May 2007

Investors capitalise on estate agency

It’s no wonder private equity firms are eyeing major groups

THE flurry of interest in estate agency groups from private equity firms has prompted a round of speculation that the housing market must be about to crash, such are the lingering memories of when building societies and banks entered the market in the 1990s!

But times have changed and the record profits generated during the past 12 months by estate agencies up and down the country have had investors licking their lips with glee at the prospect of having a slice of the real estate cake.

Forget rising interest rates or the negative impact that Home Information Packs are likely to have on the market.

The shortage of property for sale should ensure that prices will stay high for some time and the market will continue moving, while we bolster our bottom line with products and services in a way that we didn’t 20 years ago.

Those of us who have driven our businesses forward to become one-stop shops, embracing the opportunity that HIPs brings, as well as delivering financial services, conveyancing, surveying, web opportunities and a raft of related house moving extras, have created an entirely different proposition to the one that the financial institutions bought into and eventually tired of.

If only they had taken their own advice and realised that it’s best to hang on to an investment long-term than to walk away when the going gets tough.

It will be interesting to see what will happen to these businesses that are bought by private equity investors.

Clearly they won’t be running these estate agencies themselves but will be looking to sell them on at a profit.

Will we see major brands disappear as they are broken up, or perhaps put into pension funds, changing the face of the industry as we know it?

It has been interesting to watch the likes of investment houses Apollo and 3i circling around Foxtons and Countrywide, with huge variations from both sides in what they believe the businesses are worth.

Clearly they must feel that estate agency, and particularly the larger groups, are a good bet.

It would be a naïve investor who didn’t realise that there may well be a few challenging months ahead.

But if the past few years are anything to go by, the long term proposition is certainly good. Just watch out for the influx of competitors who will clearly feel there is plenty to go around.

HIPs — who is going to police them?

IT’S no secret that the rivalry between estate agents in towns across the UK is fairly intense — so much so that for sale boards go missing, literature contains mischievous comments and bad-mouthing is par for the course.

So after Home Information Packs are introduced, will agents start snooping on their rivals and taking on the role of the HIPs ‘police’ or will it be left to Trading Standards to wait for a complaint before taking action?

After all, if estate agents don’t keep a watchful eye, who will? I doubt if the public at large will be clued up about the £200 daily fine that estate agents will face if they don’t market the property with a HIP in place, not least because the Government was so slow off the mark with its efforts to educate the public about HIPs in the first place.

Or will it be left to the redress schemes that are being put in place, to ensure the regulations are adhered to?

From the day that HIPs are introduced on June 1, all estate agencies in England and Wales will be required to join a HIPs redress scheme such as the one operated by the Ombudsman for Estate Agents, which already has government approval, or the one being proposed by the Royal Institution of Chartered Surveyors.

Non-estate agency HIP providers who are members of the Association of Home Information Pack Providers must comply with the Property Codes Compliance Board; the AHIPP meanwhile is working with the DTI to get an approved scheme in place. However, there is no requirement as yet for those that aren’t AHIPP members to belong to any approved redress scheme.

The Government has indicated it will be monitoring breaches of the regulations, in order to keep agents on their toes.

But given the timescale that the industry now has to implement HIPs and the challenges looming around the procurement of Energy Performance Certificates and searches, I believe there needs to be a ‘softly softly’ approach to enforcement during the first six months after HIPs are introduced.

Otherwise the Government will incur the industry’s wrath even further - at a time when it still needs to win over the majority of estate agents, let alone its hard-line critics.

May the G-force be with you...

WE often see life in estate agency as a roller coaster ride, full of ups and downs but exhilarating all the same.

So it was with great pride that I joined 65 of my top performing staff from Spicerhaart for a thrilling few days away in Las Vegas for a real roller coaster adventure.

The highlight for many was a trip over the Grand Canyon in a helicopter, while others enjoyed taking part in the white water raft ride down the Colorado River.

The thrill seekers headed to the Stratosphere tower in Vegas to be dangled over the edge of the building or be catapulted into the air to feel the G-force.

Plus there was all the nightlife, gambling, shopping and entertainment that Vegas has to offer.

There’s no doubt that offering substantial incentives to staff is a great motivator, as those who went to Vegas will testify.

They are the lifeblood of our business and we value the work that they do.

That’s why our employees are already hard at work with their sights on next year’s prize — an action packed trip to Sun City in South Africa.