Estate Agents & Services : Market Research Report

Estate Agents & Services

Published by: Key Note Publications Ltd

Published: Sep. 1, 2007 - 178 Pages

Executive Summary
1. Introduction: OVERVIEW; DEFINITION
2. Strategic Overview: MARKET DYNAMICS; A RESILIENT MARKET; THE HEALTH OF ESTATE AGENCY; ADVERTISING; CONSUMER RESEARCH; KEY POINTS
3. Marketing Trends: PROPERTY PORTALS; RESIDENTIAL ESTATE AGENTS; OVERSEAS PROPERTY COMPANIES; HOUSEBUILDERS AND PROPERTY DEVELOPERS; BYPASSING THE AGENT; KEY POINTS
4. An International Perspective: NEGATIVE AMORTISATION; SPANISH WOBBLE; LOOK EAST?; AN INTERNATIONAL MARKET; KEY POINTS
5. PEST Analysis: POLITICAL FACTORS; ECONOMIC FACTORS; SOCIAL FACTORS; TECHNOLOGICAL FACTORS; KEY POINTS
6. Consumer Dynamics: INTRODUCTION; HOME INFORMATION PACKS; BUYING AND SELLING PROPERTY THROUGH AN ESTATE AGENT; LETTING OUT AND RENTING PROPERTY THROUGH AN ESTATE AGENT; A MOBILE NATION; VISITING AN ESTATE AGENT'S OFFICE AND SEARCHING THE INTERNET FOR PROPERTIES; RENTING OUT PROPERTY; HOLIDAY HOME OWNERSHIP; ATTITUDES TOWARDS ESTATE AGENTS; KEY POINTS
7. Company Profiles: INTRODUCTION; COUNTRYWIDE; CONNELLS; HALIFAX ESTATE AGENCIES; SPICERHAART; ARUN ESTATE AGENCIES; RIGHTMOVE; KEY POINTS
8. The Future: SOCIAL GAPS; LONG-TERM RENTING; THE BRITISH OBSESSION; THE STRUCTURE OF ESTATE AGENCY; KEY POINTS
10. Consumer Confidence: METHODOLOGY; KEY FINDINGS THIS QUARTER; THE WILLINGNESS TO BORROW; SPENDING FROM SAVINGS
11. Further Sources: Associations; Estate Agencies; Publications; Government and Official Sources; General Sources; Other Sources; Bisnode Sources

Abstract

There are four main circuits of UK estate agents selling residential property: international agents for prestige properties; mass-market national agents; regional agents; and independents with local to regional coverage. Scotland has few estate agents, because solicitors sell most property in the country. The leading mass-market estate agencies in the UK are Countrywide; Connells; LSL Property Services, with YOUR MOVE and Reeds Rains; Halifax Property Services; and the independent Spicerhaart. The leading international agents are Savills, Knight Frank and Dubai-owned Hamptons International. In 2005, the total estate agency sector, including all real-estate activities on a fee or contract basis, covering national, international, commercial and domestic subsectors, recorded a total turnover of £12.07bn. The five largest residential estate agency firms, by number of offices, had a combined turnover of around £1.05bn.

Demand for private rented accommodation is rising. Specialist lettings agencies include Leaders, Belvoir and Jordans. The importance of residential lettings in modern estate agency is clear from the merger of the Association of Residential Letting Agents (ARLA) with the National Association of Estate Agents (NAEA), which took effect in July 2007. Among young adults, fading aspirations to home ownership boost the rental market. There are more people renting than letting property through agents, pointing to a core of landlords who own two or more properties to let. The demographic profile of landlords highlights the asset gap between the most and least affluent social grades (this gap also applies to holiday homes).

Estate agency was more profitable in 2006 than in 2005 and many firms returned their best-ever figures. Income from residential sales in 2006 reached £4.5bn, with a further £2.8bn from other operations, making a total of around £7.3bn. Affinity groups help independents to compete with the large chains. The advance of franchising of fascia brands within Countrywide and LSL Property Services also enables independents to buy a stake within estate agency.

The property market remained robust in spring 2007, despite higher interest rates, but began to cool in the summer. Demand from investors and recent immigrants, and property shortages in popular areas, underpinned the market.

