Estate agents miss out on London house price boom

Competition for business has put a squeeze on margins. Amanda Seidl reports

London property prices are soaring to new heights, but up-market London estate agents cannot cash in on the boom. Homes in Chelsea are 25 per cent higher than this time last year, and most other prime areas of central London have risen by 20 per cent or more in less than 12 months. But intense competition between agents to sell a small amount of prime property has slashed commission fees and hit profits.

Harassed home buyers will be less than sympathetic to the agents' plight, but competition for business is now so hot that as many as 20 firms of agents will bid to be appointed on prime new developments, squeezing commissions to as little as 0.5 per cent per home sold. In leaner times they could expect to get between 2 and 3 per cent.

The cut-throat competition is not confined to central London. In the stockbroker belt of Surrey, prices have soared by over 30 per cent and a shortage of de-luxe homes for sale has forced agents to offer incentives to would-be vendors.

Other areas of the country have seen much more modest property price rises, but agents complain that the shortage of good properties to sell is widespread and is a serious brake on their ability to profit from the housing market's upturn. "It is extremely competitive between agents vying for instructions," says Christopher Cornell, head of Knight Frank's residential division. Jonathan Seal, development director at Hamptons International, also admits: "We're not into cutting fees generally, though all the agents become very competitive when it comes to an important London property." Profits at some agents have remained almost static.

Publicly listed up-market agent FPD Savills stunned the City when it reported profits up 36 per cent on last year, but profits for its residential agency business barely improved. This lacklustre performance meant the residential directors received lower bonuses than in 1998. Because there is little property to buy, owners are reluctant to put homes on the market. Rising prices are also encouraging homeowners to hang on to their property in expectation of a better sale later. Agents say death and divorce are now the main reasons for houses coming on to the market.

The shortage of luxury houses is forcing the agents to look at other sources of revenue. The booming market for new developments across London has attracted the attention of the large firms. Selling new flats is now as important a source of revenue to Knight Frank as luxury house sales.

Jonathan Seal at Hamptons says: "The development business has increased substantially - the amount of new property we handle is up 40 per cent on last year - but that is the result of three years' work."

Hamptons wins development business by offering to invest in the scheme as a joint venture partner and to share in the developers' eventual profit. This is paying dividends thanks to the market's strength. At a 122-apartment development in St John's Wood, Hamptons has sold all but 10 of the units six months before the building is due to be completed.

Mr Seal reckons that development work will net the firm almost pounds 2m this year, equal to half of Hamptons' group profits last year. Other quoted firms such as DTZ Debenham Thorpe and Jones Lang LaSalle are following the same route.

But many house builders are not keen to include agents, preferring to market their schemes themselves - and keep all the proceeds. Fairbriar Homes is about to start marketing an up-market scheme in Stanhope Gardens, Fulham, and has been overrun with agents desperate to be appointed.

Managing director Philip Van Reyk says that some agents claim to have buyers for half of the flats he plans to build. But he is confident that his property will sell without outside help.

There are signs, however, that the shortage of housing stock may be easing. Hamptons' latest quarterly review reports that its London offices have experienced a 65 per cent increase in the number of properties coming on to the market in May and June compared with the second quarter of last year.

And with demand showing no signs of the traditional August lull, agents may at last be able to cash in on the boom.

News
Ian Thorpe had Rio 2016 in his sights
people
Sport
Jonathan de Guzman of the Netherlands and Willian of Brazil compete for the ball
world cup 2014LIVE BLOG: Hosts Brazil take on the Netherlands in third-place play-off
News
Tommy Ramone performing at The Old Waldorf Nightclub in 1978 in San Francisco, California.
peopleDrummer Tommy was last surviving member of seminal band
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

PROMOTED VIDEO
Life and Style
Several male celebrities have confessed to being on a diet, including, from left to right, Hugh Grant, Benedict Cumberbatch and Ryan Reynolds
life...and the weight loss industry is rubbing its hands in glee
Voices
Spectators photograph the Tour de France riders as they make their way through the Yorkshire countryside
voicesHoward Jacobson: Line the streets for a cycling race? You might just as well watch a swarm of wasps
Life and Style
lifeHere's one answer to an inquisitive Reddit user's question
Arts and Entertainment
'Eminem's recovery from substance abuse has made him a more potent performer, with physical charisma and energy he never had before'
arts + entsReview: Wembley Stadium ***
Sport
Joe Root and James Anderson celebrate their record-beaking partnership
cricketEngland's last-wicket stand against India rewrites the history books
News
peopleDave Legeno, the actor who played werewolf Fenrir Greyback in the Harry Potter films, has died
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Information Security Manager (ISO 27001, Accreditation, ITIL)

£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice