I started selling houses in Yorkshire when God was in short trousers.
In the intervening 57 years (Ugh!) I have had the immense pleasure and privilege to work for and with some fantastic people in businesses that were invariably market leaders in their area.
During that time, there have been some big ups, and severe downs, the most memorable probably being the miners’ strike and three-day-week, when staff sat in freezing cold offices around a candle for light, thinking that nothing surely could be worse.
Then, much later, along comes Coronavirus which has not only effectively stopped almost all businesses operating every day of the week, but has killed thousands of people, and still is.
Like every other major downturn or crisis, life will eventually return to some form of normality for most people, but tragically I believe many thousands of businesses in all sectors, and millions of people, will suffer terminal or long-term financial and emotional damage.
The property sector will be no different, and although my guess is no more informed than the next man, I thought that I would share my thoughts – if only to help people (who like me, have lots of spare time right now) while away a few minutes of the day.
Residential Property Sales
The last 15 years has seen a steady decline in the power of traditional corporate brands (Connells being an exception) and the re-emergence of large numbers of independent agents, some affiliated to franchise groups, and latterly on-line/hybrid agencies – Purplebricks of course being by far and away the largest and for a time, most successful.
Actual numbers are impossible to obtain but it’s probably fair to say that at least 22,000 offices were around in Feb 2020.
Every one is (or should be) now temporarily closed and a huge percentages of staff are either working from home, furloughed, or have been made redundant.
New transactions have slowed to a trickle and pipelines of sales subject to contract will dwindle either by deals simultaneously exchanging and completing, or being cancelled.
UK transactions in 2020 will be (by a mile) an all time post World War II low.
What appears certain is that by the time that offices re-open in 2/3 months (????) time, pipelines of sold subject to contract deals will have contracted very severely and those that remain may see selling price re-negotiations occurring.
Fee income for ages (it’s now probably on average 6 [?] months from listing to completion) will be very modest and almost all offices will run at a loss during the first 12 months.
For some, that will be sustainable. For many, even with some financial support, it will not.
Consequently, I predict that 12 months from now:
Thousands of current offices will either not re-open, or will fail during the following 12 months.
Those that remain will (or definitely should) charge proper fees for their service (2% absolute minimum) and should VERY SERIOUSLY consider adopting a structure where vendors have (PB like) to pay at least a percentage of fees up front to help provide working capital to the embattled agent.
Agents working from home, will become much more the norm as technology enables far greater flexibility and efficiency than ever before.
As always, the very best agents, who adapt quickly and utilise the best technological and financial support will prosper.
RIP (in a business sense) the rest.
Letting Agents
When the government abolished tenant fees, they undermined the profitability of most of the sector, and effectively pushed many less efficient operators into loss making situations.
Coronavirus will make matters even worse as many tenants will either be unable to pay rents or will pretend to be in hardship in order to try and obtain “payment holidays”.
None of these factors will be good for business and more and more landlords, already bored and depressed by adverse tax and legislation changes, will, as soon as conditions allow, seek to sell and exit.
The consequences will be far fewer letting agents, some of whom will put their hands into the clients accounts (hopefully before going to jail) to delay the inevitable.
The good will prosper and grow as scale and systems support will be increasingly vital.
Fees, which have suffered, but not as badly as selling fees, will be at least maintained.
Short-term lets
Institutional and private owners have, over the last 3/4 years, devoted part or all of their property portfolios to Airbnb type lettings.
The abrupt stop to the travel and hospitality industries means that, for many, income levels are currently near nil, and in the short and possibly medium term will, I suspect, substantially reduce the supply as owners revert to the more secure, if less sexy returns, from standard AST lettings.
Portals
Can Rightmove possibly still be worth £4/5bn (or anywhere near) in the “new world”. I think not.
Will Zoopla’s very aggressive campaign to take many agents away from Rightmove be successful. I suspect so.
Does Onthemarket have any credibility left with almost anyone? It appears not much, if any!
Others – totally irrelevant.
