UK Estate Agents & Services

UK Estate Agents & Services

There are four main circuits of UK estate agents selling residential property: international agents for prestige properties; mass-market national agents; regional agents; and independents with local to regional coverage. Scotland has few estate agents, because solicitors sell most property in the country. The leading mass-market estate agencies in the UK are Countrywide; Connells; LSL Property Services, with YOUR MOVE and Reeds Rains; Halifax Property Services; and the independent Spicerhaart. The leading international agents are Savills, Knight Frank and Dubai-owned Hamptons International. In 2005, the total estate agency sector, including all real-estate activities on a fee or contract basis, covering national, international, commercial and domestic subsectors, recorded a total turnover of £12.07bn. The five largest residential estate agency firms, by number of offices, had a combined turnover of around £1.05bn.

Demand for private rented accommodation is rising. Specialist lettings agencies include Leaders, Belvoir and Jordans. The importance of residential lettings in modern estate agency is clear from the merger of the Association of Residential Letting Agents (ARLA) with the National Association of Estate Agents (NAEA), which took effect in July 2007. Among young adults, fading aspirations to home ownership boost the rental market. There are more people renting than letting property through agents, pointing to a core of landlords who own two or more properties to let. The demographic profile of landlords highlights the asset gap between the most and least affluent social grades (this gap also applies to holiday homes).

Estate agency was more profitable in 2006 than in 2005 and many firms returned their best-ever figures. Income from residential sales in 2006 reached £4.5bn, with a further £2.8bn from other operations, making a total of around £7.3bn. Affinity groups help independents to compete with the large chains. The advance of franchising of fascia brands within Countrywide and LSL Property Services also enables independents to buy a stake within estate agency.

The property market remained robust in spring 2007, despite higher interest rates, but began to cool in the summer. Demand from investors and recent immigrants, and property shortages in popular areas, underpinned the market.

Important points raised from Key Note's exclusive consumer research included an alarming lack of awareness about Home Information Packs (HIPs) — which eventually began a phased introduction in August 2007 — with nearly half of respondents (47.8%) saying that they have not heard of HIPs. Interestingly, fewer than a quarter of respondents (24.3%) thought that the packs would make home purchase easier, although this was the rationale behind their intended introduction.

Private sales bypassing agents have not caught on: estate agents, helped by effective marketing, have consolidated their position. Key Note's research shows that 19.7% of respondents have used an estate agent to sell a property at least once in the past 7 years and 19.8% have used one to buy a property at least once over the same period. More than eight in ten respondents said that they would visit an estate agent's office if they wanted to move home and almost six in ten agreed that they would search the Internet for properties if they wanted to move home. Fewer than half of respondents thought that estate agents are trustworthy, but more than half agreed that they are qualified professional people.

In 2007, estate agents are experiencing a downturn in the US and in Spain, while those selling properties in Eastern Europe are benefiting from booming interest. International property sales to the mass market have soared since the mid-1990s, but will suffer in future from costlier energy, making travel, heating and cooling more expensive. While long-haul purchases will continue to make sense for many major investors who can employ local staff and draw economies of scale, this is not so for personal buyers, who risk making unwise and unprofitable purchases.

Politicians are not yet planning clearly enough for sustainable housing within sustainable communities, a policy portfolio to which estate agents, with their local knowledge, could make a real contribution.

The expansion of private rentals should continue, as more potential first-time buyers are priced out of home ownership and as investors treat residential property more as an asset class than as a social necessity. The advance of residential property as an investment class requires estate agents to become knowledgeable about raising finance, investment prospects and taxation structures. A growing rentals sector has implications for Housing Benefit and Local Housing Allowance, which is costing the state more than £15.5bn in 2007/2008.

The Internet, an international medium, has contributed to rising property prices by enabling even the smallest, cheapest properties to be advertised globally at low cost, therefore vastly increasing the number of potential buyers.

