United Kingdom

Agencies turn to lettings to offset slow sales

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Estate and letting agencies are closing branches and teetering on the edge of bankruptcy, according to industry analysts – but more are building strong lettings portfolios to keep themselves in the black.

2023 was a tough year for estate and letting agents, according to a new report by TwentyEA. The information and marketing services company found a net loss (closures minus openings) of 1,154 sales branches and 659 lettings branches.

And management consultancy Begbies Traynor warns that there could be worse to come. More than 6,000 companies in the construction and real estate sector are in “critical financial distress”, according to their January Red Flag Alert report – and more than 10 times that number are in serious financial difficulties.

The high street still matters

Branch closures aren’t occurring because customers are abandoning the high street. The TwentyEA report found that the market share of online and hybrid agencies fell to 5.5% from 6.9% in Q4 2022, and that it has been declining since 2019.

The bigger factor was last year’s housing market slowdown. According to Nationwide, transaction volumes in 2023 were about 10% below pre-pandemic levels. House prices also fell, directly affecting agencies’ commission income, and some markets – especially in the South of England – were especially badly affected.

However, there were also signs that bigger estate agency groups could be consolidating their high street presence into fewer branches. Around 60% of the branches that closed in 2023 belonged to franchise groups. Estate agencies might not be abandoning the high street, but customers who value in-person service may have to travel further to get it.

How can agencies succeed in 2024?

Lettings could be a lifeline for agencies. TwentyEA’s data showed that estate agency branches closed at almost twice the rate of lettings branches, but the numbers of active branches were very similar – 15,401 active sales branches versus 14,544 lettings branches.

And while the lettings market faces significant challenges, like declining landlord confidence and rising rents, consistent monthly income can provide agents with reliable revenue even when the sales market dips.

Several agencies have spotted an opportunity. London sales and lettings giant Foxtons reported a £14m profit in its end-of-year trading statement that it says was driven by its lettings division, which grew 16% in 2023 and “more than offset expected reductions in sales and financial services revenue”. Meanwhile, independent agencies are also jumping back into lettings or expanding their portfolios.

Other agent headlines

New safety guidance highlights requirements for agents – Property Industry Eye

‘Breaking Bad’ drug lord raked in £11m-a-year from empire of fake estate agents – The Mirror

Agents Do Charity – get your boxing gloves ready! – Estate Agent Today

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