Some may, I hope, agree with parts of this. Others will post replies suggesting I put on my big collar (give it a rest!) and go back to my old people’s home!
To everybody in the industry however I send genuine good wishes.
This is without doubt the worst crisis that any of us living has ever experienced outside a world war.
I remain involved in varying capacities with various quotes and private property businesses but these opinions are mine and may or may not be shared by companies with whom I’m associated.
Harry Hill is an estate agency veteran, founder and former CEO of Countrywide who continues to hold a number of posts in the industry.
Comments (37)
Wise words Mr Hill.
The danger period for many businesses will be the months after normality begins to return. Adam Walker was saying something like this last week.
The property market will return, we just need to make sure we are there to service it. Being able to draw on the historic good points of Our Industry with a selective dose of useful technology is a good mix …..most of all, add in the right people.
Endure for sure, prepare to return and prosper through that old thing ……..hard work, smart work. Those that are right for Our Industry will come through this.
Let’s take a step back….. if this is it for the next year then it’s a ball of flames with no extinguisher big enough ……it’s not, it won’t be. Ultimately the biggest patient in the room is The Patient named “Economy”.
What we do need though is “The Daily Government Guest Speaker” flanked by Medical Guest Speaker & Economy Guest Speaker ……this nonsense that “We?” (that’ll be the Nation that will have to haul ass out of this mess and pay for it no doubt) can’t cope with the Mixed Messages of Stay-at-Home etc versus Our Economy Restart Plan. Do me a favour!!! If you are happy to take our taxes, you can enlighten us with how we move out of this period of “uncertainty?”.
Some of the residents of Michigan in the US took to the steps of their Town Hall, armed to the teeth with assault rifles, more ammo than the ammo store, bullet proof jackets, sidearms and g@d knows what …..because they’re fed up being told to Stay Home ….for a few weeks?! ……but, but …..it does paint a picture of how “unrest” can begin.
President Trump talks tosh 75% of the time however 25% of what he says has economic credibility (hard to attribute any credit to him however, I gave him several hours of my time to try and assess if it was just a tanned wig puppet talking or he has any substance other than “I am El Presidentaaaa”).
Germany, Austria, Scandinavia etc are all working their way through/out of this so……it’s time this feckless Government with Boris hiding somewhere got their @rses into gear and talked economy.
In the meantime, we all attend to what we can in our local markets and prepare for business …..just not quite “As Usual”.
There is still plenty of life left in the current combatants yet providing someone wants to inject a bit of fight into the punch drunk.
Financial services has been part of the process for years and like Harry says its like a tripod, if you take one leg away it falls over.
The banks and the proc fees/arrangement fees are a big part if only the current crop of FS MDs get their smelling salts out and aim high instead of more body shots.
Banks are closing branches in their hundreds if not thousands annually and thus their distribution network is diminishing rapidly.
They make money by lending money. Fees have hardly been changed in years and now is the time we should be knocking on doors and being bold and telling them this is what we want or you are off panel. They will comply, no doubt about it and simply pass on the fee to the client via booking fees.
If you look back in time, Banks hardly charged product fees unless it was bond money they were lending and now suddenly every product has a fee and they keep it.
Current product fees are around £1000 so we could insist on half of that on top of our current proc no problem. They will simply increase the booking fee to £1500
I personally think that many will become simply battle weary and give up.
The longevity of any business now is access to cash. It is that simple.
Agents will have to take upfront payments to survive; it will become the norm. £500 up front for a £1000 off at the end……
The public will also be battle weary and put off aspirational moves; we will be left with many forced sales – death, divorce, debt after this and house prices will inevitably tumble, especially as access to credit is squeezed.
There seem to be a lot of drum beating do-gooders on social media bragging about how they will endure and prosper – good luck to them; a dollop of realism from Mr Hill may be what they need in order for them to calm down a bit.
To the gurus breaking the lockdown for a fast buck or a headline – shame on you. This is a time to be serious about the health of your family and friends, to be serious about preserving your business, and to be realistic about the wider impact on everyone’s lives.
