Real Estate Revolution or Evolution?
Kevin Hollinrake, MD, Hunters Property Group
Bill Gates once said that we overestimate the change that will take place in 2 years and underestimate what can happen in 10 – it may take a decade, but I believe that the UK estate agency industry is heading towards the biggest changes it has ever seen.
It is a testament to the tenacity, resourcefulness and sheer bloody-mindedness of estate agents in this country that our industry has not been totally decimated by the market collapse of the last 2 years. No industry could suffer a 65% fall in transactions unscathed, yet we have seen relatively few branch closures; generally agents seem to have preferred to reduce headcounts (50%) rather than the number of offices (25%)*. Of those that have closed, some are apparently just ‘mothballed’ and will re-open as the market recovers. The question we need to ask is why? Have agents based this business decision on today’s facts or because that is how they have weathered previous recessions? I am sure that this has been effective in the past, but I believe that things have changed – and that the buying habits of our customers have changed too.
I think the reason that technological changes have so far had little impact upon the structure of estate agency in the UK is that we have all been making too much money – we haven’t needed to change. Internet only agents like Wow Property and National House Network have hardly taken the market by storm, so possibly we have believed that our industry would be changed little by the internet revolution – but I believe that it may be worth taking a little time to consider how these changes may now affect us.
Of course, the fundamentals of estate agency have nothing to do with technology – they are about people. Great estate agents don’t sit behind a desk bashing-out emails all day; they get out there and talk to as many potential new clients as possible. At its best, however, IT can help to remove the things that stand between a good estate agent and his customer, such as office and people management, bureaucracy, sales reports and all other non fee-earning activities. Without these time-consuming hassles the agent can be much more productive and more successful.
Having made the difficult decision to close 3 of our suburban York offices in August 2009, we offered the managers the opportunity to cover those areas without an office or staff as a self-employed, home-based franchisee. We call them ‘Personal Agents’ because they cover a small, defined territory and have a one-to-one relationship with the customer. Our first two Personal Agents are the no. 1 selling agents in their patch despite the fact that their competitors have an office and a team of three, not because they are uniquely gifted, but because that’s all they do - sell. We now have twelve agents trading in this way in various parts of the country.
It is all very early days of course, and we are making our changes gradually and watchfully. But the initial results have been startling, and we believe we should go where the customer wants us to go. We cannot avoid making changes just because we have invested time, money and have an emotional attachment to our office networks. The logic and facts are clear – footfall is a fraction of what it used to be, our customers now search primarily online, they want a more personal service and they generally move very locally and, therefore, want a local agent. The localised nature of the service may also lead to more cooperation between agents and possibly a multi-listing approach, another evolution that would be very well received by buyers.
There are no new ideas under the sun, of course, and I do not claim that our model is totally unique - similar systems operate in many other countries including the US and Australia and there are other early adopters in the UK such as Miles & Barr and Intercounty – but I think that this model will be a child of our time.
We believe that there is even greater potential with our model by building a national network of agents under our brand, or by retaining and connecting other strong brands around the UK. We would be delighted to hear from any agents around the country that would be interested in talking to us about this, or indeed individuals who would like to work for themselves as a Personal Agent. I am sure those considering such a move would be interested to know that our first Personal Agent will net over £100,000 in his first full year of trading and believes that he has the capacity to double that figure next year.
It is because of this that I believe, possibly most controversially, that fees will drop. As a company we have always championed higher commissions to ensure that we achieve a consistently good profit margin over and above the increasingly high overheads we have to contend with. With this new model overheads are reduced by around 90% whilst productivity increases. In these circumstances agents will still be able to earn significant sums whilst charging below 1% and, as a natural consequence, market forces will drive down commission rates.
I think offices will still have their place, as they provide name-awareness, help to build successful teams and provide administrative functions, but we will need a lot less of them and they won’t necessarily need to be on the high street.
Maybe it would have been easier to have been part of an earlier generation of agents (particularly those that built up a healthy chain of offices in the late ‘80s) but, like it or not, we live in interesting times!
* Source, Daily Telegraph
