While controversy swirls around the approach and motives of the sackings and branch closures at Spicerhaart, other agents are showing how they can pull teams together at difficult moments like these.
Estate Agent Today has seen a message to the staff of Choices Estate Agents from its chairman, Simon Shinerock, revealing an open communications approach and an unusual way of sharing the pain of reduced income, if that happens, during the crisis months.
He says an event such as Coronavirus leads to companies showing their true colours, and that his letter – which we reproduce below, in full – has been met with universal support from his team.
I am writing to you so you can understand my thinking at this difficult and unprecedented time because it falls to me to make crucial decisions over the coming days that will affect the long term survival of the business and everyone who works in it.
Before I go on I want you to know that compared to our competitors we are a relatively financially strong company, which means that if we are careful we stand a much better chance than most of getting through this crisis and out the other side.
However, we don’t have unlimited resources and based on what I am now seeing we might not be able to sail through without some drastic temporary measures being put in place. I would also like to say that during the crisis I will not personally be taking anything out of the business and will if necessary make a substantial sum available from my savings in order to get us through.
That said, like any business or family we need to make ends meet and if our income is going to drop substantially over several months we have to plan to reduce our expenses accordingly.
At the moment we don’t know for sure how badly we will be affected but it’s now obvious new business will be harder and we will take a hit if a significant number of tenants don’t pay their rent.
Our biggest expense by far is our wages bill, it constitutes over 50% of all our expenses and it is the one over which we have the greatest control.
In stark terms I have a choice, I can try and get through this by making a lot of people redundant, something I really don’t want to do, or, I can try and keep as many if not all of you employed by asking you to be prepared to potentially make a personal sacrifice during this difficult time.
Normally we expect to make a profit every month, our rental income means we can predict and forecast how we are doing quite accurately and we have been making great progress this year so far.
I’m happier with my senior management team than at any other time and I can see the quality of all our staff improving all the time. I’m also more confident than I’ve ever been that we as a company are offering a market leading proposition which has become the envy of our competitors.
So, under normal circumstances I would expect this to be a record year for us. However I can now see that it is most likely that over the coming weeks and months our income is likely to decline and put us in an unsustainable loss making situation unless we put a contingency plan in place now
Obviously the best outcome is that we continue to do new business and take advantage of the many opportunities that will arise as landlords and sellers find it harder to get a result from their agent either because of lack of proactivity, or because some agents will throw in the towel, something we are already beginning to see.
There will also be a lot of private landlords in distress who may want our help and we should be on the lookout for them. I can still foresee an optimistic outcome where we get through this in profit, now that would be an achievement and it’s something we must aim for and do everything we can to achieve. However, we also need a plan for what we do if we don’t make a profit and can’t sustain our current cost base.
I want you to know we are exploring all avenues, negotiating discounts and payment holidays with suppliers, looking at government loans and assistance, getting rid of unnecessary expenditure, everything we can to get us through this.
On the last point please try to help by keeping non essential expenses down to a minimum, every little helps. If after looking at all these options we still can’t cover our costs I am proposing that we apply a fair income reduction formula to everyone in the company.
What I mean is that whatever the percentage shortfall is in a month we apply that percentage to everyone’s pay which would be reduced accordingly. So, as an example, if our normal wages bill is £200,000 and we had a shortfall of £10,000 it would mean everyone would be paid 5% less than normal.
If we put in this backstop now we may never need it, I hope we don’t but it will mean I can make firm plans for the future, retain as many of our people as possible, focus on the business and come out of this as strong and fit as possible.
Because of the extraordinary nature of this situation I will be available to any member of staff who wants to speak to me personally to ask questions or tell me about their concerns. All I ask is you speak to your manager first and if you still feel you want to talk to me I’m available.
I’m delighted to say that since writing this message, during today most of you have been told about its contents and that as a company everyone has received it positively.
You will be getting an email on Monday from HR confirming the change will be in place, the earliest it can affect your pay is April. I really believe that by pulling together we can come through this intact, stronger and wiser.