Countrywide, the largest national chain of estate agents, was bought for £1.05bn by US private-equity firm Apollo Management in 2007. Countrywide is expanding through selling franchises for the Bairstow Eves fascia. Connells, the largest seller of new homes in the UK, and part of the group including the Skipton Building Society, continues to develop partnerships with housebuilders, and has expanded into selling new properties overseas. YOUR MOVE and Reeds Rains, the agency groups within LSL Property Services, are growing through franchising, as well as through financial services, many of them from Norwich Union, whose parent Aviva owned YOUR MOVE until 2004. Halifax Estate Agencies provides a distribution channel for the HBOS banking group. As with Countrywide and YOUR MOVE, growth in branch numbers is primarily through franchising, which Halifax terms as licensing. The independent Spicerhaart, the fifth-largest national chain by outlet numbers, has found growth difficult. Financial services are a priority in 2007, as part of a one-stop-shop approach to property.

Rightmove has won the contest of the property portals, because the website is well designed, fast and easy to use, and contains vast amounts of information. The success of Rightmove benefits the major shareholders Connells, Countrywide and Halifax Estate Agencies.

International investors favour land and property in the UK for reasons of stability and security, as much as for immediate profit potential, but the inflow of funds is pushing prices up rapidly. The international market is divorced from the national market, in which the strata are becoming separate, rather than a fluid continuum, owing to greater concentration of wealth, widening gaps between high and average earners, and personal taxation that hits the middle sections of society hardest.

First-time buyers may be overstating their incomes to obtain a mortgage, with the risk that they will not be able to maintain loan repayments. The affordability gap is boosting the private rentals sector, which is also supported by Housing Benefit. Calls for convergence between the private and social rented sectors are increasing. Private rentals are expected to grow by around 50% between 2007 and 2017, creating a need for estate agencies to let and manage much larger numbers of rental properties. By 2030, more than half of the UK's households could be in rented homes.

Estate agency is transforming from a retail service for occasional customers to an asset-management service for continuing clients. In future, more of the mass market will be devoted to lettings, and the trend towards enhanced professionalism, financial services and integrated property services in estate agency will continue. Tesco's entry into the estate agency market in summer 2007, as an additional shop window, should benefit the property market overall.

1. Introduction
OVERVIEW
DEFINITION

2. Strategic Overview
MARKET DYNAMICS
Setting the Scene
HIP Hopping
Four Main Categories
Changing Structure
Table 1: Leading Groups of Residential Estate Agents in the UK (number and %), 2004, 2006 and 2007
International Agents
Savills
Knight Frank
Hamptons International
Humberts Group
Harrods Estates
Substantial Provincial Chains
Arun Estate Agencies
Kinleigh Folkard & Hayward
Andrews Estate Agents
Chancellors Estate Agents
Selling Prestige Homes
Jackson-Stops & Staff
Strutt & Parker
Lane Fox
Foxtons
Smiths Gore
Agencies Important In Their Regions
Bradleys
Townends
Farrell Heyworth
Acorn Group
Keith Pattinson
Jump Estate Agency Group
Peter Alan
O'Riordan Bond
Goadsby
The Venmore Partnership
Burchell Edwards
Rook Matthews Sayer
Dacre Son & Hartley
Lettings Specialists
Leaders
Belvoir
Jordans
Association of Residential Letting Agents
Affinity Groups
movewithus
Home Sale Network
HomeLink Network
Others
Franchising
RE/MAX
Xperience
Townends
Winkworth
Hunters
Others
A RESILIENT MARKET
Figure 1: Changes in the UK Interest Rate (%), July 2003-July 2007
No Simple Answer
Table 2: Number of Housing Transactions in England and Wales (000 and index 1978=100), 1978-2006
Figure 2: Number of Housing Transactions in England and Wales (000), 2002-2006
Figure 3: Number of Housing Transactions in England and Wales and Average UK House Prices (000 and £), 1996-2006
THE HEALTH OF ESTATE AGENCY
2002
2004 and 2005
2006 and 2007
ADVERTISING
CONSUMER RESEARCH
KEY POINTS

