Will Clark, Director of online estate agent SellMyHome.co.uk, queries why more and more estate agents are entering the market?
There are now nearly 600,000 employed in the estate agent industry. That’s more estate agents than teachers. More estate agents than policemen, nurses and firemen put together and more estate agents than enlisted servicemen. More estate agents than teachers.
I’ll let that sink in.
In fact we have 180,000 more estate agents than the entire United States.
In most industries and markets, increased competition leads to increased levels of service and increased level of customer satisfaction. In the estate agent industry we are seeing the opposite, complaints to the Property Ombudsman in 2014 were up 40% on 2013.
So we have more “competition” in the sense that there are more estate agents and yet the service levels are actually decreasing. At this point it’s probably worthwhile pointing out how exactly this is allowed to happen. Take Ealing as an example of how house price inflation impacts estate agent fees:
Ave Price in 2010: £344,285 = Ave Fee in 2010: £6,179
Ave Price in 2015: £507,072 = Average Fee in 2015: £9,127
(Average estate agency fee: 1.8%)
According to reports from Which? there is absolutely no evidence that the average estate agent fee has decreased over the last five years. Since 2013 an additional 30,000 estate agents have joined the industry and with the volume of sales largely constant the only explanation is that house price inflation simply attracts more estate agents like flies to, you know what I want to say. So every time you hear about house price inflation remember that this means more money into the pockets of even more estate agents.
Office of Fair Trading issues guidance on price competition in Estate Agency:
“We believe that the best way to tackle the lack of price competition is through promoting and encouraging new business models.”Office of Fair Trading 2013
Two years ago the Office of Fair Trading were concerned about lack of price competition so I can only wonder what they must be thinking as house prices continue to rise, agents fees continue to rise and yet percentage fees remain constant.
This industry relies on entrenched beliefs and the asymmetrical barrier of information that estate agents have constructed over the years. The bad news for the High Street is that with the democratisation of data these barriers aren’t just being broken down they are being ripped down. There has never been more information available for buyers and vendors than there is now. Using Rightmove, Zoopla and Property Detective one is able to get a very good idea about an area in less than an hour. These services are readily available and readily used by all.
Recently, the CEO of another online estate agent suggested that High Street Estate Agents are extinct but they just don’t know it yet. These are particularly strong words but I certainly believe our traditional counterparts must adapt to the shifting landscape of the market. High street agents will have to deliver a better customer service in order to prove their value because online estate agents are now providing an extremely attractive alternative and are definitely challenging the commission based model of yesteryear.