The Paul Smith column: What I got right, what I got wrong – and yes, I’d bid for parts of Countrywide

What a tumultuous year 2018 was.

It has left our industry weakened by Brexit uncertainty, and shocked by online agents Emoov and Tepilo going into administration, the closure of Hatched, and witnessing the slow death of Countrywide.

Today I reflect on the predictions I made for 2018 www.propertyindustryeye.com/the-paul-smith-column-platt-to-leave-countryslide and I future gaze towards this year.

Countrywide

At the beginning of 2018 I predicted that the Countywide board would struggle to turn the super-tanker around in the wake of former CEO Alison Platt’s exit.

Shares had then tumbled from £6 to £1. They’re now hovering around the 9p mark!

Bringing back its team of old timers to restore it to its glory days and going back to basics simply isn’t working and I predict it will limp on through 2019 until its credit facility matures in 2022.

The big question, then, is how is it going to pay the money back? I said heads should roll at board level and Countrywide lost a non-exec director after a shareholder revolt over directors’ remuneration.

Its losses are growing and I predict it will have to close hundreds of offices so that it can invest heavily in the business, leaving just one brand in the towns where it operates, instead of 53 different brands nationwide.

This might give it a chance to invest in technology and reduce ad spend by promoting fewer brands.

Even as far back as September 2017 I had warned that the only way forward was to break up the business and sell off its component parts.

Certainly if I were a shareholder, I’d want to get some money back before it’s too late.

They’d get good money for Bridgfords, Slater Hogg, Taylors and Hamptons as well as its financial services – although that has reduced in size significantly in the last three years – plus its surveying and legal businesses. I’d bid for them!

I fear, though, the writing is on the wall and it’s just a matter of time before this super-tanker goes aground and everyone jumps ship.

I feel very sorry for those Countrywide soldiers at the coalface – they are working hard and trying to get some traction on the basics, but you need the generals to be investing in technology, digital marketing and people, and, alas, I don’t see that happening.

The generals are not leading the charge!

Online agents

I had predicted that Tepilo would part company with Sarah Beeny.

I don’t think any of us could have foreseen that Emoov would have bought out Tepilo and Urban and then gone into administration in such a quick and dramatic way, or that Connells would ditch Hatched so quickly.

I did, however, query whether it was wise for Emoov to spend so much money on awful rebranding.

I have also constantly warned that the online agents won’t be able to survive if they charge so little.

I predict that the Purplebricks’ share price, down 62% last year and now sitting at 140p (compared to its all-time high of 513p), will continue to slide as the market faces another quiet year amid Brexit uncertainty.

In its recent trading statement, it showed a loss of £25.5m, having spent an obscene £39m on marketing. With that sort of spend they should have 20%-30% of the market but they haven’t.

As soon as Purplebricks stop the huge spend, where does that leave them?

The spend is not sustainable. It will constantly need that huge pool of investment if it wants to splash the cash on advertising and propping up its struggling businesses in the US, Australia and Canada. Investors aren’t going to get their money back for some time to come.

As for the other online agents, I had predicted that HouseSimple will waste lots of money trying to chase Purplebricks, which it has, and that it would join forces with Yopa, which it hasn’t – though I haven’t ruled that out in the future!

It needs to dig a lot deeper and spend at least £1m a month on TV and the same on online advertising. With a no sale, no fee model, it’s got a long wait for pay day.

I predict that online and hybrid agents will have no choice but to put up their prices if they are to make any money – which evens the playing field with high street agents who offer a far better service.

Branding

At this point, I’d like to reinforce the importance of branding in 2019. Those with prominent brands are going to do far better than those with little online or high street presence.

It’s interesting to see Purplebricks spend yet another small fortune of investors’ cash on changing its branding – to something very staid and ‘establishment’.

So much for being a challenger, disruptor brand. Is it really the right time to become traditional?

As for easyProperty, a brand associated with ‘cheap’, would you feel you’re getting a cheap service because of the cheap price, and doesn’t it cheapen the value of your property?