Finally, this is new ground for everyone and I don’t claim to have all the answers, I may well make some mistakes and errors of judgement along the way but I promise you this.
I will do everything in my power to steer us through this crisis and out the other side and I will fully recognise everyone who gives the company and me personally their support and trust along the way
A mortgage broker that’s just become a partner of OnTheMarket is warning that house prices are likely to fall 10 per cent over the rest of this year because of the virus crisis.
John Charcol is saying that the peak UK house price for 2020 is likely to be the one recorded in the March Nationwide house price index – already released – or in the price reflected next month by the government.s UK House Price Index.
Thereafter, Charcol’s mortgage technical manager Ray Boulger expects prices to fall 10 per cent by year end, with transactions tumbling in the next three months alone to a figure lower than that recorded at the worst depths of the 2009 credit crunch.
“It is clear activity in the property market will be severely curtailed, not only because of the economic uncertainty dissuading people from moving but also as a result of practical problems of surveyors visiting homes to prepare a mortgage valuation” he says.
However, if any silver lining can be found to the current crisis, it appears that first time buyers may be the beneficiaries eventually.
“Many people who had planned to move home this year will delay their move until conditions stabilise, not least because it will become very difficult to put property chains together” suggests Boulger.
“This will put first time buyers in pole position and so when they decide the time is right to buy, they will be in a very strong negotiating position to secure their first home at a good price, an advantage that will dissipate when the market begins to recover” he continues.
John Charcol has this month announced a partnership with OnTheMarket, meaning portal users will have access to digital tools and guides from the mortgage firm.
Luke Somerset, chief commercial officer at John Charcol, says: “We are delighted to be partnering with OnTheMarket. This latest partnership offers prospective homebuyers access to a leading property portal combined with expert advice when seeking a mortgage. Ultimately this will offer customers an effective and enhanced journey when purchasing a property.”
Savills is the latest agency to warn about the possible threat of Coronavirus to its business activities and success this year.
In its preliminary final results for 2019, issued this morning – and showing a strong performance for the international property group – the company says: “It is difficult accurately to predict the full impact of this issue on our business for 2020 as a whole. However, given the nature of the real estate market, we would anticipate that any near term slowdown caused by sentiment and specific measures taken to combat COVID-19 would generally result in a temporary delay in activity rather than an absolute loss of business.”
It continues: “In Asia, particularly China, it is clear that COVID-19 is having a significant impact on transactional activity and may have a similar effect elsewhere, depending to an extent on the length and severity of each outbreak. Our focus is on the welfare of our staff and clients and we have instituted protective measures in locations potentially affected by this virus.”
The trading figures for the company – which has a vast commercial and international infrastructure as well as its UK resi sales and consultancy activities – show a successful 2019.
Today’s statement says: “Our UK residential business continued to perform well in challenging conditions for much of the year which saw the UK market volume of transactions with values greater than £1m declining by two per cent year-on-year. “Against this backdrop and buoyed by the clear General Election result in December, Savills UK Residential business performed well, growing revenue by six per cent year-on-year.”
The company also says it successfully acquired and integrated London agency Currells.
Countrywide’s share price fell by as much as 17 per cent at one point yesterday afternoon as investors assessed the latest pratfall by the company – the collapse of its bid to sell its commercial arm.
As we reported yesterday there was an announcement from Countrywide a few minutes before the Budget, prompting industry cynics to say that this was a classic example of attempting to bury bad news.
The announcement effectively admitted that its bid to sell Lambert Smith Hampton to Monaco-based John Bengt Moeller for £38m was dead in the water, with new buyers being sought.
The revelation was described on Twitter as a “shambles” by respected property commentator Peter Bill, the former editor of Estate Gazette.
In a brief trading update released at the same time Countrywide reported a £17m drop in revenues last year and revealed the tenant fees ban had cost it £12m.
Within a few minutes of the announcement the Countrywide share price plummeted from 265p to 220p; it recovered slightly during the afternoon to close at 232.4p, down well over nine per cent.
