This article was originally published in November 2020.

It’s all change in the residential property market as estate agency business models are reshaped and players come and go. Who will emerge as the winners?

A paradigm shift in the way business is conducted is racing ahead, and plenty of innovation – largely proptech-driven – is emerging to add choice or confusion, depending upon your viewpoint. In the short term all this change is muddying the waters, but this will settle down and the winners can hope to reap the rewards of greater market share and increased profitability.

The structure of estate agency is also changing. A seemingly endless flow of individual agents, perhaps surplus to requirements at established businesses, are now entering self-employment – often under the umbrella of American-led operators such as eXp Realty and Keller Williams, with the promise of a better work-life balance and greater rewards. These operators are making a lot of noise about their growth but much less about their sales performance. Individual agents are very good at promoting the umbrella operation, but it must be remembered that they are rewarded for doing so in a pyramid-type scheme whereby they earn from other agents they attract to the network. In reality, they will all need to perform well or they will be taking a slice of very little.

I have written here before about the potential benefits but also the downsides of these set-ups. Certainly, I expect churn among this group to be substantial, as not all will be able to realise their dreams or adapt to this new way of working. For the parent operators this is less important since, provided they keep loading the sausage machine at the top, some sausages will appear at the bottom – and will do so without the huge costs of an employed workforce.

Estate agents such as Spicerhaart and Fine & Country are following suit, with similar models based around individual agents supported by the parent brand. This is a common model in countries such as the US, but fee levels are much higher there and so individuals need less volume than in the UK.

The property portals have all come in for criticism over how they have handled themselves during the current crisis and the big three, Rightmove, Zoopla and OnTheMarket, are now being joined by a raft of new or revamped players – Homesearch, Boomin (led by the Bruce brothers of Purplebricks fame), OpenBrix, proptyle and no doubt others. Many are more data-focused than the current big three, have better technology underpinning their offerings and, in some cases, will be seeking to unlock the value and new money available by engaging and monetising the 99% of portal visitor traffic that does not currently transact. There will not be room in the market for all of them to succeed, and the big three (despite their issues) currently hold the higher ground. I expect consolidations and casualties going forward.

The professional bodies are not immune to change either. Propertymark, which includes ARLA and NAEA, seems to be in some disarray. Under its chairman, ex-property ombudsman Chris Hamer, they have been driving a regulatory-focused agenda (aiming to introduce the Regulation of Property Agents’ recommendations, which call for qualifications and licensing), and hoping that the group, which is due to rebrand entirely as Propertymark, can be the leading force. They will undoubtedly have RICS and others to compete with, if the recommendations of RoPA eventually happen.
The chief executives of ARLA (David Cox), and NAEA (Mark Hayward), have either left or are leaving, and many aspects of the organisation currently appear rudderless. The Propertymark board has been remarkably quiet and rumours suggest that the organisation was being run as an unhappy dictatorship. As I write, this might be about to change as Chris Hamer has also now resigned.

Understandably, the Propertymark board have probably wanted to keep quiet as there was a huge hole in their most recent accounts (a provision of £679,000) caused by incorrect arrangements on VAT. There appear to have been no direct repercussions in terms of heads rolling (although the top three people have now left or are leaving), or even a change of accountants, but it is hardly an endorsement of the probity of an organisation seeking to be the regulator for the industry!

It is, of course, easy to take pot shots at others. However, all businesses are having to make adjustments and take decisions on what changes to make in order to survive and thrive. The government’s short-term amendments to stamp duty are creating a brief boost, but the sword of Damocles of greater job losses and recessionary pressure hangs over everyone. Mistakes are being made and not all change will turn out to be positive, but history is always written by the winners – and their rewards could be significant.