I think keeping the Easy brand was a faux pas. But then many of the online or hybrid agents have plumped for unattractive names – I associate Tepilo with tepid, Yopa with a yoghurt drink, while EweMove should be put out to pasture!

Branch closures

Regarding branch closures, I predicted there would be 18% fewer agents this year and more consolidation in the market. I don’t know the exact figures but we could have been closer to that mark if Countrywide had cut their losses a lot sooner.

I still think we have 20% too many agents for the market and it’s therefore inevitable we’re going to lose a number of businesses in 2019 with the fallout from Brexit and the ban on tenancy fees.

I get approached every week by independent owners looking for a buyer for their business.

RICS has said average stocks are at record lows and new instructions in November were at their lowest for almost two-and-a-half years. RICS is expecting further declines in the months to come.

Foxtons and Sequence

Foxtons has moved back to its old model and consolidated six closures.

I predict Foxtons in 2019 will close more branches. I also said Connells/Sequence would have a number of poor-performing branches.

I can’t see either of these brands holding on to non-profitable branches with high-cost rents and I predict there will be more closures to come.

This business will produce substantially fewer profits than in previous years is my prediction.

The American model

I also believe in 2019 that those agents trying to follow the American model here in the UK will struggle.

As Purplebricks has discovered, the US model is very different to the UK.

Research from the National Association of Realtors says there are 1.3m estate agents in the US and only 3% of them sell 25 homes or more a year.

Many estate agents have a second job to make ends meet. Their average fee is 5% in the US, while ours is 1.2% in the UK.

Will the likes of Keller Williams, RE/MAX and Century 21 really make any inroads in an already saturated market which is struggling with sales? I doubt it. They’ve come and gone in the UK before.

Portals

I warned that portals would put up their prices in 2018 despite agents struggling with costs – and I was right because portal prices only ever go one way!

It is inevitable, therefore, that increasing numbers of agents will move over to OnTheMarket, which I believe will vie for second position behind Rightmove within two years and will consolidate that position within five.

It has already doubled the number of branches listed to 12,000 since floating on the AIM market in February 2018.

It only takes one big agent to take a leap of faith and move away from the current dominant portals and others will follow.

However, as long as agents think that portals are their umbilical cord, nothing will change.

No change!

Precisely for this reason, I predicted we’d see an increase in estate agencies becoming their own media companies, investing more in social media, search engine marketing and digital advertising, using big data, propensity modelling and artificial intelligence.

I thought individual estate agents would become their own brand on Facebook, making their mark and raising their profiles in their local communities.

But it’s not happening!

I thought we’d see a lot more content marketing, ratings and reviews, and a real shift in the way that agents marketed to people online.

There’s a real gap in skills, technology, funding and desire here, with lots of agents burying their heads in the sand, stuck in the old way of doing things and not wanting to change.

Do I think this will be any different in 2019? Not a cat in hell’s chance. Has GDPR scuppered everything for us? Not really.

Agents who embrace search engine optimisation and use up-to-date data will survive.

Those who live for today and don’t face the future are missing out on the most cost-effective ways of reaching the market. There appears to be a lack of investment and innovation right across the industry right now due to lack of funding, which ultimately will impact the speed of sale and customer experience.

Lettings

I predict in 2019 that all the best local independents that have no or little reliance on lettings will be the ones that not only survive but will thrive.

I even wonder if Brexit will have the same impact on agency that the millennium bug had? That is, no impact whatsoever and we were all worried about nothing!

And finally

A final note for all those people working for Emoov: I do genuinely hope you can look forward to this year with some optimism.

There is room in the market for people who are ambitious and forward-thinking, for those who are prepared to move with the times.

I wish you – and all our industry colleagues – better times ahead and a prosperous 2019.

  • Paul Smith is CEO of Spicerhaart

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22 Comments

  1. DM87

    *yawn*

    Wouldn’t it be nice if the CEO of Spicerhaart spoke about Spicerhaart’s plans in 2019 rather than making predictions on everyone else’s business…..

