October 2007

Ignore our industry at your peril, Mr Brown!

GORDON BROWN may have had plenty to occupy himself in his first few months of power, but there’s one industry he should ignore at his peril — ours!

The housing market is a key barometer for the rest of the economy and yet we’ve heard nothing from Number 10 about how it will prevent the property industry from falling on its knees.

The US sub-prime mortgage crisis may have been the catalyst for the Northern Rock fiasco and subsequent European credit crunch, but interest rate rises and the introduction of Home Information Packs have come at a huge cost to the UK housing market.

Already, some HIP providers and estate agencies are going under or are on their last legs, internet agencies are struggling and Domestic Energy Assessors are slashing their fees in half or walking away. And that’s just for starters.

It would be a foolish Prime Minister who shuts his eyes to the weakening market — and an even more foolish estate agent who says or does nothing and hopes for the best.

The starting point should be to kill off HIPs, the worst legislation ever introduced into our industry.

Considering a quarter of people surveyed earlier this year didn’t know that HIP stood for Home Information Pack and that two fifths thought a HIP contained a full structural survey, it hasn’t exactly captured the public imagination.

Many lenders don’t want them, many solicitors don’t trust them, many estate agents aren’t even bothering with them.

We know that people are holding off from selling their properties because they don’t want to shell out hundreds of pounds for a Pack.

If and when HIPs are rolled out across all properties, will HIP providers be in a fit state to handle the market? Which providers will last the course?

None of us can say what percentage we’re down on sales because of HIPs and what amount is attributable to the lack of confidence in the market as the credit squeeze tightens.

We may be holding out at the moment and those of us who are more financially secure are sitting safe and comfortable. But if this crisis continues, we’re all in for a rocky ride ahead.

Interest rates look like they will remain stable and won’t go up this side of Christmas but the best festive present we could ask for is a rate reduction and subsequent lowering of mortgage rates to ensure the barometer doesn’t explode under the pressure.

The Government knows the Conservatives are hot on their heels with popular vote-winning policies that will see HIPs ditched, the inheritance tax threshold ramped up and Stamp Duty abolished for most first time buyers.

Wouldn’t it be in their best interests to hear what those at the sharp end are saying and ensure our pleas don’t fall on deaf ears?

Don’t cut your fees — however tempting it might be!

ISN’T it ironic that Foxtons, one of the most profitable companies in London, should go bust in the US?

One reason is said to be the way in which they discounted their fees to as little as two per cent, compared to the average rates of their American rivals of six per cent.

The collapse of the sub-prime market and the wider housing downturn meant that Foxtons simply ran out of cash. I’ve maintained all along that cutting fees in a sluggish market is akin to professional suicide.

We’ve done our sums, which show that upping our fees by a quarter per cent on an average priced house will bring in an extra £600 per property.

While you can argue that if you’re discounting your fees you will pull in more of the market share, you will be working twice as hard for not much cash.

My advice is don’t cut your fees or you will start a price war in your local area that will benefit no-one. If you go back to a level playing field, all with low rates, everyone will be in the same boat and struggling to survive.

It might sound contrary to the general laws of supply and demand, but cutting your own fees isn’t like reducing the price of property. You’ve still got to pay the bills — or the creditors will come calling and you’ll be out of business.

Taking the lean approach...

THERE are plenty of ways in which estate agents can improve the way they operate — and one approach we’re adopting at Spicerhaart is Lean and Six Sigma working.

Every business needs to bring in outside expertise from time to time to look at the way they operate. In our case, we have appointed two ‘blackbelts’ in Lean and Six Sigma methodologies, to go through our processes with a fine-tooth comb, to ensure a smoother experience for customers, suppliers and staff.

To those of you unaware of what Lean Six Sigma is all about, ‘Lean’ is an approach that seeks to improve flow in the value stream and eliminate waste. ‘Six Sigma’, first initiated by US telecommunications giant Motorola, uses a powerful framework and statistical tools to uncover root causes to understand and reduce variation. A combination of both provides a structured improvement approach and effective tools to solve problems. This creates rapid transformational improvement at lower cost.

We’re going back to the drawing board, researching what our customers want and utilising a wide range of data in order to remove waste, cost and delays in all of our processes.

We’ll be looking at our IT infrastructure and technology, into which we have invested over £10 million in recent years, and assessing the way in which our customer contact centre operates. We’ll be looking at the lead times of our operations to simplify the end to end processes and drive real commercial value.

Just because the housing market has come to a bit of a standstill doesn’t mean we have. It just means we will be ultra fit when the market comes bouncing back.

...and finally...

CONGRATULATIONS to everyone who received accolades at the Daily Mail Property Awards.

We scooped the three awards we entered — Best Estate Agency Marketing (Spicer McColl), Best Estate Agency in Glamorgan (Darlows) and Best Estate Agency in Essex (haart).

It’s always nice to see our contemporaries at these events — and it’s a great boost to our own teams who have worked so hard throughout the year.
Well done to you all!