy-to-let lending currently accounts for 12.3% of total outstanding mortgage lending by value, and 11.6% of mortgages by number according to the CML.
None of this suggests that the business of estate agency is likely to be any more secure for a few years yet. Those that have survived so far have been those that have diversified into lettings and property management, which provide regular monthly returns. They have not completely abandoned the riskier sales side, which depends entirely on the commission paid on the completed sale. Most now also have an online presence as potential buyer behaviour moves increasingly to using online property companies with traditionally lower fees than the high street agents.
If the High Street agents are to survive they need to revisit their business models, diversify their activities and be sure they are up to speed on all the regulations governing landlords’ and tenants rights’ and other property letting regulations.
Many estate agencies went under immediately after the financial crash of 2008, but are they at less risk now? Turnaround adviser Martin Pocock, of K2 Business Rescue, considers the state of the market.