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Alfie Moon

100s Of Estate Agencies Going Out Of Business

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Reading the Metro newspaper on the way to work this morning I looked at a short article in their 1/2 page Business section. The article was focused on the number of Hotels in the UK going out of business during the recession but also mentioned that in the 3 months to June this year 510 Estate Agency businesses had ceased trading. So, it looks like it is not only that large numbers of Estate Agencies have been cutting their staff numbers right down to the bone but also that very large numbers of Estate Agencies are still going out of business ...... despite the so called 'recovery'.

And still Estate Agents can't get into their heads that any reported, or even worse actual, rise in property prices will put more of them out of business and the recession/depression in the property market will be much deeper and continue for much longer than otherwise m,ight be the case.

They need to concentrate on increasing the number of successful completed transactions (pointless getting properties to go SSTC that have little or no chance of completing + no point putting propertioes on the market with asking prices that mean they won't sell) and the only effective and realistic way they can do this is to cut asking prices aggressively and repeatedly until sales go through successfully.

Edited by Alfie Moon

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well, with around half the volume and 20% off, not only have commission numbers halved, but the value has dropped too.

course, the adverts and the office cost the same, as do the salaries..

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I think Estate Agents want banks to lend again so prices go up again, so people will want to sell their house because they can get a 'fair' price for it.

If they understand what the original poster was saying, they would have been overqualified to be Estate Agents in the first place.

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510,is that all?doesn't seem that many.there's seven on my local high street.there were only two ten years ago.,

It depends on whether a single Estate Agency business has 1 outlet or 3, or 5, or 10. The phrasing in the report suggested it was 510 Estate Agency businesses rather than 510 outlets (although this needs to be confirmed). Also, the 510 figure suggests an annual rate of over 2000 closing down their business - not a small number, whether that be businesses or outlets. I suspect next year - with interest rates likely to rise; massive service cuts with related unemployment; large tax hikes; and the need to start reducing the national debt rather than continuing to expand it (all due to be in place before or after the General Election) - will be a much, much harsher year for the property market than 2009, and even 2008, and so disatrous for Estate Agents. I think 2010 will see many more closures of Estate Agencies than 2009.

With the lowest Bof E Base Rate for a few hundred years and gigantic amounts of quantitative easing (and hence national debt) all that the property market has been able to produce, in terms of a recovery in 2009, has been transaction levels that remain at historically low levels and hence just a mini-market that is currently functioning on small numbers of people with 25% or bigger deposits - the rest of the property market remains in a state of complete breakdown/non-functioning.

If I was an Estate Agent now I would be looking to jump ship asap. No doubt there are many deluded Estate Agents that think 2010 is looking like it will shape up really well for them ..... oh dear.

Edited by Alfie Moon

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I predict the airwaves of 2010 will be full of estate agents boasting that their business has tripled in a year. It will be because 5 of their local competitors have closed down so they have picked up their business, but they won't see it that way - it will be evidence of a strong recovery!

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Well I'm sitting here listening to one colleague on the phone to his missus, looking for somewhere to put down their hard-saved 20k deposit, another in her mid twenties buying a place in a craphole on the south coast 'we can get a mortgage, it's just a question of which one we choose', and yet another saying 'it's a good time to buy'

Somethings spooked the herd into looking at buying at the moment, so some of those EA's may yet have a job.

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Well I'm sitting here listening to one colleague on the phone to his missus, looking for somewhere to put down their hard-saved 20k deposit, another in her mid twenties buying a place in a craphole on the south coast 'we can get a mortgage, it's just a question of which one we choose', and yet another saying 'it's a good time to buy'

Somethings spooked the herd into looking at buying at the moment, so some of those EA's may yet have a job.

So Badger what can Mr and Mrs 20K buy with their cash? And do you know what type of mortgage they are getting? Do you have any idea where they think interest rates are going?

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So Badger what can Mr and Mrs 20K buy with their cash? And do you know what type of mortgage they are getting? Do you have any idea where they think interest rates are going?

Nope, don't like to stick my nose in too much as am likely to get bearish at their sensitive and difficult time.

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looking for somewhere to put down their hard-saved 20k deposit, another in her mid twenties buying a place in a craphole on the south coast 'we can get a mortgage, it's just a question of which one we choose', and yet another saying 'it's a good time to buy'

Somethings spooked the herd into looking at buying at the moment, so some of those EA's may yet have a job.

I dunno where you live but I'd wager that the 20k aint going to go far!

I love "it's a good time to buy". It's one of those totally vacuous statements that has caught on.