Nested is the latest online agency to base a marketing campaign around criticism of established estate agents.
In three 30-second TV ads it accuses established agencies of failing to give a complete service to their customers.
Instead it claims to be “unique” in supporting vendors both through the sale of their existing property and their purchase of a new one.
A statement issued to the press in support of the advertisements accuses High Street agencies of focussing “only on selling properties” and asking what it would be like if other professions did the same approach “and only did half a job.”
Despite the onset of the Coronavirus crisis, one of Nested’s advertisements features paramedics and an ambulance “with hilarious results” according to the press statement issued on behalf of the agency.
“Making the investment into producing an … advertising campaign has been a huge step for us at Nested, and we’re excited to see how the ads are received by consumers. They aim to highlight our novel and hassle-free approach to an archaic and fragmented industry” says Ben Bailey, head of brand and communications at Nested.
Almost exactly a year ago Nested, which offers vendors a form of guaranteed sale, laid off 20 per cent of its workforce because of a drop off in business according to a technology publication.
This was despite the fact that in 2018 Nested raised £120m in one funding round and £80m in another, as well as earlier funding when the company launched.
Nested operates in London only – although in 2017 it told Estate Agent Today that it hoped to expand to cover Bristol, Oxford, Cambridge and Manchester the following year.
The Guild of Property Professionals is calling on the new chancellor, Rishi Sunak, to use his Budget speech, which will take place tomorrow, to support investment in the private rented sector, as research shows that buy-to-let landlords are exiting the market in droves.
Tax and regulation changes continue to have a negative impact on the buy-to-let market, with a significant number of landlords selling buy-to-let properties with a view reducing their portfolio, or exiting the market altogether.
Mortgage interest relief changes, the scrapping of the ‘wear and tear’ allowance and the introduction of the 3% stamp duty surcharge have hit landlords’ profits over the past few of years, which partly explains why so many people are exiting the BTL market and thus reducing the supply of much needed private rented stock.
The government’s draconian tax changes have not just pushed a number of BTL landlords out of the PRS, but also left many prospective tenants with little alternative but to bid against each other, pushing rents up in the process, as a result of falling housing supply.
Iain McKenzie, CEO of the Guild of Property Professionals, said: “If we wish to sustain a thriving private rented sector there must be no further taxation on landlords. Tenants want more choice not less.
“The government should do more to support landlords to remain in the sector, not drive them out, which will ultimately cut the supply of rental properties and put upward pressure on rents.”
The housing market has had a strong start to the year, with improved activity levels and property price growth across every region in the UK, and McKenzie hopes that this trend will continue for the foreseeable future.
He continued: “Ideally, the housing market needs 12 months of a stable environment to enable it to bear the fruit of pent up frustration. It would be pertinent for the government to avoid anything that could hamper consumer confidence, which is already at risk with the threat of tough measures to prevent the spread of Coronavirus.
“It is likely there will be further support for first-time buyers by way of discount through a ‘First Home’ scheme, which could see new homes discounted by up to 30%. Whilst it is fair to say that first-time buyers are the lifeblood of the property market, getting the balance right between new buyer incentives and support for second-hand house buyers is the key to a fluid market.
“With that in mind, like many, we would welcome any positive news on Stamp Duty. Boris Johnson had previously pledged to implement changes to current stamp duty legislation by raising the threshold to £500,000. Although mentions of this have been more subdued in recent months, it would relieve large sections of the country from the burden of stamp duty and go a long way to bolstering consumer confidence.”
An agency has repaid a £6,000 reservation fee to someone who thought they had purchased a property for £83,000 but was later told they must pay £100,000.
The Sunday Times reports a case where a reader made what they believed to be a successful bid of £83,000 for a property in Newport, south Wales, in an online auction held by Pattinson.
At the time of the auction they paid a £4,150 deposit and the £6,000 reservation fee.
But when they later tried to visit the property they could not, and told the paper: “My solicitor subsequently confirmed that the house had been repossessed … by the bank that had provided the mortgage for the previous owner.”
