The days of mass celebrations resulting from multiple sales completions in a day are gone. Data from HMRC showed property transactions had fallen by more than 50% in April, which has resulted in many estate agents wallets becoming considerably lighter.
Estate Agents-some people love them; others choose to have a different opinion. But, one thing that cannot be disputed is they provide an important service, and like any service, it deserves to be rewarded.
It’s no secret that the UK property market has pretty much been on hold for the past few months, and this has had some wide-ranging financial ramifications. One is the decline in revenue for the average UK estate agent. It’s quite simple, no transactions, no fees to charge.
GetAgent.co.uk sought to investigate the impact of the declining transactions and looked at the average fee charged by estate agents and what the total potential value is when considering all residential transactions.
The company then compared this to market performance over the last year and five years to see how lucrative it is to be an estate agent in the current market climate.
In the financial year of 2015-2016, the average estate agent charged a fee of 1.3%+VAT which equated to £2,622 on the average house price of £201,695; £3,146 when taking VAT into account.
Fast forward five years and this fee has dropped marginally to 1.25%+VAT, however, with house prices climbing to an average of £231,906 the average agent has seen income from each transaction climb by 10.6% to £2,899.
The difference? A -11.8% reduction in transactions, meaning that five years ago, the 1,321,630 annual transactions within the residential market would have made the industry nearly £3.5bn in fees.
The lockdown in March meant agents were restricted throughout April with transactions plummeting. This resulted in a notable decline, with £86,373,744 lost in fees.
Between 2018/2019 financial year and 2019/2020, the data also shows transactions have fallen by -1.9% meaning that while the average estate agents fee has still increased when compared to this time a year ago, the industry as a whole has seen revenues fall by nearly £25m where the fees secured on completed transactions are concerned.
Colby Short, the founder of GetAgent.co.uk, said: “The property industry has endured a tough couple of months and the Government’s lockdown of the market has had a notable impact on transactions and as a result, the revenue of many agents.
This struggle is likely to continue over the coming months as we inevitably see a further reduction in transactions.
The good news is not all agents are average, and we’ve seen a monumental 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 understand that differentiator now.
Many will have to knuckle down, manage overheads and potentially jettison 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.”
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