House prices plunge again – as estate agents raise their fees
Many of Britain's biggest estate agents are raising their prices in a desperate bid to increase their earnings from the ever-dwindling number of homes they are now able to sell.
Leading agents have suffered a disastrous fall in income as the housing market has gone into reverse, with Hometrack, a property market analyst, warning today that prices fell for the 10th month running in July. The average home has lost 1.2 per cent of its value during July and is now worth 4.4 per cent less than a year ago.
As a result, anyone who does not need to sell their property has opted not to do so, with the number of transactions around the country falling by 3 per cent in July alone, Hometrack reports. In some areas, the slowdown is even more dramatic, with the East Midlands, for instance, seeing almost 8 per cent fewer transactions in July compared to June. Hometrack does not cover Scotland and Northern Ireland.
A spokeswoman for Kinleigh Folkard & Hayward, a London-based estate agency, said the depressed state of the market had left it with no choice but to raise its average fee to 2 per cent of the sale price. "Our fees have gone up because of the nature of the property market as it is – we are having to do more to find buyers for our customers," she said. "In that situation, it is inevitable that fees will have to go up – we have 50 branches across London and have had to raise our fee across the board."
Parviz Khan, a branch manager at Birmingham-based estate agent Abbey Estates, said: "Our sales have just completely dried up and did so pretty rapidly once the crunch set in toward the end of last year. We've been forced to raise client fees in some areas to remain competitive."
Colin Nagle, a sales manager, at Roberts Newby, a Buckinghamshire agent, said: "What is happening is that the flexibility in fees that was there when the market was strong has now disappeared. We are all spending more on marketing when income is much less than it would have been this time last year."
The increased cost of estate agents' fees leaves sellers facing a double whammy of bad news. In addition to being forced to accept substantially lower offers for their homes, many sellers now have no choice but to hand over a larger slice of what they do get to their agent. An increase from 1.5 per cent to 2 per cent in the estate agent's fee on the sale of the £228,000 average price of a detached home would leave the seller paying costs of £4,560, some £1,140 more than in the past.
Hometrack said the number of new buyers on estate agents' books had fallen by more than6 per cent this month. Sellers now get just 90 per cent of the asking price, the lowest level since the survey began in 2001, and on average a property will spend almost twice as long on the market today as it did last summer.
Richard Donnell, Hometrack's director of research, said: "Transaction volumes have been the greatest casualty of the decline over the past year – the majority of homeowners do not need to move. We are only going to see around 750,000 transactions this year compared with 1.2 million last year. Only 4.5 per cent of the market will change hands. Agents need turnover to drive their income, and one option is to put up fees."
However, consumer groups said property sellers should not have to suffer twice at the hands of the collapsing market.
"Consumers should not be forced to pay more to sell their home just because transaction numbers have fallen," said Mark McLaren, principal public affairs officer at Which? "We have long been worried about unfair terms in estate agent contracts. In the property downturn, consumers need to be on their guard, read the draft contract carefully, and make sure they fully understand its implications, especially regarding what fees may become due, and when."
The Bank of England noted the trend in rising estate agents' fees last week, warning in its regional trends survey that prices were rising across the country.
But Peter Bolton King, the chief executive of the National Association of Estate Agents, said there was little evidence of significant fee hikes. "We are seeing some instances of fees going up but agents still have to compete with each other and the margin being made on fees is not as great as the public think," he said.
There are some bright spots for property market professionals. The Royal Institute of Chartered Surveyors said today that the cost of rural land has soared by 47 per cent over the past 12 months in line with soaring global food prices.
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