“There seem to be a lot of drum beating do-gooders on social media bragging about how they will endure and prosper…”
So what’s the suggestion, J1?
‘Doing a Private Fraser’ on SM – wailing that they are doomed? Surely that will only produce one outcome.
A degree of drum-beating isn’t a get out of jail free card by any means – but if it lifts the mood just slightly it might just produce the desired effect at a time when we will all need every bit of fairy dust there is.
You mis-understand Sir.
My view is that “some” of these people don’t seem to show empathy towards the plight of others; just pushing their wares rather than offering support and advice.
Let’s maintain social positivity and good humour, but let’s be sensitive too.
To the gurus breaking the lockdown for a fast buck or a headline – shame on you. This is a time to be serious about the health of your family and friends, to be serious about preserving your business, and to be realistic about the wider impact on everyone’s lives.
I really hope people don’t break rules to earn quick money. We have a suspected case in our household at the moment, and it can be very frightening. They could only have caught it from buying food at the supermarket as that is the only place that any of us have been to.
People should remember that this virus can be very serious for anyone, even if you are young and healthy. It can trigger over reaction of the immune system…a little like if you suddenly developed a peanut allergy and then someone blew peanut dust in your face. It is a scary way to go…as the damage done can cause your lower lungs to fill with fluids, making it very hard for you to breath and opening you up to the risk of secondary infection.
My “boy” Harry as usual has produced a timely piece .As a partners in the 1970’s with a dozen offices in Norfolk we have remained friends .It is ironic that he was present at the birth of Rightmove and now seem likely to witness its corporate “funeral “
David Bedford.
DB! A great friend and inspirational senior partner for my formative years. One of the UK’s most accomplished and respected agents, with sons now carrying on the family tradition in East Anglia.
wow an article which mentions part of the PB model being adopted, and no mass negative comments…..:)
No… because he’s not suggesting that the unsavoury parts of the model – those that bring untold shame on the industry in general – be adopted.
‘Portals
Others – totally irrelevant.‘
Suspect this last comment isn’t going to age too well.
Looks like its going to pan out that way.
I would add Savills to the success story of traditional estate agent with a broad reach who have prospered
What is certain there is unlikely to be a swathe of money swirling ,very selective in funding the next best thing so some of the offers who have failed to gain traction will wither on the vine
When it all starts kicking off I think agents will be super busy and those who have muddled through will pick up well . Prices might be lower but there must be a pent up demand to be released and banks keen to see equity being released
Just need a positive lending market
I can’t see CWD coming out of all this intact . The debt might be pushing up towards £100m by the summer Some of the brands like Dixons were going great guns til all this
Maybe time to reflect how badly they have been let down by the BODS
Already announced that Urban Spaces have just peeled off and joined Base ,revenue following .Maybe others too without any financial consideration
One thing is for sure Harry would have arrived at the crisis with some hay in the barn
Simplifying the outlook for the portals to that extent and dismissing the technical generation shift that is occurring spoils a thoughtful read.
Zoopla are in by far the worse position of the 3 G3 portals; being an unambitious pace setter to Rightmove for 10 years, a happy No2, has left them exposed to their own complacency as a portal and a CRM provider. The attempts to be more agent focused and friendly since a noticeable sea-change in their attitude when Mr. Bryant took over in 2018 hasn’t seemingly won them back the friends they lost by unnecessarily going to war with OTM. By the time Alto is finally done, reliable and stable as a replacement for their 5/6 legacy CRM systems it will be lagging behind much lighter systems that are beginning to find their feet.
OTM could quite easily and rapidly find a fresh set of legs if only they would get way from trying to be a G3 portal – Primelocation II
Rightmove have a long overdue and forced opportunity to catch up with the innovation Mr. Hill has dismissed as totally irrelevant.
