The transforming business of estate agents

Frances Senn

It is widely accepted that most things are easier done online. Physically entering estate agents is becoming a thing of the past. Nowadays potential buyers often have completed a preliminary property search online prior to their visit. Online property search companies offer clever capabilities; filters, price ranges and property comparisons, with the aim of saving the consumer money. Websites and smartphone apps make searching for a property far more time efficient. Long gone are the days spent waiting for an estate agent to inform you a property has been listed, you can now be proactive each evening and find out for yourself.

Due to this ease of use, big UK estate agents, such as Foxtons and Countrywide, are losing market shares as a direct result of online competitors. This is further problematized by the lack of activity in the UK housing market at the moment. Any increases or decreases remain marginal. Investors are running out of patience and their shares have reduced by about a quarter in the last year.

Traditional brokers are under pressure from the success of online agents who have obtained 5-7 % of the UK home-sales market over the past three years. This is because buyers are likely to save money by consulting online sources when looking for a property.

It is evident that in order to save the estate agents, something needs to be done. Brokers will need to look for ways to cut costs and the easiest way to do this is by mergers and acquisitions (M&A). In a merger, two companies will combine and seek shareholders‘ approval, causing the acquired company to become part of the merging company and cease to exist entirely. In an acquisition, the acquiring company obtains the majority stake in the acquired firm, which does not change its name or legal structure. This could save the traditional estate agents money and increase shares.

Although M&As may not be a completely desirable course of action, figures from Moore Stephens show that 19% of estate agents are currently under threat of insolvency. Given that the popularity of online estate agents does not seem like it will diminish in the foreseeable future, it is a course of action well worth considering.

Despite shares underperforming, there is evidence to suggest that Foxtons and Countrywide could boost shares if the housing market picks up. However, the predictions for 2018, taking into consideration tax changes and the reduced number of properties being sold, it is likely that the market will remain stagnant.

Measures have been taken by the estate agents, for example Foxtons has decided to branch away from its London-based market focus and Countrywide’s chief executive resigned and has been replaced by someone with experience in online business adoption in order to tackle this online battle. However, this caused shares to plummet by almost 20%, leaving investors uncertain over the capability of the firm.

It seems as though the estate agents need to prove their worth within the UK housing market. Online competition is fierce, but the estate agents need to instil some trust in their investors by taking actions to move them forward in our internet focussed world. Until then, their instability will prevent investors from buying into them.

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