    Shame PIE’s NYresolution wasn’t to stop giving this dinosaur air time

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  2. smile please

    My prediction for 2019, water will be wet and Spicerhaart will have at least 40% staff turnover in their branches.

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  3. Hillofwad71

    “Even as far back as September 2017 I had warned that the only way forward was to break up the business and sell off its component parts.
    Certainly if I were a shareholder, I’d want to get some money back before it’s too late.
    They’d get good money for Bridgfords, Slater Hogg, Taylors and Hamptons as well as its financial services – although that has reduced in size significantly in the last three years – plus its surveying and legal businesses. I’d bid for them!”
     

    Why on earth would you need to do that?All you need to do is secure the services of the main drivers of those businesses who will cherry pick the staff ,acquire some premises nearby and their clients will follow .Line up the ducks.All you have to do is ask!

    They must all be sick of pedalling like mad earning good fees to service a still very substantial debt  incurred by a set of Directors who are still on the premises who must have by now lost their respect No appointments to main board of talented individuals from within

    Any major surveying contracts coming to an end where a personal relationship has developed with individuals

    You just scoop them up.You better be quick as they will be breaking off independentally

    The question you should have asked yourself is why haven’t you done it already !

     

     

     

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  4. Probably Pork in the Pie

    Hmmmm.  Maybe get your own house in order before trying to fix others.

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  5. B Mills

    It only takes one big agent to take a leap of faith and move away from the current dominant portals and others will follow

    Go on then Paul, we’ll follow.

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  6. SLF

    I predict that online and hybrid agents will have no choice but to put up their prices if they are to make any money – which evens the playing field with high street agents who offer a far better service.

    NO, high street agents do not offer a far better service. I spent a few decades in the high street and am now with a non high street agent. The service levels are much higher than in the high street. Contributors on here have no idea of the way we work. I think it’s fair to say that most non high street agents just have a giggle into their coffee each morning at the ill informed and ignorant comments on here.

    So how much better is the high street?

    On the way to a valuation last night at 7pm I passed about 10 agents….all closed.

    Yesterday at 6.15 I called a high street agent to do a chain check. Closed.

    I valued a house yesterday morning at 8am. They’d called three high street agents who’d all refused to come out. The same happened last week with an 8pm valuation. No high street agent would attend.

    I’ve just been instructed on a very saleable detached cottage. They chose me because every agent in town bar one was closed on Sunday.

    This Sunday I have two valuations in the afternoon and 4 viewings in the morning starting at 8.30am. Both valuations tried to book high street agents. “Sorry, we’re closed”. I’m guessing the viewer wouldn’t have been able to view anything else on Sunday through the high street agents either “Sorry, we’re closed”

    I had a viewing on a rented house a few weeks before Christmas. I turned up at the agents office at 4.30pm on a busy Saturday to pick up the keys find they close at 4pm. Every Saturday.

    Of all the agents in my patch only two can be contacted “out of hours”. Useless. People work and need to be able to call their estate agent when they’re able to.  My phone is on until about 11pm every night and I regularly get calls.

    And I do all the things that I did in the high street.

    I call every single one of my sellers on a set day every week.

    Sellers can text, phone or email me at any time. Up until 11pm they’ll get an immediate reply.

    I revisit every single one of my listings after 4 weeks marketing. This is booked in at instruction.

    I ring out every new property. Yes we do have databases of buyers.

    We have a sales progression department but I also progress all my sales.

    I obviously finance and chain check every offer, just as you’d expect. But chain checking with the high street can be just as big a nightmare as the high street say it is with us. If I actually manage to speak to the “person who’s dealing with it” I have the same problem 90% of the time. Incomplete details and sales agreed without thoroughly checking the chain.

    What else……..well just in December I also came across the following:

    A viewer who’d just been stood up at a viewing by a high street agent. This isn’t uncommon.