3. Marketing Trends
PROPERTY PORTALS
Rightmove
ESPC (UK)
Primelocation
Table 3: Main Media Advertising Expenditure on Online Estate Agents/Move Services by Principal Advertisers (£000 and %), Year Ending March 2007
Findaproperty
Propertyfinder
Other Portals
Look4aProperty/look4ahouse
Fish4 Homes
Halfapercent
Casualties
RESIDENTIAL ESTATE AGENTS
Table 4: Main Media Advertising Expenditure on Residential Estate Agents in the UK by Principal Advertisers (£000 and %), Year Ending March 2007
OVERSEAS PROPERTY COMPANIES
Table 5: Main Media Advertising Expenditure on Overseas Property Companies by Principal Advertisers (£000 and %), Year Ending March 2007
HOUSEBUILDERS AND PROPERTY DEVELOPERS
Table 6: Main Media Advertising Expenditure on Housebuilders and Property Developers by Principal Advertisers (£000 and %), Year Ending March 2007
BYPASSING THE AGENT
KEY POINTS

4. An International Perspective
NEGATIVE AMORTISATION
SPANISH WOBBLE
LOOK EAST?
AN INTERNATIONAL MARKET
KEY POINTS

5. PEST Analysis
POLITICAL FACTORS
Stamp Duty — An Onerous Tax
Table 7: Credit and Loans Outstanding to Individuals and Housing Associations in the UK (£m and index 2000=100), Years Ending 31st March 2000-2007
Questions of Zero Carbon
Homes for First-Time Buyers?
ECONOMIC FACTORS
Return of the Long-Term Tenant
The Spread of Unaffordability
Table 8: Income Distribution in the UK (% and £), 1999/2000 and 2004/2005
SOCIAL FACTORS
TECHNOLOGICAL FACTORS
KEY POINTS

6. Consumer Dynamics
INTRODUCTION
Table 9: Summary of Results (% of respondents), 2007
HOME INFORMATION PACKS
Table 10: Attitudes Towards Home Information Packs (% of respondents), 2007
BUYING AND SELLING PROPERTY THROUGH AN ESTATE AGENT
Table 11: Buying and Selling Through an Estate Agent at Least Once in the Past 7 Years by Social Grade (% of respondents), 2007
Table 12: Buying and Selling Through an Estate Agent at Least Once in the Past 7 Years (% of respondents), 2007
LETTING OUT AND RENTING PROPERTY THROUGH AN ESTATE AGENT
Table 13: Letting Out and Renting Property Through An Estate Agent at Least Once in the Past 7 Years by Age (% of respondents), 2007
Table 14: Letting Out and Renting Property Through An Estate Agent at Least Once in the Past 7 Years by Social Grade (% of respondents), 2007
Table 15: Letting Out and Renting Property Through An Estate Agent at Least Once in the Past 7 Years (% of respondents), 2007
A MOBILE NATION
Table 16: Those Who Have Moved Home at Least Once in the Past 7 Years (% of respondents), 2007
VISITING AN ESTATE AGENT'S OFFICE AND SEARCHING THE INTERNET FOR PROPERTIES
Table 17: Visiting an Estate Agent's Office and Searching the Internet for Properties (% of respondents), 2007
RENTING OUT PROPERTY
Table 18: Renting Out Property (% of respondents), 2007
HOLIDAY HOME OWNERSHIP
Table 19: Holiday Home Ownership (% of respondents), 2007
ATTITUDES TOWARDS ESTATE AGENTS
Table 20: Attitudes Towards Estate Agents — Those Who Agree That Estate Agents are Trustworthy and Properly Regulated (% of respondents), 2007
Table 21: Attitudes Towards Estate Agents — Those Who Agree That Estate Agents are Qualified Professional People and Give Good Value for Money (% of respondents), 2007
KEY POINTS

