Property Industry Eye published my first article on April 2 this year entitled Agents’ fees: Is this what you are earning?
I thought a follow-up might be useful, and maybe as a headline “How do you measure up” might be apt.
The information for this article is based on the invoices that My Home Move settles month-on-month. Over the year this will amount to well over 20,000 agent invoices, so it’s fair to say we have a significant sample to work from.
It includes transactions in every postcode.
However, it is only right to point out that it does not include many transactions in central London – but we all know that this market that has its own dynamics – nevertheless, it includes a significant amount of data from what we know as Greater London.
By the nature of their business model, we do not settle online or hybrid agents’ invoices, so you can conclude that these figures only include invoices from high street agents – big, small, corporate and independent. All figures exclude VAT.
To put all of the figures into some form of context, My Home Move’s view of average house prices is shown in the chart below. It is based upon the house prices of all of those that we completed since the beginning of 2013.
In simple terms the average house price then was c. £200,000 and is now c. £250,000, which by the year end will be 25% growth in the past three years.
Chart 1. Average house price according to My Home Move data: Jan 2013–Nov 2015
The next chart shows the average fee that agents received over the same period which, if you follow the trend line, was slightly less than £2,900 in January 2013 and has now risen to c. £3,050 which is only 5% growth. So it is safe to conclude that fees have not increased at the same rate as house prices, because if they had the average fee would now be over £3,600!
Chart 2. Average fee received by estate agents based on My Home Move invoice data: Jan 2013–Nov 2015
In this time, the fee has remained largely static and therefore, even in this age of low inflation, is worth less than it was.
I have also tested these conclusions with agents from all over the country, and whilst there are regional variations, the figure of +/- £3,000 seems to be about right.
Below is another chart that shows the movement in percentages charged year-on-year in bands.
Chart 3. Percentage charged by estate agents, year-on-year, 2014–2015
This, in general terms, illustrates the fall in the number of estate agent fees being charged at 1.2% or above, and the rise in the number of transactions that are charged below 1.2%. No surprise there I guess.
The biggest incremental growth year-on-year is without doubt the increase in the number of invoices between 0.5% and 0.75%, even outstripping the incremental growth of those charging between 0.75% and 1% which was the growing sweet spot that I highlighted in April.
In 2015 “less than 1%” now accounts for over 30% of all transactions, and over 1 in 16 are being done for less than 0.75%.
A transaction at the average house price of £249,578 at 0.5% is worth just £1,248, and at 0.75% is £1,871 – and don’t forget that this is on a ‘no move, no fee’ basis, so if you sell only 50% of your stock at this rate, you are earning only, in round numbers, £600 to £950.
I appreciate that the lack of stock has a significant influence on what is charged, and it is well reported just how little stock there is. But will agents’ fees rise as stock becomes more available? The evidence suggests otherwise.
Charging a % of the asking price, on top of which has to be added VAT, seems to be a cumbersome way of charging a client, and must surely get in the way of negotiating a fee when you need to.
A reduction in your fee of just 0.1% (at the average house price) including VAT is exactly £300, and surely this is too much to throw away each time?
So I guess the final question is, is it time to consider a new, transparent and easy to understand charging system?
And as I have not sold a house as an estate agent for well over 15 years, I look forward to hearing your answers.