Ex-Countrywide chair signals the death of traditional agency
Historically low sales volumes and the continued bleak economic outlook have made the traditional estate agency business model unviable, according to ex-Countrywide chairman Harry Hill.
Speaking at The Negotiator’s Survive & Thrive conference in Birmingham last week, Hill (pictured) expressed his astonishment that anyone was surviving solely of the back of house sales.
He congratulated delegates for still being in business, adding: “I don’t think a living can be made anymore from just selling homes. People have to diversify in to other income streams.”
Hunters managing director Kevin Hollinrake disagreed, insisting that the estate agency market would remain for a number of years. “I still think estate agents can make money. In 2009 we made as much money as we did in 2006 and 2007 put together.”
He adds: “We are seeing very steady transaction numbers, and it is realistic to expect a slight drop in house prices.”
Hollinrake and Hill were speaking as part of a panel debate alongside Burchell Edwards managing director Michael Brucehosted and host, former Conservative MP Steven Norris.
The debate, which tackled a range of agency issues including portals, service standards and diversification, followed a call from the UK’s leading housing market economists for agents to batten down their hatches in preparation for a tough economic road ahead.
Royal Institution of Chartered Surveyors economist, Joshua Miller, says while the economy is out of a recession, house prices are up and transactions have recovered modestly, these positives are likely to be reversed as the economy slows.
“A double dip is not a central case but probability has increased.
There is a subdued outlook for house prices and transactions at best.”
While Miller predicts that a double dip, should it happen, would be far less severe than that experienced previously, he does not expect transaction levels to return to normal for at least the next five years.
He consequently advises agents to reduce their headcount, avoid installing expensive flat screen display screens around the office and to reduce overheads as much as possible. He adds: “Sector consolidation might even be required to do that.”
As The Negotiator Online revealed last week, Lloyds Banking Group economist, Martin Ellis, similarly predicts that agents face a number of ‘significant headwinds’, including rising unemployment, subdued earnings growth, tax rises and an ongoing shortage of mortgage funding in the year ahead.
He says: “There is a non-negligible risk of a double dip. The risks of sovereign debt on the economy could spark a new financial crisis, but this is a risk, not a forecast.”
Ellis predicts that house prices will end the year where they started, with transactions likely to rise but remain historically low, offset by a £300bn gap in mortgage funding.
The afternoon Birmingham event was hosted in partnership with Trinity Mirror Digital Property, supported by Virgin Media and attended by more than 100 delegates.
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