7. Company Profiles
INTRODUCTION
COUNTRYWIDE
Corporate Strategy
Advertising and Distribution
Profitability
Table 22: Financial Results for Countrywide PLC (£000, number, % and £), Years Ending 31st December 2004-2006
Table 23: Turnover and Operating Profit for Countrywide PLC by Sector (£m and %), Year Ending 31st December 2006
Future Developments
CONNELLS
Corporate Strategy
Advertising and Distribution
Profitability
Table 24: Financial Results for Connells Ltd (£000, number, % and £), Years Ending 31st December 2003-2005
Future Developments
LSL PROPERTY SERVICES
Corporate Strategy
Advertising and Distribution
Profitability
Table 25: Financial Results for LSL Property Services PLC (£000, number, % and £), Years Ending 31st December 2004-2006
Table 26: Financial Results for your-move.co.uk ltd (£000, number, % and £), Years Ending 31st December 2004-2006
Table 27: Financial Results for Reeds Rains Ltd (£000, number, % and £), Years Ending 31st December 2004-2006
Future Developments
HALIFAX ESTATE AGENCIES
Corporate Strategy
Advertising and Distribution
Profitability
Table 28: Financial Results for Halifax Estate Agencies Ltd (£000, number, % and £), Years Ending 31st December 2003-2005
Table 29: Financial Results for HBOS PLC (£000, number, % and £), Years Ending 31st December 2004-2006
Future Developments
SPICERHAART
Corporate Strategy
Advertising and Distribution
Profitability
Table 30: Financial Results for Spicerhaart Group Ltd (£000, number, % and £), Years Ending 31st December 2003-2005
Future Developments
ARUN ESTATE AGENCIES
Corporate Strategy
Advertising and Distribution
Profitability
Table 31: Financial Results for Arun Estate Agencies Ltd (£000, number, % and £), Years Ending 31st March 2005-2007
Future Developments
RIGHTMOVE
Corporate Strategy
Advertising and Distribution
Profitability
Table 32: Financial Results for Rightmove PLC (£000, number, % and £), Years Ending 31st December 2004-2006
Future Developments
KEY POINTS

8. The Future
SOCIAL GAPS
The Home-Owning Elderly
The Wealthy Investors
The Young
LONG-TERM RENTING
THE BRITISH OBSESSION
Property as a Cash Cow for Government
Paying for Long-Term Care
Table 33: Trends in Life Expectancy and Healthy Life Expectancy at Birth in the UK by Sex (years and %), 1981 and 2001
Figure 4: Trends in Life Expectancy and Healthy Life Expectancy at Birth in the UK by Sex (years), 1981 and 2001
Table 34: Projected UK Population by Age (000), 2007-2017
The Asset Management Business
THE STRUCTURE OF ESTATE AGENCY
Diversification — Where Do Estate Agencies Go Next?
Franchising 142
The Entry of Mass-Market Retailers?
KEY POINTS

10. Consumer Confidence
METHODOLOGY
KEY FINDINGS THIS QUARTER
THE WILLINGNESS TO BORROW
Confidence Improves
Table A: The Average Amount Consumers Are Willing to Borrow in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), February 2006-2007
Willingness to Borrow Slips Slightly
Table B: The Number of Adults Willing to Borrow in Order to Purchase Expensive Items (000 and %), February 2006-2007
SPENDING FROM SAVINGS
Slight Increase in Spending from Savings
Table C: The Average Amount Consumers Are Willing to Spend from Savings in Order to Purchase Expensive Items at Current and Constant November 2004 Prices (£ and £bn), February 2006-2007
Saving Grows in Relative Importance
Table D: The Average Amounts Adults Are Confident Spending to Purchase Expensive Items (£ and %), February 2006-2007

11. Further Sources
Associations
Estate Agencies
Publications
Government and Official Sources
General Sources
Other Sources
Bisnode Sources