The PWA tech that centres on agents on a local level cannot be dismissed so glibly. There is an opportunity for multiple niche market and hyper local portals to co-exist and collaborate now the duopoly has been not only broken but is at war with itself.
Silver lake investing heavily in Airbnb, to support owners with short lets isn’t likely to win them many friends with the letting and management users of ZPG’s portal or CRM’s
How this plays out is anyone’s guess but one thing is certain every single automated valuation algorithm has just had a power surge and will be utterly unreliable whilst the post Covid economy is so uncertain. Those people who cannot win saleable profitable instruction will be the ones who struggle the most to recover, followed by those who do not control their costs.
Lettings done properly and well will continue to provide regular and stable income.
I agree that having offices on every High Street location will not be as necessary. Connells mentioned were a good agent as the old core business a la Eddie Moss (Harry will remember) had an exceptional culture that was carried on through the decades. Sadly I dont see that same culture existing today in many of the larger corporate entities ,Countrywide being a classic example. Maybe its just a sign of the times.
I certainly wouldn’t want to be the largest agent in the UK at the moment in terms of physical office outlets.
Nothing wrong with being the largest agent in the UK – if you have a well run business and an effective model like Connells. Get yourself within the Top 3 agents in terms of market share on sales and lettings; optimise revenue from mortgage services and conveyancing and you’ll make good money (in normal times) from ALL locations. Closing down multiple branches is simply an acknowledgement of failure! I’d have thought you would acknowledge that having a physical office has so many benefits – house builder clients are certainly quite keen for agents to have them to market their developments!?!? …. also a useful place whereby clients can have a proper meeting with the mortgage consultant; sign their tenancy agreement; drop off/collect keys etc.
Those large corporates that have tried to kid themselves that they can close multiple branches and cover those locations from nearby branches have found out that it simply doesn’t work – it is nothing more than the ‘white flag of surrender’ and sends a terrible message to the staff within their remaining branches. Surely it’s also difficult to optimise a national new homes offering when you are closing lots of your branches Major Tim?
You really do have a “chip on your shoulder”.
Times are a changing. As for effective sales operations surely its quality people and cutting edge marketing not just offices on every High Street (that no one visits anymore) that clients want. Argument is for a bit of both and each location and market place can differ. But this is only my opinion Chippy.
Pretty balanced view that I agree with.
The only thing I think I would add to what Harry’s said is, yes fees should go up but in my experience knowing agents there will be a high percentage that will actually cut fees (yes stupid i know). I have already seen agents on other forums ask ‘What specials/ discounts will agents be offering when this madness is over. Truly depressing business owners are thinking this.
These agents that day what discounts etc, hopefully will disappear from the market. You can’t cut costs in a market like this. Good agents always prosper in a tough market. I started in 1990 2 years into a recession that lasted another 6 years. Those were the best times I had in agency. People will pay for great service. Anyone can sell a house when it’s flying!
I think Dave G means you “can’t cuts fees in a market like this” opposed to “costs” which you MUST cut.
A good and informed view from Harry Hill, who is being utterly realistic.
Yes you are correct, sorry it was a typo. Agents who cut fees in a tough market will soon go to the wall.
This was a good read, more from Harry Hill.
Totally Agree with Harry, fees need to go up and our model needs to change. Sellers need to show a commitment to the agent and to moving from the start
I worked under Harry, Gerry and my MD Mike Ansell at Mann @ Co. All these guys are proper Estate Agents and I learned a great deal from working within that group in the early 90’s. You may not always like what Harry has to say, but mostly I agree with his comments. I think in a few years time agents will look back and day “ Do you remember the days when we used to go round people’s houses, measure up, take photos, floor plans, virtual tours, prepare property descriptions, phone out to our database, spend thousands in portal fees, agree a sale and progress it for months through to completion and ONLY THEN GET PAID!!” Wow that seems crazy. How and why did we do that!!!