    A viewer waited half an hour for the high street agent who then turned up with the wrong key.

    A seller disinstructing the high street agents and instructing me based on his poor quality photos.

    I valued a house where the high street agent booked in before me had rung half hour before his appointment to say he’d double booked and couldn’t make it.

    I was chasing a sale that was coming up to exchange only to find that the buyer at the bottom of the chain had pulled out five days before and the high street agent hadn’t told anyone. Apparently the negotiator who took the call went ill the following day and hadn’t told any colleagues or made any notes.

    I listed a house that had been on for 3 months and had one viewing. In that 12 week period they had one phone call from the high street agent to arrange the viewing. That was it, no contact. I also very quickly got agreement to reduce the price from £410,000 to £400,000. Three months the high street agent had marketed at this ridiculous figure with no advice or mention of portal search brackets.

    I came across a high street agent who’d made a big deal on the valuation that our agents aren’t local. This was a house that took me three minutes to walk to from my house.

    I’m looking for an investment flat myself at the moment. I viewed one at the beginning of December and the agent didn’t know the service charges or lease length and didn’t know what a combi boiler was. There’s also a flat I want to see this weekend. I called the agent to arrange a viewing yesterday morning and still haven’t heard back.

    I could go on, and on. The high street does not offer some wonderful, unequaled platinum level of customer service. I deal with high street agents every day and it’s really slack. Always happy to knock and criticise “online “agents but never being able to see the poor service they’re offering themselves.

    The bottom line is, a good non high street agent can offer a far better level of service than a high street agent. Anyone available for a valuation 7.30pm this Saturday?

    Happy New Year!

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    1. Leespoon

      lol…..

       

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      1. Property Pundit

        lol indeed. Must be slow off the High Street to come up with that diatribe!

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    2. 6thEarl

      yep available at 7:30 (am or pm) on Saturday (where do you live?) and was also available over festive period and was working all of last weekend.

      Your comment re High Street v Online are to say the least a bit broad brush – good and bad in both camps I am sure. I’m just pretty convinced that those High Street Agents offering 7 days a week, extended opening hours, great customer service, exceptional local knowledge (just successfully sold an 11 bedroomed country home for my 5th consecutive time) will out perform those that don’t (online or otherwise) and even those online that say they do.

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      1. SLF

        Then you are indeed a high street agent who does his best to offer a complete service to fit in with the 24/7 expectations of the buying and selling public. However, many other high street agents do not.

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    3. MarkRowe

      Love the way in which you’ve written this… trust me, none of your ‘potential clients’ are reading PIE in your area, so no need for the pitch.

      More importantly though, we in the industry know you work hard… you do you boo, and we’ll all say well done 😉

       

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      1. SLF

        No pitch, just a few facts.

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        1. ArthurHouse02

          I would say your facts are more like “facts” in the same way, the call centre brigade make “claims” about many things that they do.
          A certain large “estate agent” of a certain colour, never checks chains in my experience, never has any file notes when you sales chase them and often has no clue what is going on. Though this is probably good service to you.
          In over 20 years not once have i even been asked to do a valuation on a Sunday, even when we used to open on Sundays. In my experience those who are committed to selling their home make time to approach the matter professionally and understand that everyone has lives and families and dont expect proper estate agents to spend all night valuing someones house.
          From LPEs that i have spoken to the main reasons that appointments are done on sundays, 9pm in the evening etc are A) because out of choice and a desperation to make yourself look different, and B) because the levels of income are so poor that appointments will be done no matter how inconvenient. I would suggest that this makes you look like a poor estate agent who lacks the ability to ask the right questions. People respect those that have an opinion rather than nodding along like a dog on a parcel shelf.

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          1. Shaun77

            Have you not heard of work/life balance? It’s not all about burning yourself out and working every hour under the sun. You just can’t attract good staff that way as people deserve a life away from the stresses and strains of estate agency.

