Slaying of the super-agents

Autumn Property Survey

MANY dreams were ambushed by the recession, among them the idea that large financial institutions can run huge chains of estate agents at a profit.

This was one of the defining marketing theories of the 1980s. Take a big insurer or building society and pour millions into buying out hundreds of small local estate agents. Put the lot under a single corporate umbrella and cross-sell your mortgages and endowment policies.

Wonderful theory. In practice it has turned into a huge loss-maker. For instance, Prudential Property Services, which peaked at 805 offices in 1988, was dumped by the Pru in 1991 after incurring losses of pounds 400m.

Two years ago Abbey National sold its Cornerstone estate agents chain of 357 offices for just pounds 8m, after losing at least pounds 243m on the business since it was launched in 1987.

Other institutions have joined this retreat, often selling back the offices at a huge loss to the local business people who had founded them.

Other big names have shrunk, rather than disappeared. Halifax Property Services had slimmed down from 709 offices in December 1989 to 526 at the end of last year. General Accident Property Services had reduced its branches from 623 in 1989 to 358 last autumn.

There are two main reasons for this failure. The first is the worst residential property crash since the Second World War, with no real recovery in sight (but small agents continue to prosper). Then there are the top-of-the- market prices paid by the big boys in the 1980s. When a local agent received his windfall, there was little incentive for him to stick around and work under the new bureaucracy. Quite the opposite - he would take the money and run.

Some of the cannier chains allowed small offices to keep their original names, but elsewhere the absence of local knowledge has been badly missed. This is critical. Being an effective estate agent involves knowing where local schools and supermarkets are - the general lie of the land. Without this special knowledge, the agent offers little of value.

Another flaw in the grand design was the idea that people would first select their houses, and then arrange their mortgages and buy their endowment policies through the same estate agents. The theory went that people would be happy to do everything under one roof. If it worked for Sainsbury, surely it would work for estate agents.

Perhaps people would even start buying other personal financial products, like unit trusts, some hoped. It has not happened. Cross-selling has stubbornly refused to take off, clients preferring to make their mortgage arrangements separately.

One company has spectacularly bucked the trend towards retrenchment: Hambro Countrywide. Owned by Hambros, the merchant bank, it recently bought the 11-branch Spencers chain in Leicestershire from the National & Provincial Building Society. This brought Hambro's strength up to 757 offices, by far the biggest in the UK and an advance of more than 200 on its total in December 1989.

The City is convinced Hambro can make a lot of money if the housing market recovers, but this is a huge if. Last year the estate agent operation made losses of pounds 6.4m, and broker Smith New Court expects it to lose another pounds 17.4m this year. Other big operators are hanging in there, but the longer a housing recovery takes to arrive, the bigger the pressure to get out.

There is one piece of advice the big boys might take: open on Sundays. Not to do so seems silly when this is one of the few days most people can view properties.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
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

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

The secret CIA Starbucks

The coffee shop is deep inside the agency's forested Virginia compound
Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

How the Establishment closed ranks over fallout from Nessie 'sighting'

The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
One million Britons using food banks, according to Trussell Trust

One million Britons using food banks

Huge surge in number of families dependent on emergency food aid
Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

2,500 years of history in 3,000 amazing objects

Excavation at Italian cafe to fix rising damp unearths trove
The Hubble Space Telescope's amazing journey, 25 years on

The Hubble Space Telescope's amazing journey 25 years on

The space telescope was seen as a costly flop on its first release
Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

Did Lord Ashcroft quit the House of Lords to become a non-dom?

A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
Apple's ethnic emojis are being used to make racist comments on social media

Ethnic emojis used in racist comments

They were intended to promote harmony, but have achieved the opposite
Sir Kenneth Branagh interview: 'My bones are in the theatre'

Sir Kenneth Branagh: 'My bones are in the theatre'

The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
The sloth is now the face (and furry body) of three big advertising campaigns

The sloth is the face of three ad campaigns

Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
How to run a restaurant: As two newbies discovered, there's more to it than good food

How to run a restaurant

As two newbies discovered, there's more to it than good food
Record Store Day: Remembering an era when buying and selling discs were labours of love

Record Store Day: The vinyl countdown

For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
Usher, Mary J Blige and Will.i.am to give free concert as part of the Global Poverty Project

Mary J Blige and Will.i.am to give free concert

The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
10 best tote bags

Accessorise with a stylish shopper this spring: 10 best tote bags

We find carriers with room for all your essentials (and a bit more)
Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

Paul Scholes column

I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England
Jessica Ennis-Hill: 'I just want to give it my best shot'

Jessica Ennis-Hill: 'I just want to give it my best shot'

The heptathlete has gone from the toast of the nation to being a sleep-deprived mum - but she’s ready to compete again. She just doesn't know how well she'll do...