Important points raised from Key Note's exclusive consumer research included an alarming lack of awareness about Home Information Packs (HIPs) — which eventually began a phased introduction in August 2007 — with nearly half of respondents (47.8%) saying that they have not heard of HIPs. Interestingly, fewer than a quarter of respondents (24.3%) thought that the packs would make home purchase easier, although this was the rationale behind their intended introduction.

Private sales bypassing agents have not caught on: estate agents, helped by effective marketing, have consolidated their position. Key Note's research shows that 19.7% of respondents have used an estate agent to sell a property at least once in the past 7 years and 19.8% have used one to buy a property at least once over the same period. More than eight in ten respondents said that they would visit an estate agent's office if they wanted to move home and almost six in ten agreed that they would search the Internet for properties if they wanted to move home. Fewer than half of respondents thought that estate agents are trustworthy, but more than half agreed that they are qualified professional people.

In 2007, estate agents are experiencing a downturn in the US and in Spain, while those selling properties in Eastern Europe are benefiting from booming interest. International property sales to the mass market have soared since the mid-1990s, but will suffer in future from costlier energy, making travel, heating and cooling more expensive. While long-haul purchases will continue to make sense for many major investors who can employ local staff and draw economies of scale, this is not so for personal buyers, who risk making unwise and unprofitable purchases.

Politicians are not yet planning clearly enough for sustainable housing within sustainable communities, a policy portfolio to which estate agents, with their local knowledge, could make a real contribution.

The expansion of private rentals should continue, as more potential first-time buyers are priced out of home ownership and as investors treat residential property more as an asset class than as a social necessity. The advance of residential property as an investment class requires estate agents to become knowledgeable about raising finance, investment prospects and taxation structures. A growing rentals sector has implications for Housing Benefit and Local Housing Allowance, which is costing the state more than £15.5bn in 2007/2008.

The Internet, an international medium, has contributed to rising property prices by enabling even the smallest, cheapest properties to be advertised globally at low cost, therefore vastly increasing the number of potential buyers.

Countrywide, the largest national chain of estate agents, was bought for £1.05bn by US private-equity firm Apollo Management in 2007. Countrywide is expanding through selling franchises for the Bairstow Eves fascia. Connells, the largest seller of new homes in the UK, and part of the group including the Skipton Building Society, continues to develop partnerships with housebuilders, and has expanded into selling new properties overseas. YOUR MOVE and Reeds Rains, the agency groups within LSL Property Services, are growing through franchising, as well as through financial services, many of them from Norwich Union, whose parent Aviva owned YOUR MOVE until 2004. Halifax Estate Agencies provides a distribution channel for the HBOS banking group. As with Countrywide and YOUR MOVE, growth in branch numbers is primarily through franchising, which Halifax terms as licensing. The independent Spicerhaart, the fifth-largest national chain by outlet numbers, has found growth difficult. Financial services are a priority in 2007, as part of a one-stop-shop approach to property.

Rightmove has won the contest of the property portals, because the website is well designed, fast and easy to use, and contains vast amounts of information. The success of Rightmove benefits the major shareholders Connells, Countrywide and Halifax Estate Agencies.

International investors favour land and property in the UK for reasons of stability and security, as much as for immediate profit potential, but the inflow of funds is pushing prices up rapidly. The international market is divorced from the national market, in which the strata are becoming separate, rather than a fluid continuum, owing to greater concentration of wealth, widening gaps between high and average earners, and personal taxation that hits the middle sections of society hardest.

First-time buyers may be overstating their incomes to obtain a mortgage, with the risk that they will not be able to maintain loan repayments. The affordability gap is boosting the private rentals sector, which is also supported by Housing Benefit. Calls for convergence between the private and social rented sectors are increasing. Private rentals are expected to grow by around 50% between 2007 and 2017, creating a need for estate agencies to let and manage much larger numbers of rental properties. By 2030, more than half of the UK's households could be in rented homes.

Estate agency is transforming from a retail service for occasional customers to an asset-management service for continuing clients. In future, more of the mass market will be devoted to lettings, and the trend towards enhanced professionalism, financial services and integrated property services in estate agency will continue. Tesco's entry into the estate agency market in summer 2007, as an additional shop window, should benefit the property market overall.

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Estate Agents & Services

Table of Contents

Abstract