            To be fair, after having worked for over 20 years in the industry, most people would be at a point where they delegate a lot of this stuff but, as is the case with online agents, you have to be the “Chief, Cook and Bottle Washer” as there just isn’t sufficient resource to properly allocate roles and responsibilities accordingly. As a result, you end up wearing far too many hats meaning you become a jack of all trades and master of none. This is borne out by your very own comments above.

            If I was a vendor, I would be incredibly concerned that you had sufficient time to put the level of care and effort into each aspect of the role, particularly seeing as you only get paid for delivering against one metric – listing.

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    4. rsvstu97

      PMSL.

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  7. Hillofwad71

    SLF

    “NO, high street agents do not offer a far better service. I spent a few decades in the high street and am now with a non high street agent. ”

     

    Are you now saying that you  personally offer a better service to your clients now you are not a High Street Agent?

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  8. SLF

    Yes, definitely. 

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  9. AgencyInsider

    There are good agents and bad agents both on and off the high street.

    To contend that being off the high street makes an agent somehow ‘better’ is laughable.

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  10. smile please

    Not sure how we got onto online vs High Street but always happy to explore this avenue.

    My opinion, online ‘agents’ are agents new to the market or cannot hack the constant demands of service and standards that is required of them by their employer or the public in the high street set up.

    When i recruit, i would probably not look at a neg or branch manager that was coming from an online agency. Unless there was a letter saying they had made a big mistake joining the murky online world.

    I think was you have worked at an online agents you have tarnished your CV. I look at around half a dozen reps in 20 odd miles of my location all journeymen that have never been high achievers, poor work ethic and not very knowledgeable. Yet there they are banging the drum saying how wonderful they are ….. We know the truth…..

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  11. Anthonyw

    Isn’t it time everyone stopped talking about and comparing one with the other (traditional vs online)? There is no reason why all models can’t co-exist. I believe we all still have pretty much the same amount of competition, as far as I can see, there hasn’t been a massive influx of new agents joining the industry. Most of those who are online have come from a traditional agency, so if they where good or bad in their old job they are most likely the same in their current one.
    The branch closures/consolidation (IMHO) are inevitable – simply because of the internet. The majority of people now look online first – and its not just the younger generations, but over 70s who also do online first. One guy 82 said he found one of our property online. One day a guy like that will not be so memorable because over 80s surfing the net will be the norm. I would go further and say that branches that keep a high street presence in the future will need to diversify. 
    I have read about some quirky (like one that converted its front into a cafe/agency, or another brand who created a community hub). It will be those that survive in the future I think. Ours might be one of the ones that get left behind because our chief is still stuck behind the times in many ways but I am slowly persuading him to try new things :O)
    I disagree that the American model will struggle. It is actually a very good idea for an agent willing to take a risk for example of having no salary for a couple of months (and particularly if you operate in an area with high end property like London).
    Regarding portals, anyone could have predicted that portal costs would rise, and also that agents would take up the offer of free from OTM as it is a no brainer. What is harder to predict is just how many of those 12k will remain once their free period ends and then the charges go up (it is inevitable as they cannot sustain low prices AND pay for ridiculously expensive archaic TV advertising). Sorry, but I don’t think they help themselves or us at all in terms of driving more traffic to us in leads. The marketing people need to be sacked as none of the ads are any good – they don’t evoke anything other than to press the pause button until the ads are finished in order to fast forward! Maybe Paul hasn’t dropped RM etc. because he can see the elephant in the room and realises it is out of the frying pan into the fire?
     

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  12. BALLY07

    I havent even read this whole thing but smell further P.S TRIPE! Absolute rubbish indirect boasting and inaccurate comments about other businesses.

    Lets talk about haart turnover of staff and how when P.S wrote his January 2018 article my local haart branch has no staff still working there than what were working there in 2018. NONE. absolute pure tripe from PS who has no touch  on whats going on within his business, let alone anyone elses!

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  13. Number1EA82

    How ridiculous is this. Sorry Paul what bullsh@&. Have you looked at all of your brands? There rubbish

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