The buyer was told the purchase could only go ahead if they paid the bank’s valuation of £100,000; the buyer could not afford the higher cost but received back only £3,685 – the deposit minus legal fees.
The £6,000 reservation fee was kept by Pattinson at the time, as the firm had said from the outset that the fee was non-returnable.
The buyer concludes in its comments to the paper: “I think it is highly unethical for an auctioneer to list properties under a repossession order without disclosing this to potential buyers.”
The newspaper’s personal finance section pursued the case and obtained guidance from the Royal Institution of Chartered Surveyors that all relevant documents relating to a property should be available for inspection – online, at the agent’s and auctioneer’s office or at the seller’s solicitor.
The buyer claims to have previously been sent a pack containing a draft contract, the property information form and other documents – but none that raised concern with their solicitor.
“RICS found no evidence of misconduct by Pattinson” says the newspaper; nontheless, the paper asked Pattinson to refund the reservation fee – which it has now done.
The newspaper goes on to say that the company apologised for having failed to respond to the buyer’s recent queries. “It said it had been in an ‘unfortunate position’ as ‘the repossession after the sale had been agreed was completely out of our hands’.”
Estate Agent Today understands that three senior figures have departed from a key central London branch of Knight Frank.
Each of them was a partner in the company and they formed the senior management at the agency’s Kensington office: it is not known why they left.
They are believed to be Tom Tangney, who had been in the industry for over 35 years and had been at Knight Frank for 20 years; Pete Bevan, who had been closely involved in high value PCL sales for some years; and office head Sami Robertson, who was regarded as a key contact in the agency for some Far East clients.
Knight Frank recently lost central London legend Daniel Daggers, known in the industry as Mr Super Prime, who was the subject of media speculation with regard to posts of properties on Instagram. He had sold £3.85 billion of properties including a £95m mansion at London’s St James’s Park, bought by a US billionaire, and an unmodernised off-market house sale in central London worth £45m.
Knight Frank has provided EAT with a lengthy statement about the three Kensington departures, which we have published below; it does not mention any of the three departures by name.
“This is a great opportunity to ensure we have the strongest management and hire the best talent in the market. We firmly believe in recruiting or moving talent from within and in parallel to this, always looking for the very best external candidates within the market who have indicated they would like to join our award-winning team.
“Immediately after the department head for Kensington left the firm, James Pace, proprietary partner and head of the Chelsea office, moved to lead the Kensington sales team. James has been in the Knight Frank Partnership since 2006 and opened the Chelsea office in 2007, building a highly successful team and an unrivalled track record in the Chelsea and wider prime central London market.
“Supporting James, William Allen also joins the Kensington sales team as partner following 10 years at Strutt & Parker in their prime sales team, specialising in the Kensington and Holland Park markets. Tom Van Straubenzee, who jointly runs Knight Frank’s Private Office, will also take up a strategic position working closely with James, William and the existing team moving forward, assisting both vendors and buyers.
“In Chelsea, Charles Olver was promoted to Department Head for sales, taking over from James Pace. Charles has been with the firm for over ten years, based in the Knightsbridge office where he has been a Prime Central London negotiator.
“James is a true asset to our team, with over 25 years of experience and an exceptional track record earned during his time running the Chelsea office. Together with William’s local market knowledge and strong client relationships, they will bring a renewed energy and direction to the Kensington office. Charles is a highly respected agent in Knightsbridge and we look forward to him bringing his enthusiasm and understanding of the PCL market to his new role in Chelsea.
“Kensington is a crucial part of the Knight Frank network of offices and we expect it to remain as such well into the future.”
Increasing numbers of reports suggest that the government will use next week’s Budget to confirm a three per cent stamp duty surcharge on the purchase of homes by non-UK tax residents.
The new surcharge – strongly hinted at by the government for many months – would be on top of existing stamp duty on a property, and on top of the current three per cent additional homes surcharge.
