Almost 2,500 estate and letting agency firms have gone bust in the last five years.
In England and Wales, 2,181 went out of business, with 265 business failures in Scotland since 2013.
The figures were researched by Scottish agent DJ Alexander, whose managing director David Alexander told publication Insider that there were a number of factors in play including the general slowdown of the high street, where the likes of Marks & Spencer and Debenhams have told of a large number of store closures.
He said: “Clearly online competition has had a dramatic impact on the high street with its lower cost base and its generational and cultural shift from on-street to online shopping.”
He added: “The generational and cultural change is enormous. For most people under 40 the idea of wandering from shop to shop in city centres is alien to them and they conduct many of their purchases on their phones, tablets or computers.
“This situation is only likely to continue and we can see that high street outlets such as estate agents are suffering as a result and will continue to suffer over the next few years.”
Alexander said that rents and business rates have also played a part, while a further issue for letting agents is the way the property investment market has been hit by tax changes, resulting in a thinning out of smaller landlords.
Alexander, whose business has branches in Edinburgh and Glasgow, said more people would look online for a one-stop shop for their property needs.
He went on: “The loss of the high street estate agent does not mean less service. In fact it means more, with a greater focus on the needs of the client.”
He said it was a brave new world, where estate agency will continue to exist, but not in the same way.
He said that there will be more closures as the market adjusts.
The full piece is at: https://www.insider.co.uk/news/dj-alexander-estate-agents-bust-12971168
I’ll say several things. Firstly yes as the market changes some agents will fold, due to a number of reasons but not only due to the call centre agents. Secondly he does realise that high street estate agent do advertise properties on the internet as well? Lastly people may buy stuff on their phone etc, but i am pretty sure if he wanted to buy a house he would still want to go and see it?
And lastly again a reduction in competition is not good for service or the cost of providing this service. If in many years to come high street agents do not exist, the level of service provided by those that remain will be bang average and the cost of this will be a damn sight more than it is today.
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If all the agents left the high st.. pb and tips would open offices and say it’s the modern way to move… crackers
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We’ve just had best month in 2 years. Up an down like a yoyo
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Let’s just blow the myth that on-liners have a lower cost base.
No they don’t.
They are now, and will always continue to spend much more on advertising their massively loss making businesses; and all they are succceeding in doing is dragging down standards!
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J1 – couldn’t agree more, would only add that they’re doing so using that sleight of hand of OPM aka, Other People’s Money.
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J1,
I would love to know the cost per instruction that the likes of PB spend just on advertising alone.
I am sure someone out there has already calculated the cost per instruction/completion. Will these call centre agents be in existence once the crowd funding and investor funding lessens ?
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These figures are already freely available, FY 2018 PB made £8.1 million profit in the UK.
The average revenue per instruction rose 7% to £1168
The cost per instruction this includes portal cost fell in FY 2018 to £332.
So please don’t just type without research.
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The increased revenue per instruction is ancillary revenue – actual instruction revenue (per listing) is down significantly.
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Ostrich17,
PB’s revenue increased massively if you look at the latest 2018 accounts. UK revenue up 81%. Group revenue up 101%.
The number of UK instructions rose 56.2% from 41211 in the 2017 financial year to 64376 in the 2018 one. So revenue from the listing fee alone was up 56.2%.
Marketing costs in the UK are indeed significant, being 21.4m in the 2018 FY. Revenue being £78.1M.
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CD46
“The revenue for the year was split 57:43 between instruction and ancillary revenue respectively (FY 2017: 70:30). We have seen a notable shift towards ancillary as we continue to increase our focus on offering more products and choice to our customers.”
Instruction revenue has fallen from £ 762 per listing to £ 666 per listing – why is that?
Have PB reduced their instruction fee by £ 100?
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>Instruction revenue has fallen from £ 762 per listing to £ 666 per listing – why is that?
No, I don’t think that’s right.
UK revenue up 81%. An increase in both the fees received from an increase in the number of listings and also an increase from ancillary revenue. It’s just that a bigger proportion is now from ancillary.
Like i said earlier, the number of instructions increased significantly.
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CD46
“The average revenue per instruction rose 7% to £1168”
“The revenue for the year was split 57:43 between instruction and ancillary revenue respectively (FY 2017:Â 70:30)
£ 1168 x 57% = £ 666 instruction revenue per listing
£ 1088 x 70% = £ 762 instruction revenue per listing
How do you account for such a fall if PB have not reduced fees?
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>“The revenue for the year was split 57:43 between instruction and ancillary revenue respectively (FY 2017:Â 70:30)
That just means the revenue in 2018 was made up of 57% “instruction” and 43% “ancillary”. So with total UK revenue of £78.1m that would mean approx. £44.5m “instruction” and £33.6m “ancillary”.
For 2017 this was 70% “instruction” and 30% “ancillary”. So with total UK revenue of £43.2m that would mean approx. £30.2m “instruction” and £13.0m “ancillary”
So “instruction” increased from £30.2m to £44.5m betwen 2017 and 2018 and “ancillary” from £13m to £33.6m (approx.)
£1168 is the average revenue per instruction. Not to be confused with total revenue.
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CD46
Even using your calculation the average instruction revenue is down to £ 691 per listing.
PB minimum listing fee is higher than this (and even higher in London).
I have used the KPI figures produced by PB in their report which should be directly comparable i.e not apples with pears.
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>Even using your calculation the average instruction revenue is down to £ 691 per listing.
>PB minimum listing fee is higher than this (and even higher in London).
It would be getting close if you added VAT. But not quite close enough.
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CD46
“It would be getting close if you added VAT. But not quite close enough.”
VAT is not included in published accounts or KPIs.
The concern for PB is that instruction level income per listing has fallen dramatically and they have not explained why, which raises a number of questions.
