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.