This week, the RICS said that house sales had fallen to their lowest level since records began in 1978. Lucy Barnard reports from south London on how the area’s estate agents are struggling to stay afloat
James Brooks, the sales manager of the Streatham branch of estate agent Kinleigh Folkard & Hayward, gestures gloomily up the length of Streatham High Road toward his rivals’ empty shopfronts. “Last week,” he says, “Thompson Vales moved out of the office with the blue sign – they’ve merged two areas into one office. And Bushells, down the road there with the yellow sign – they moved their Streatham business to Balham, so that office is now empty too.”
Brooks’ own office, in this “up and coming” south London area, has also been forced to scale down its operations in the wake of the home sales downturn, reducing its team of negotiators from six to four.
No wonder. This week, the RICS said its members had found that in May sales volumes had fallen by 31.5%, year on year. This means that the average branch sold just 17.4 homes over the past three months – the lowest level since records began in 1978. This reduces the average branch revenue per month from around £38,000 in 2007 to only £21,500 this year.
Lack of customers
On a rainy June morning, KFH’s brightly lit shopfront, next to a halal meat and fish shop on Streatham’s main drag, is certainly empty of customers, but the office’s four smartly dressed estate agents are hitting the phones to drum up sales.
“We’re in the fortunate position of not having had to make anyone redundant. One of my office’s negotiators went to our Balham office and one got a new job outside the sector,” says Brooks. “I’ve been in the estate agency business in various locations for 11 years and I’ve seen seasonal downturns before – but never such a dramatic change in the market.”
Streatham’s estate agents are not alone in their predicament. According to property website Movewithus, one-third of the country’s 12,000 estate agents could close within a year as house sales plummet.
“Agents in regions across the UK are experiencing a reduction in transactions of 30-50%,” says Movewithus director Robin King. “The crisis will reach catastrophic levels unless the government pays due attention to the various industries reliant on the housing market, of which estate agency is only one.”
Another business website, Debtwire, believes that the sector has already been reduced by 1,000 offices, compared to this time a year ago, when there were 13,000 estate agents’ offices across the country. The website says offices continue to close at a rate of 150 a week.
In February, Countrywide – Britain’s biggest chain of estate agents and the owner of Alan De Maid, Alder King, Bairstow Eves and Gascoigne-Pees – shut 50 of its branches and warned of further cuts to come. Foxtons, too, lost 63 staff. Last month, Spicerhaart, which owns Felicity J Lord and Spicer McColl, closed nine branches in southern England and Wales, and LSL, which owns Your Move, closed 12 offices, with a loss of 315 jobs (see p75).
Savills also made 14 of its residential development team redundant and other firms are expected to follow suit. In March, Brooks’ own firm, KFH, closed two of its offices – in Orpington, Kent, and Hampstead, London – but the 50-strong network said that it had opened two more offices in north and south London to make up for it.
In May, estate agency chain Humberts was forced to sell off a number of its constituent firms due to market conditions and a fall in its share price.
The reason for this is clear: people all across the country, like those in Streatham, have all but stopped buying houses. For KFH in Streatham, which relies on a 2.25% commission on each sale to cover its overheads, sales have fallen by half.
Offices cut back
“Last year,” says Brooks, “we took an average of 10 properties per week onto our books and we were selling eight. This year, we’re taking on an average of six or seven and selling an average of four.”
Other agents tell a similar story. Bushells confirmed that it had closed its Streatham office, and is thought to have closed three others, because of “market conditions”, and a Thompson Vales spokesman confirmed that it had “streamlined” its operations from Streatham Hill into its Streatham Common office due to the same “market conditions”. However, he said that the firm would continue to man the Streatham Hill office at weekends, was continuing to update the window display, and would “look forward to reopening it fully, hopefully in a few months’ time”.
The national picture tells a similar tale. The latest Land Registry figures show that the number of house sales in the UK fell by one-third to 72,479 for the four months to February 2008, compared with 103,141 in the same period the previous year. And last month, the Council of Mortgage Lenders predicted that estate agents across the UK would sell one-third fewer homes in 2008 compared with the previous year.
Across the country, agents are reporting similarly gloomy conditions. “We’re seeing the lowest market activity since 1991,” says Alex McNeil of Bramleys estate agents in Huddersfield. “Prices have been falling for 12 months, although more rapidly over the past six weeks.”
Sales at “crisis point”
“Demand has plummeted to a crisis point with sales at their lowest May level in memory,” adds Neil Hunt of Wilkins Vardy in Chesterfield. “The volume of sales has reduced to a trickle, with buyer confidence lower than at any time since the 1990s,” agrees Alan Coy of Bannister & Co in Felixstowe.
“Transactions have virtually halted. Where sales have been agreed, it is very difficult to get them through to exchange,” says W J T Edmonds of T R G Lawrence & Son in Yeovil. “As volumes drop, solicitors seem to take longer and longer, thereby increasing the chances of buyers negotiating downwards.”
For the agents themselves, who rely on commission, take-home pay has dwindled. “We’re trying to come to terms with how the market has changed and to cut our cloth accordingly, but it has hit all of us,” says Brooks. “We sold six properties last week, which was better than previous weeks.”
For Brooks, as branch sales manager, with the ultimate responsibility for the income his team brings in, the pressure to keep providing income is mounting.
“I’ve got a meeting on Thursday – we have them regularly with our area director to discuss how we’re getting on and what we could be doing better,” says Brooks.
“I have lots of support from my staff and the people in charge of the firm, but you put pressure on yourself. You can’t help looking at your neighbour’s figures. You can’t expect to do what you did last year – we had to come to terms with that fact in March.”
In order to sell, Brooks says that he is increasingly forced to disappoint potential sellers by telling them that their homes are not worth the amount that they thought they were. Last week, the six properties his branch sold went for an average of 4.5% below the asking price – at price levels where he thinks property stood two years ago.
He says: “It’s not an easy conversation to have – telling owners that they may have to drop the price – so it’s not surprising a lot of estate agents are still sidestepping the issue. If a house in your street sold last year for £400,000, you must price it this year at, probably, £365,000 in order to be able to sell. We can’t predict where the market will be in six months’ to one year’s time. At the moment, we are trying to find a level where we slightly undersell, because the market trend is downwards.”
Searching for good news
Despite the market downturn – and the very real threat of being forced to follow in the footsteps of his competitors by making staff redundant or seeing his own office closed – Brooks, like any good agent, is searching for a silver lining.
“The good thing for buyers now,” he says cheerfully, “is that there’s less stamp duty to pay and you’re less likely to be gazumped. People are offering 20% below what a property is on for. There’s no such thing as a bad or low offer, as it gives sellers a base to work from.”
The slump sets in – the casualties so far
Months and cutbacks
February
Countrywide shuts 50 branches, warns of further cuts. Foxtons loses 63 staff
March
Kinleigh Folkard & Hayward closes two branches
April
Hamptons International reported to have asked investors to back a £5bn fundraising
May
Spicerhaart closes 9 branches. LSL closes 12 offices with the loss of 315 jobs. Humberts suspends trading of its shares and confirms it has cut staff numbers by 100. Savills sheds 14 staff. Marsh & Parsons says it has lost 10% of its staff since May 2007. Connells says it is not replacing staff. It is understood to have closed 6 offices. Humberts’ shares suspended and firm announces it has lost 100 staff. Marsh & Parsons says it has lost 10% of its staff since May 2007
June
SW
TEAM independent network says seven of its members have closed down since start of year