The Financial Times, citing well-placed sources in The Treasury, suggest this measure will be finally confirmed by new Chancellor Rishi Sunak in his first Budget on March 11.
Leading PropTech entrepreneur Neil Cobbold, who is chief sales officer at automated payment platform PayProp, says this new stamp duty will be welcomed by domestic investors who may see competition from their overseas counterparts diminish over the coming months.
“It’s likely to have the biggest effect in the capital, where the government estimates that one in eight new London homes were bought by non-UK residents between 2014 and 2016. The surcharge was previously mooted at one per cent but its increase to three per cent will certainly act as a deterrent” he says.
But Cobbold warns: “Tenants in large English cities could suffer in the long-term if the additional tax burden leads to a fall in overseas investors and subsequently the number of rental properties available” says Cobbold.”
He adds that while there has in the recent past been much speculation surrounding wider stamp duty changes, the government appears to have put those on ice.
“Stamp duty is a hot button for consumers and property professionals, so the calls to reform the system are always plentiful in the lead up to a Budget. Boris Johnson has previously said that stamp duty rates are ‘absurdly high’ so there could be changes later in his tenure.”
“In the meantime, property professionals and consumer groups will continue to lobby politicians to reduce the pressure. Reconsidering the three per cent surcharge on additional homes and the tax rates which affect the very top end of the market would be a good first step” he explains.
Richard Donnell, director of research and insight at Zoopla, also wantsa to see SDLT reform in next week’s Budget.
“It’s time for the Chancellor to turn his attention to the core housing market and review the price bands and five per cent stamp duty rate that covers averaged priced homes across large parts of London and the commuter belt. No government wants to cut taxes indiscriminately, particularly when losses could be high. However, any cut to the rate of stamp duty could stimulate much-needed marketed activity in southern England in particular” says Donnell.
Any bid by Zoopla and OnTheMarket to displace Rightmove as the number one portal in the UK is at best expensive and at worst futile according to a leading analyst.
Mike DelPrete – former head of strategy at a New Zealand portal and a long-standing analyst of estate agencies in the UK and the US – says Rightmove is an example of a company with what he calls ‘network effects’
By this he means dominant online forces such as Rightmove, Facebook, eBay, and Craigslist are enjoy network effects – being ‘the’ place that people want to be seen, or want their products advertised.
“Even if a new entrant’s product is objectively better, a smaller audience of potential buyers and sellers means an inferior consumer proposition. Sellers want to advertise to the biggest audience possible, and buyers want the largest selection possible” he says in his latest report on the state of portals worldwide.
Specifically referring to the UK landscape he says: “For all the cyclical uproar aimed at Rightmove over its ever-increasing fees, its traffic dominance shows no signs of waning. It remains the undisputed best place to advertise properties for sale, with Millions More Buyers than its closest competition.”
DelPrete says all three major UK portals reported higher January traffic than the two previous years but while Zoopla’s and OTM’s percentage gains may sound impressive, they are from smaller bases than Rightmove’s.
“Rightmove’s traffic lead over its next closest rival remains strong and fundamentally unchanged over a number of years, despite several companies attempting to challenge its dominance” he says.
And he adds that even after Zoopla’s $3 billion acquisition by private equity firm Silver Lake in 2018, and OnTheMarket raising and spending tens of millions of pounds to compete, Rightmove’s traffic dominance remains intact.
And DelPrete writes: “The evidence suggests that it is nearly impossible for a runner-up portal to overtake the leader. In fact, there is no evidence that the all-important traffic leadership metric between the top two portals can be budged even a small amount.
“Which begs the question: Why are upstart portals attempting to displace leading portals? OnTheMarket launched in 2015 to challenge the duopoly of Rightmove and Zoopla in the UK. It was founded by a broad consortium of traditional real estate agencies who didn’t appreciate the market and pricing power enjoyed by the existing portals.”
The analyst says there are similar scenarios in Australia and the United States.
He sums up his analysis this way: “Attempting to compete directly with a leading portal is at best expensive, and at worst futile.”