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I love "it's a good time to buy". It's one of those totally vacuous statements that has caught on.

yep,it's a good time to buy

it's a good time to buy

it's a good time to buy

it's a good time to buy

it's a good time to buy

it's a good time to buy

it's a good time to buy

if you repeat it often enough, it has an hypnotic quality.

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510 out of how many? is this 1%, 10% 80% of the total?

According to home.co.uk in Aug 2007 there were 18,000 + EA's registered in the UK. So if 500 went pop in just 3 months (OP) that's about 3% of them gone in 12 weeks - and fecking good riddance.

If I remember rightly, during the 80's recession about a third of all EA's went to the wall. Someone else may want to correct me on this.

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510 out of how many? is this 1%, 10% 80% of the total?

UK House Prices Why They Don't Add Up

......the most worrying news for those who need house prices to recover is the abysmal levels of sales transactions. In August 2007 transaction levels were at 120,000, they now flounder at 35,000 per month - equal to one per estate agent, or less if you take into account those properties sold direct by the house builders. House sale records are not available for the 1960's, however I'm reliably informed that even at the depths of the recession in the 1970's house sales volumes were greater than they currently are...

So house sale volumes are close to a quarter of their August 2007 peak, estate agents are selling (at best) a property a month,

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Heard an EA on the today programme this morning. He was saying how great low interest rates are. He pays hardly anything on his IO tracker and can get great deals on TVs and other consumer goods. It is good to know that he is benefiting from our low interest rates and printing of money. Well done Mervyn. (Note i don't even blame Gordon for this, it is up to Merv to raise interest rates and stop the printing machines. He is supposed to be independent).

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Playing devil's advocate for a moment.

The agents probably can't risk suggesting a lower selling price because the vendor will simply move to another agent who will promise them a higher selling price (which they'll more than likely not achieve).

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Playing devil's advocate for a moment.

The agents probably can't risk suggesting a lower selling price because the vendor will simply move to another agent who will promise them a higher selling price (which they'll more than likely not achieve).

RM earlier this year:

Rightmove Index: Raised Asking Price Doing More Harm than Good

The latest release of Rightmove's house price index shows asking prices on UK property rose 0.9% this month compared to last month.

The report admits that agent's are being forced to up initial advertising prices to win new instructions, amid the fierce competition for the few quality properties that are currently being put onto the market.

That makes the asking price rise, for me, more like bad news than good news. I understand that agent's are trying to survive in a difficult market, but we need to firm out the price drops that we have had, before we can ascertain if they are enough to bring the market to bottom, and accelerate any further drop that may be necessary

In short, by humouring unrealistic vendors over asking prices, agents may be doing nothing more than prolonging their own misery. ......

The report also said that lack of mortgage availability is hindering market recovery as sellers who have dealt with the market reality and drastically dropped their asking price are faced with buyers unable to obtain finance. Rightmove commercial director Miles Shipside said:

"Some sellers are still pricing wishfully high, though it is encouraging that elements of the market have adapted relatively quickly to find a new price floor at a discount of around 25% from peak. "

"Until banks get their own houses in order, the active minority of sellers and agents who have drastically adjusted pricing will remain frustrated by the limited functioning of the financial services sector."

So, after its initial optimism the Rightmove index enforces the realisation that the UK property market recovery hinges on two things: vendor realism and mortgage availability. The latter more than likely hinged on a recovery to the wider UK economy, which in my opinion is also necessary to increase buyer numbers sufficiently to bring vendor realism

The problem with high asking prices is that lenders valuations are realistic and getting a chain to completion is very difficult, eventually someone will have to spell it out to sellers.

RM's recent HPI said EA's were advising sellers to take a lower cash offer rather than a higher offer from someone who needs a mortgage or I assume a valuation above 25 - 30 % below peak, it also said:

.....Miles Shipside, commercial director of Rightmove comments: “After several months of activity and prices revving upwards from last winter’s low point, both will start to hit the limiter without more mortgage finance. In spite of pent up demand, the market and pricing is boxed in by restrictive lending criteria put in place to ration mortgages given the lack of funds available to lendersâ€

......Future price and transaction growth is now controlled by the bottleneck of mortgage availability. This is unlikely to change for years to come, with the Centre for Economics and Business Research (CEBR) forecasting that mortgage application levels will recover slowly and remain well below the levels seen in the early part of this decade as far ahead as 2013. Even in 2013 the CEBR state that numbers will still be 24% below 2006 levels. This may well reflect a paradigm shift in access to mortgage lending.