Oh for the good old days to return withdrawal fee payable and an advertising budget to boot. Certainly cut out the timewasters. Crikey am I really that old now to remember that?
this whole crisis has meant we all need to sit up and realise it’s time to adapt as the world has moved on 3 years in 3 months.
agree sales fees need to go up ✅
agree for a ‘marketing charge’ up front (Though, I would say that being an Aussie) ✅
agree stock is going to get real tight. find your must sell and must buys and hug them for dear life ✅
agree that if you don’t have an efficient lettings business for the future it’ll be even more tough. lettings is your cash cow, and it’s the perfect way to find warm sales opportunities too (every landlord knows/is a buyer, every tenant knows/often will become a buyer/seller). You get paid to service them and prove you’re not full of it. Great deal IMO
work hard and be nice to people. the rest often takes care of itself.
A bleak, but realistic assessment of industry prospects from a seasoned campaigner.
Can I add?…..
My research suggests that a substantial majority of those planning to move pre-Covid have delayed, not abandoned, those plans. My advice to the agents is, get proactive. Crouch into the starting blocks, be on your marks. Be in touch with your owners and prospective buyers well in advance of the shackles coming off. I believe the market will roar back into life. Be ready to ride that initial wave. That’s certainly what I’m advising my developer clients.
Harry Hill is right when he says the good agents will survive, exhaustive preparation and great communication will be part of that.
Astute viewpoint Harry … thought provoking.
Harry,
Wise words as always.
In my opinion, one of the great leaders in our industry who along with Anthony and Gerry got it so right at the time.
As you say, the good agents will adapt and survive.
Totally agree. Looking back I was proud to work for a company run by those guys. It’s just so sad to see the mess that has unfolded since they left and the disastrous decisions subsequently taken by people who didn’t have a clue and to keep blindly betting on red when it turned up black each time. Share price in old money now circa 3p (pre consolidation) who would have thought that 4 years ago. A retail business my ar*e.
Harry,
Agree with all you say, especially on the portals. Maybe time to have another chat with M.D.
Only instructions on rightmove last week are purplebricks.
Says it all about rat agents and rat sellers.
Like to see Harry get 2% now.
Hard enough when he no competition.
Bless You
According to Zoopla, Purplebricks’ last 7 days gross ‘listings’ for the UK was 185.
Of those, some 82 – 44.3% – were #RElisted.
Whilst in the main Rightmove and Zoopla clearly have very different criteria for treating RElisted properties, there is no doubt that a proportion of what you are referring to had seen daylight previously.
And whilst there is no doubt that there are a proportion of what you refer to as “rat sellers”, I would say that the average PB would-be vendor simply chooses their Agent based on the claims and the hype – and that in their minds all estate Agents do the same job so why pay more?
I don’t necessarily agree with Mr Hill’s 2% – for many Agents that wouldn’t pay the bills – but I do speak from experience that some vendors are prepared to pay a premium fee for a premium service. And if I’ve said this once I’ve said it fifty times – if an Agent can’t negotiate themselves a profitable Fee then they shouldn’t be passing themselves off as an Agent. These will be the companies and individuals that will bring a degree of validity to Mr Hill’s ‘predictions’ – that are in effect nothing more than a rinse’n’repeat of what is heralded every time an asteroid appears close to our industry homeworld.
Only time – and future history books – will tell. But surely it is every Agent’s responsibility to do everything in their power to debunk the predictions the industry is being bombarded with?
If they don’t step up to the plate – then those predictions can and will only come true.
Ah yes! That not unusual nonsense reply. Who would ever imagine that there was no fee cutting competition when I was in business?Do you imagine that the man running Porsche considers the price of a Fiat when he prices his cars?
FYI When HH was at CW i was there and when running a branches in locations with agents charging 1.25 i was achieving over 2% sole.
Its a mindset, granted it is harder now but there are agents doing it.
I ‘used’ to achieve 2.95% sole.
That was in the 90’s.
Lol that’s why countrywide are bust now Harry.
All your good staff left and undercut you with a better product.
Also, yes they are new instructions peebee why say it in 3 words wen u can write an essay.