Gloom pervades the boardrooms of the major financial institutions heavily involved in estate agency, and there is no immediate sign of improvement on the horizon. Massive first-half losses are being reported as the chains feel the full effects of a market almost at a standstill, with prices in many cases marked down to well below the inflated levels reached just over a year ago. There is no shortage of finance — the building societies are flush with funds — but Nigel Lawson’s reliance on high interest rates to curtail economic activity is making mortgages prohibitively expensive for many, even though the societies are holding down rates for as long as possible to cushion the blow.
Significant amounts are at stake for the major players. Hambro Countrywide turned in losses of £6.6m in the first six months of 1989 compared with a profit of £14.4m for the same period last year. These figures, however, pall into insignificance when measured against the seriously discomfited. General Accident (perhaps not misdescribed) reported a deficit of £9m, Royal Life £14.5m, and Prudential a chart-topping £24.7m.
Figures of this magnitude are exposing the flaws in the arguments that underpinned the explosive incursion of the financial services giants into the comparatively parochial world of estate agency. Size in terms of numbers of offices and saturation coverage has proved to be no guarantee of success — rather the reverse, in fact — and the vast sums spent on “rebranding” and the establishment of new corporate images have not warded off the repercussions of a general slump in activity. New uniforms give no assurance of new business.
In any sphere of business it is easy to be wise after the event, but it can be argued that, in relation to estate agency, the banks, building societies and insurance companies have been caught up in a competitive Klondike-style gold rush whose rocky road is characterised by high toll charges and a very uncomfortable ride. Having bought local practices, it has been relatively easy (though undoubtedly expensive) for the new corporate owners to do away with the long-established and well-known names. Styles of management have undergone radical revision. Old partnerships and their personal and idiosyncratic involvement — for good or ill — have been replaced by the committee structures, budgets and sales targets which are considered essential in organisations now spanning hundreds of offices which only a few years ago were run on an individual or small-business basis.
But more than names and management styles have changed. Many of the firms bought out were mixed surveying practices well able to take full advantage of a house-price boom, but had solid professional departments producing a steady stream of income irrespective of mortgage interest rates and the vagaries of supply and demand for property. Now the balance has shifted. With an eye to marketing the supposedly profitable extras of mortgages, insurances and financial advice, the emphasis has been placed overwhelmingly on the volume of house sales, the key to unlocking this additional income. The market’s volatility is proving this policy, however understandable, to be suspect. In depressed times like these the professional side of the surveying firm should come into its own, but morale may well have been eroded by several years of comparative neglect.
The inevitable reaction to these heavy losses has been the shedding of staff and the closure of offices, often under the euphemism of rationalisation, and with every prospect of dismal second-half results more such retrenchment appears unavoidable. This can only hasten the fragmentation that is already evident, with partners and staff of the firms taken over seeing a niche in the local market for a small-scale and essentially personal property service provided with minimal bureaucracy.