While HSBC is the only major lender to have taken a more proactive stance and increased its market share, its reported average loan-to-value of circa 50% on new mortgage lending is a perfect illustration of the new era of both caution and cherry picking.

Shipside adds: “Lenders are looking to remove as much risk as possible from their mortgage book. While the government’s left-hand is waving them on to lend to more home movers and small businesses, the right-hand is effectively flagging them down again by urging lenders to re-build balance sheets and improve capital adequacyâ€.

As Shipside in January 2009 was telling sellers to reduce 25% , I guess the message will get through eventually

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Playing devil's advocate for a moment.

The agents probably can't risk suggesting a lower selling price because the vendor will simply move to another agent who will promise them a higher selling price (which they'll more than likely not achieve).

This point is always made but is countered by the fact that in the 1990s crash it was the Estate Agents that took the risk of cutting aggressively that survived the crash, and some even made a decent living out of it - because they adapted their selling strategy to the context of a falling market (both in terms of prices and transactions) and the context of the wider economy being in recession. It was these Estate Agents that developed the reputation of being able to sell whilst other EA's stuck with their boom time strategy whereby high and rising prices are everything but developed the reputation of selling little or nothing.

The above fear of risk that you mention above is simply a recipie for stagnation/paralysis - hence the current historical low levels of transactions being achieved. This aversion to risk taking and of taking positive and appropriate action by Estate Agents is ensuring that the vast majority of potential buyers can't enter the market - it is only a tiny number of people with 25%+ deposits that can realistically consider entering the market.

My comments are based on conversations with my brothers friend who owned a small chain of Estate Agents in Kent that adapted and operated well in the 1990s crash. He is astounded at the lack of adaptation by current Estate Agents who are basically working actively towards their own demise. The friend sold his EA business a few years ago and is rather well off.

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He pays hardly anything on his IO tracker and can get great deals on TVs and other consumer goods.

good to know EAs have a responsible attitutde to debt during the current crisis

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Heard an EA on the today programme this morning. He was saying how great low interest rates are. He pays hardly anything on his IO tracker and can get great deals on TVs and other consumer goods. It is good to know that he is benefiting from our low interest rates and printing of money. Well done Mervyn. (Note i don't even blame Gordon for this, it is up to Merv to raise interest rates and stop the printing machines. He is supposed to be independent).

Mervyn is a shill, although a great supporter of mentally unstable PM's and their defunct parties, fraudulent bankers and speculators.

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This point is always made but is countered by the fact that in the 1990s crash it was the Estate Agents that took the risk of cutting aggressively that survived the crash, and some even made a decent living out of it - because they adapted their selling strategy to the context of a falling market (both in terms of prices and transactions) and the context of the wider economy being in recession. It was these Estate Agents that developed the reputation of being able to sell whilst other EA's stuck with their boom time strategy whereby high and rising prices are everything but developed the reputation of selling little or nothing.

The above fear of risk that you mention above is simply a recipie for stagnation/paralysis - hence the current historical low levels of transactions being achieved. This aversion to risk taking and of taking positive and appropriate action by Estate Agents is ensuring that the vast majority of potential buyers can't enter the market - it is only a tiny number of people with 25%+ deposits that can realistically consider entering the market.

My comments are based on conversations with my brothers friend who owned a small chain of Estate Agents in Kent that adapted and operated well in the 1990s crash. He is astounded at the lack of adaptation by current Estate Agents who are basically working actively towards their own demise. The friend sold his EA business a few years ago and is rather well off.

Good post; I was simply trying to suggest what might be going on in the agent's heads. Hopefully they'll cotton on soon.

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Can't remember who posted this yesterday, might have been Alfie.

Estate Agent Today "Does the W Recovery have to spell "Woe"? "

...Let’s suppose the market is in the middle of a ‘W’ trend-line, where we have come down the first slope and are on the way up, but waiting on the other side is another down.

We need to make sure the ‘W’ has the symmetry of a traditional typeface rather than something that has been drawn by Salvador Dali, whose surrealist images hang lopsidedly into the future.

I am no economist, but there does seem to be an inescapable logic in the argument we are in for a double-dip recession with sharply rising unemployment, falling tax revenues, public spending cutbacks and lower incomes, irrespective of which party is in Government.

All this could mean greater budget deficits and more downward pressure on the housing market for the next two or three years. ......

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510,is that all?doesn't seem that many.there's seven on my local high street.there were only two ten years ago.,

Quite we don't need all these agents and eventually they will be cut down to size... one perhaps two dominant agents will survive per town and perhaps a couple of one man bands... without greater numbers of sales theres simply no way this number of agents can survive as anything other than larger groups or one man bands.

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