July 8, 2008
Even estate agents get the blues
The housing downturn that started in the US now seems to be hitting the UK, where I am at the moment, with a vengeance. It makes me wonder what will happen to all those estate agency branches that throng so many high streets.
I suppose know the answer to that already. Fifteen years ago, I spent a lot of time covering the tribulations of the UK building societies that had bought estate agency chains in the housing expansion of the late 1980s and were lumbered in the early 1990s slump.
Abbey National, for example, sold the Cornerstone estate agency in 1993 for £8m, or £23,000 per branch, which was a tenth of the price it had paid to buy the chain six years earlier. Many other building societies also divested loss-making agencies.
Estate agency is, of course, a highly cyclical business that depends a lot on sales volumes. Estate agents in the UK currently charge 1.5 or two per cent of the sale price per transaction, which is a lot finer a price than the five or six per cent common in the US.
Savills, an upmarket estate agency, was extremely gloomy about the prospects for sales today, talking of house prices both in London and elsewhere having fallen and being likely to fall further.
I have conducted my own informal market survey this week since I am helping a relative with a possible sale of a house in London and have chatted to estate agents. It is not a pretty picture.
One agent I talked to said his branch had 30 properties for sale and had only obtained offers on two of them. The problem, he said, was that banks and buildings societies had cut back mortgage loans so sharply that potential buyers were unable to make bids.
As I walked along Chiswick High Street this week, I noticed that one estate agency branch had already shut down and there was a notice in the window seeking another tenant. I suspect there will be a lot more estate agencies facing that problem soon.
In the early 1990s, the big corporate chains ended up selling out to small independent surveyors, who got themselves a bargain at the bottom of the market. Perhaps history will repeat itself.
