May 2008
MARKET 'IN SHREDS'
Rates of sales halved in a year, say NAEA, while Hill predicts that if current
trend continues, a third of offices could close
THE slump in transactions has plunged most estate agencies
into losses this Spring — and if the current trend continues, as many as
a third of offices could close, Countrywide chairman Harry Hill has forecast.
Many major agencies are already reporting office closures and job losses, while
the latest activity survey by the National Association of Estate Agents suggests
only half the number of properties changed hands in March this year compared
to March 2007.
Sales in March — which should have marked the beginning of the busier Spring
period — were only seven per branch in March 2008 compared with eight in
February and 14 in March 2007.
According to EAN’s City correspondent Mike Goodman, these figures suggest
most estate agency branches are struggling to make any profit from sales and
most are making losses, with other business such as lettings, surveys and management,
and arranging mortgages, allowing firms to pay their way.
Most of the major corporates report sales down 30 to 40 per cent on this time
last year, Goodman adds.
Industry analysts Plimsoll Publishing are predicting that as many as one in seven
estate agency companies could disappear completely if the current trend continues
or deepens, but Mr Hill, chairman of the UK’s biggest estate agency chain
with more than 1,000 offices, predicts an even worse outcome if the current conditions
continue.
“The market is in shreds — we reckoned that in March this year,
315 estate agency offices closed,” said Mr Hill. “If that trend continues,
then one third of the country’s 14,000 offices could close.”
Ahead of their results for the first quarter of this year being published, Countrywide
weren't saying whether or how they themselves had been hit by the slowdown in
the market.
But their nearest rivals in terms of number of offices, Connells, traditionally
one of the most profitable, have been feeling the pinch.
They have closed half a dozen offices, a small percentage of their network of
more than 500 branches, and group executive chairman Stephen Shipperley fears
that job losses in estate agency will also work their way through to other associated
businesses, such as removals, retailing and building.
“Our sales in April are about 40 per cent down on 12 months ago,” said
Mr Shipperley.
“Prices are already 15 per cent down. We are fortunate that our business
model does not depend purely on transactions. As a group we traded profitably
during the first quarter.”
The owners of Your Move and Reeds Rains, LSL Property Services, told shareholders
last month that estate agency turnover was down 16 per cent during the first
three months of 2008, while the surveying division enjoyed a 15 per cent rise
in turnover.
Group chairman Roger Matthews also told the annual meeting that estate agency
results were “slightly below expectations”, while surveying results
were better than expected.
Spicerhaart, with more than 200 offices, have closed a small number of branches
due to poor trading conditions.
The closures include seven Haart offices at Plympton, Plymouth, Paignton, Andover,
Basingstoke, Hereford and Abergavenny, plus two Darlows branches in Neath and
Llanelli in Wales. Its Swansea branch has redeployed two sales staff but is expanding
its lettings operation. A further two branches are under review.
Around 36 staff have been affected, 22 of whom have been redeployed to other
branches while 14 have been made redundant.
NAEA president Stewart Lilly said: “The global credit crunch, squeeze on
mortgage approvals and the media cloud that currently surrounds the property
market are undoubtedly having an effect on individuals’ decisions to buy
or sell.
“There is a constant need to remind people that the underlying factors
that hold up the property market — low unemployment, historically low interest
rates and a pent-up demand for houses – still exist and some agents are
still reporting stable markets and steady sales. Over the next few months
it is imperative that the shackles are released on the mortgage market so consumer
confidence can be rebuilt, allowing the market to stabilise.”
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