Research by estate agent comparison site, GetAgent.co.uk, shows the extent to which agency revenues may have suffered amid the enforced industry-wide Covid-19 lockdown.
GetAgent analysed the average fees charged by estate agents and the total potential value when taking into account all residential transactions.
The comparison site then compared its analysis of average fees with market performance over the past 12 months and five years to find out how profitable estate agents are in the current market climate.
GetAgent’s research revealed that in the 2015-2016 financial year, the average estate agent charged a fee of 1.3 percent +VAT, which equates to £2,622, or £3,146 when factoring in VAT, on the average house price of £201,695.
However, for the most recent financial year, fees charged by the average estate agent had dropped slightly to 1.25 percent.
Despite the marginal decrease in fees, GetAgent’s research indicates that the average agent has seen income from each transaction increase by 10.6 percent to £2,899 as a result of house prices climbing to an average of £231,906.
According to the research, there has been an overall reduction in transactions of 11.8 percent over the past five years.
The data means that the 1,321,630 annual transactions in 2015, across the residential market, would have made the industry almost £3.5bn in fees.
With estate agencies forced to temporarily shut down their brick and mortar operations in March, combined with restrictions on agents throughout April, property transactions have plummeted.
GetAgent’s research indicates that £86,373,744 worth of fees have been lost.
The data also shows that transactions have dropped by 1.9 percent between the 2018-2019 financial year and 2019-2020.
This means that although the average estate agents fee has risen compared to 12 months ago, the industry as a whole has suffered a revenue slump of almost £25m overall.
Colby Short, founder and CEO of GetAgent, said:
“The property industry has faced a difficult couple of months.
“The Government’s lockdown of the market has had a notable impact on transactions and as a result, the revenue of many agents.
“There will be a continuous struggle over the coming months as we inevitably see a further drop in transactions.
“The good news is not all agents are average and we’ve seen a colossal effort by many to adapt, evolve and in some cases, thrive in current market conditions.
“People still want to move and it will be those agents out on the front line helping them to do so that will remain relevant in an ever evolving industry.
“As ever these days, the best service will prevail and UK agents are really understanding that differentiator now.
“Many will have to knuckle down, manage overheads and potentially close branch offices.
“Some may also reconsider Rightmove as one of their biggest expenses.
“However, in recent years we’ve seen the industry survive the financial crash, pivot to fight against online agents and overcome months of Brexit uncertainty, and we’re confident we will see this resilience shine through once again.”
Comments (6)
If you think this news is bad wait till the 12th June when the nuclear bomb could be dropped on the industry at the recommendation of a select committee.
On mass redundancies for lettings and financial ruin for landlords.
Sorry to be a house price pedant but what is the point of working out agency incomes based on anything other than transaction price averages?
Agents get paid on completions therefore work out the fees based on transaction average prices rather than the land registry/ ONS HPI average which have an algorithm bias towards lower price transactions
If you have been introduced to us before Daniel I apologise but are you staff or a guest contributor?
Hi Robert – can you expand on the algorithm point and why the LR/ONS would show a bias towards lower priced transactions? Surely, their purpose is to track all transactions?
You’d think so but in order to arrive at an average house price HMLR employ an algorithm that excludes properties from the data set. The upshot is that only about 36% (estimate) of properties qualify to be included in the calculation.
First time buyer properties; flats and starter homes which transact frequently are included but ‘Forever Homes’ that people live in for a long while are only included once they have transacted twice since 1995. That means more expensive properties people retire to don’t appear in the figures twice so don’t get counted.
Properties that are transferred between parties such as the forever homes being left in a will, don’t show in the data set.
If you have a data set that is looking at the transacted twice properties, they tend to be at the lower end of the market.
The value of all properties sold divided by the number of properties sold gives a more meaningful ‘transaction average’
Transaction average is currently close to £300,000.
Not affecting the averages but al this is complicated by the delay in reporting completions to land registry. [Sales that were typically agreed 3 months before completion, put on the market 3 months before that and valued a month before that]
I refer to that as valuation lag, that’s a number that varies from activity centre to activity centre and can be plotted using transaction data.
Transaction value/transaction volume = average price paid
Thanks Robert
It seems absolutely ludicrous that ‘official’ government stats are missing out on such a large proportion of transactions.
To be honest, I’ve also thought the whole ‘average price’ concept to be a bit of a nonsense anyway. Not only because the ‘lag’ you refer to often represents a period of around 8 months (and given the market can change in an instant, it’s entirely misleading), but also because it’s only ever based on properties that have transacted. Using this logic, if in any given period in any given area the only property that transacted was a 1 bedroom flat, that becomes the official average house price for that area, even though there are many more valuable properties within that area.
You would have thought by now somebody would have introduced a more meaningful process. Maybe including re-mortgage data would help.
we have that as part of the professional (agent) edition of r4p. The problem is introducing the concept to valuation lag staff who have had no formal valuation training.
We can adjust for lag but explaining x to the power 1 over y so valuers understand the numbers we are presenting is the challenge.
Our valuation modelling has been tested by veteran RICS valuers and stands up to their critical eye.