Estate agents battle for survival as UK housing slump continues » Housing » 24dash.com

Figures showing the number of homes changing hands increased for the second month running during October offered a glimmer of hope to struggling estate agents this week.

As a profession that relies on sales commission for its income, estate agents currently find themselves at the sharp end of the housing market slowdown.

Property transactions are running at around half last year's level, with Government figures showing that there were only 59,000 sales in September.

But it is not until the figures are split down to individual estate agents that the real impact of the stagnant market is seen.

The Royal Institution of Chartered Surveyors (RICS) said its member estate agents sold an average of just 10.9 properties each during the three months to the end of October, the lowest level it has recorded since it began collecting data in 1978.

The situation was even more dire in London, where the average estate agent sold only six homes during the same period - less than one a fortnight.

The National Association of Estate Agents (NAEA) is slightly more optimistic, claiming its members made seven agreed sales each during October, but this is still only slightly up on an all time low of five reached in August, and half the level seen during the boom years of 2006 and early 2007.

Unsurprisingly, the low level of transactions is leading to the sector haemorrhaging jobs.

It is hard to say exactly how many jobs have been lost as there is no body that monitors employment levels among estate agents, but some estimates put the figure at between 5,000 to 7,000 since the downturn began.

Some of these will be through compulsory redundancies, while others will be due to resignations as people find they cannot live on their basic salary without the boost they previously received from sales commission.

The Centre for Economics and Business Research recently predicted that up to a further 50,000 estate agents could lose their jobs during the coming year as the housing market continues to struggle.

The figure is well up on its previous estimate of 15,000 job losses by the autumn of 2009.

And it is not just jobs that are going, entire estate agency businesses are also being forced to shut up shop, and even major nationwide chains are closing branches, with Halifax Estate Agents announcing plans to close 53 branches earlier this year.

Property website Rightmove said up to 300 estate agents were quitting its service each month, with at least three out of every four of those no longer advertising on the site either going bust or failing to pay their fees, indicating that they were in financial difficulty.

But there are signs that the problems in the sector are driving some much needed innovation.

Popularly despised due to the perception that they do very little for their money, estate agents who had previously ridden the wave of the boom years are now having to rapidly up their game to survive.

Peter Bolton King, chief executive of the NAEA, said: "In the main the majority of those who have had to close are people who opened in the past 10 years on the back of a very strong market and who don't know what to do in the current situation."

Many estate agents have opened up lettings businesses alongside their traditional sales ones in a bid to insulate themselves from the current downturn, as the number of people looking to rent is reportedly soaring as sales levels collapse.

This is backed up by figures from Rightmove, which show that while the number of estate agents advertising on its site has fallen by 15% during the year to the end of October, the number of letting agents using the site had jumped by 25%. The NAEA said its lettings arm, the Association of Residential Letting Agents, had also seen an increase in members.

Agents are also increasingly making use of technology to improve the service they offer, such as automatically sending out text messages or emails to potential buyers when they receive new listings.

The NAEA recently launched its own property-listing website, Propertylive.co.uk, following demand from its members. It rushed through development of the site in just five months in view of the current downturn.

Some agents are introducing US-style 'open house days' to boost interest in properties. These were once a popular sales tool in the UK, but gradually disappeared when the market was strong.

Others are being more innovative still. Sham Peerthy, of Heathville Scott Associates in Hackney, has converted part of his office into a cafe.

He said after having to let his sales team go, he did not need as much space. The cafe, which is run by his wife, now accounts for around 35% of his turnover.

Some estate agents are also beginning to change their fee structure. Traditionally agents' fees have been a percentage of the sale price achieved for a property when the transaction is complete.

But with some estate agents struggling to sell even one property a fortnight, this is causing cash-flow problems.

One estate agent in London is replacing its usual sales commission with an up-front flat fee in a bid to win business.

Lauristons, which has six branches across the capital, is offering customers the choice of paying a fee of £999 when they put their home on the market, or the traditional commission of 2% to 3% when the property is sold.

Steve Truman, managing director of sales and marketing at Lauristons,
said: "The market is changing and the current economic climate means it probably won't be the same in the future.

"Estate agents are one of the only ones (professional groups) who don't charge a fee up front."

Most of the changes that are taking place in the sector are good news for consumers.

Estate agents are currently unregulated and the downturn is weeding out agents with no experience or qualifications who set up business during a period when demand for property was so high that many homes were sold through sealed bids.

Mr Bolton King said: "What is happening is that the poorer quality agents are disappearing. When we come out of this, we will have a higher level of standards. The bar has been raised."

Anybody can currently set up as an estate agent, regardless of whether they have any qualifications at all, or even a criminal record. In many cases the biggest hurdle people face is getting planning permission for their office.

This is despite the fact that for most people buying or selling a home is the biggest financial transaction they ever make.

It recently became compulsory for all estate agents to belong to a redress scheme, giving consumers a way of complaining and getting compensation if things went wrong. But the Royal Institution of Chartered Surveyors dismissed this requirement as being "a case of bolting the stable door after the horse has bolted".

Gillian Charlesworth, RICS director of external affairs, said: "We have been pressing the Government to introduce a proportionate but properly effective regulatory regime to prevent cowboys from entering this market and letting consumers down with sharp practices and poor service."

Despite the current downturn, the NAEA agrees that it would like to see the sector regulated.

The internet has long been hailed as a tool that will one day remove the need for the middleman in property transactions altogether.

Websites Sellmyownhome.co.uk offers people the chance to advertise their property on the site for just £9.99, with packages that include a 'for sale' sign and personal adviser costing up to £499.99.

Home.co.uk will list people's property for free if there is no picture, while it charges £30 for an entry with a photograph. The site also enables people to include a link to their estate agent, if they are using an agent but are hoping to drum up more interest in their property themselves.

So will the housing market downturn hasten the demise of estate agents altogether as people instead turn to these websites?

Mr Bolton King thinks not. He said: "I'm not worried. Now is not the time when this is going to work.

"You get what you pay for. If you pay £50 to put your property on a website, that's fantastic, but you are not appreciating the sort of effort and work that goes into a property sale."

He added that 93% of all homes were still being sold through an agent.