Despite UK house prices stabilising at the start of 2023 – after significant monthly falls in November and December last year - estate agents are continuing to face challenges.
According to the latest Halifax House Price Index, the average house price of £281,684 is about £12,500 (-4.2%) below its peak in August 2022.
Meanwhile, HMRC’s monthly property transaction data shows home sales decreased in December, with 101,920 sales completed. This is down 2.6% on November.
Housing market slowing down
Many potential home moves have been paused as homebuyers feel increased pressure on affordability from increasing inflation and interest rates. Many buyers and sellers are taking stock while the market continues to stabilise. This reduction in transactions is really hitting the profitability of estate agents, particularly those businesses that have not been agile in adapting their operating model to cut unnecessary costs.
Online estate agent Purplebricks’ latest half-year results revealed a 16% drop in revenue, a 38% plummet in gross profits and a rise in operating loss to £11.7 million. Purplebricks earns money from listing instructions, and in 2023 that pie will be 12% less for all agents as the housing market cools. This illustrates the challenges that face the industry.
Challenges for estate agents
It is vital that estate agents adapt to the modern market. Traditionally, the structure of an estate agent involved numerous offices with a high staff count. However, this high-cost model has become outdated and is not competitive with the structure of online-only sellers.
The use of technology is vital to attract clients. A great website is the most important building block. The use of 360 degree virtual tours, and links to apps such as Google Maps to show the local area and amenities, are a great start. To keep your profile to the fore, you can use criteria searches with automatic alerts for potential buyers and the use of social media, including newer platforms such as TikTok, can help raise the profile of your company, particularly with younger buyers.
Personal service
Estate agents, however, cannot rely on simply listing a client’s property on the portal and waiting for offers to roll in. Both buyers and sellers appreciate dealing with a genuine member of staff who understands their needs and goes that extra mile to provide a great service.
A regular phone call or face-to-face meeting might produce long-term benefits. Communications such as this could trigger comments suggesting they want a different approach to marketing their property or are willing to tweak the property in response to viewers’ comments. With buyers, it might reveal that they are open to purchasing in a wider postcode area, at a different price range, or prepared to explore a broader scope of property type than from their original online request. The greater the information you have, the better your service is likely to be.
Cash Flow
To survive in these times of economic instability and high inflation, all businesses must keep a constant eye on their financials. Keeping accounting records up to date is vital. A constant effort must be made to ensure costs remain under control and be aware of cash flow.
If you would like to speak to a member of our restructuring team to ensure your business is able to respond to the challenges the industry is faced with please get in touch.