Is the number of listings correct? or have they included circa 8k re-listings from previous years?
What is included in Revenue? Why have they not split out income from their lettings business?
Are they netting off customer refunds against revenue? or is it an admin cost?
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>VAT is not included in published accounts or KPIs.
That is correct so you need to add it. The turnover figure for a VAT registered company does not include VAT so you have to add it on if you are comparing with advertised listing fees of £849 and the London one which I can never remember.
So you have £691 + VAT = £829
So there is something wrong as the average fee would be £849+ unless they are discounting or providing refunds or part refunds.
So why the discrepancy?
It could be that any of the figures provided are incorrect. Turnover, percentage of turnover that is for listing or the number of listings. Or it could be that discounts or refunds have been applied for some of those listings.
Or perhaps there’s a lag between turnover and listing numbers? So for example they include a listing when it is listed but the amount is included in turnover some days or weeks later when they present the invoice in regard to the deferred payment.
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Ostrich17
Apparently, PB’s total marketing costs including portal fees are £332 per instruction.
However, their TV/radio spend increased from £14 million to £21 million last year.
£21 million divided by 64376 instructions = £326 per instruction.
This may suggest that this marketing spend has not been included in their TOTAL marketing spend as it is unlikely that they only pay the portals, LPE’s and other items only £6 per instruction?
Therefore, should the total marketing spend really be £332 plus £326 = £658?
The additional £7 million marketing spend for last year divided by 64,376 instructions cost an extra £108 per instruction?
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TF
I cannot see anywhere in their report where it says TV/radio spend – it does say total marketing (inc.portals) is £21 million(£14 million prev.yr).
£ 332 v £ 326 is rounding difference (i.e. 64376 x £332 = £21.4 million).
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Total marketing spend should include Google Adwords and social media advertising. If you’ve seen the bids for ‘online agents’ for most areas you’ll see they must be spending a fortune on GA alone.
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‘“The revenue for the year was split 57:43 between instruction and ancillary revenue respectively (FY 2017: 70:30). We have seen a notable shift towards ancillary as we continue to increase our focus on offering more products and choice to our customers.”
Translation: We can’t money out of selling houses
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Costs them £100 a review from fake happy customers
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They have a lot lower fixed cost base as the vast majority of the people that work for them arent technically employees so no NI, no mat leave, no holiday pay, no pension contributions, no sick pay etc. Also if they arent listing they arent earning so during quiet months PB wage bill (or whatever they call it) will drop accordingly.
I would LOVE to know if all the LPEs were employees what it would do to PBs figures.
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LPEs which I have spoken with are delighted with the flexible working conditions, no stuck in the office staring at the clock for it to hit 630, no difficulty in blocking out holiday blocks and the benefits or being primarily self employed tax wise.
The fixed working conditions often adopted by the high street are becoming a thing of the past, they really need become more flexible with their employees.
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I am sure some LPEs are happy, the apparent turnover in my patch however would indicate that some are not happy.
Regardles my point remains if PB had the costs associated with employing the LPEs rather than utilising the gig economy their accounts would look dramatically different.
At some point I am sure some disgruntled ex LPE will test it in court which may well be interesting
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The turnover mainly seems to be the new LPEs over the last 6 months, this is mainly due to the postcodes which they are solely allotted (not prime) and also they are likely to only be 3rd choice for the others they will cover when required.
The way the structure works gives the early adopters large advantages.
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Not around here, the local TOs longest serving LPE has been in place about 12 months, only a snap shot I conceed.
Out of interest how do you know who is leaving and why they are leaving ?
I am guessing that as you have ignored my point re costs you agree ?
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AgentQ73,
Surely PB would just reduce the amount of net pay if they had to pay NI and holidays. That’s how it used to work in the old days when I was a self employed software development contractor.
People usually have more important things to do than challenging their employment status. I understand there have been a few cases in other sectors where some people have indeed challenged their status but what was the cost to the employer? It’s all very well imagining that every LPE is going to make a claim but I don’t see that happening. I could have done so too but as I entered into the contract with my eyes wide open it would have been dishonest to then go back and try and get more.
Perhaps if you are on minimum wage it’s a different matter but there are pros & cons with self employment. Or you may make a claim if you hold a grudge about something.
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Cyberduck46
If they did reduce the net pay by 20%ish what effect do you think this would have on their LPE retention rate ?
” It’s all very well imagining that every LPE is going to make a claim” thats not what I said or even anything close.
In my opinion at some point in the future some disgruntled LPE who is off on long term sick or maternity leave is going to challenge their employment status as has happend to most other big gig economy employers. Do you agree ?
I dont know the cost to the employers but cant imagine its negligble as they seem to spend a lot of time and money fighting the case. From memory Pimlico plumbers fought it to the high court and still lost.
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>If they did reduce the net pay by 20%ish what effect do you think this would have on their LPE retention rate ?
The usual reasoning is that you receive more as self employed. If you are likely to receive less then you are very unliklely to make a complaint.
>In my opinion at some point in the future some disgruntled LPE who is off on long term sick or maternity leave is going to challenge their employment status as has happend to most other big gig economy employers. Do you agree ?
Posisbly, but I don’t see the cost being an issue.
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” If you are likely to receive less then you are very unliklely to make a complaint”
Dont understand that, surely if you are taking less home you are not going to be happy.
The cost of paying NI, pension contributions, mat leave, sick pay, holiday pay, ensuring new starters get minimum pay, HR etc on 650 ish people wouldnt be an issue ?!?!?!
OK then………
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650ish people? You were talking about “some disgruntled employee”
Prior to that I suggested “It’s all very well imagining that every LPE is going to make a claim”. Your reply being “thats not what I said or even anything close.”.
Now all of a sudden you’re talking about 650ish people “The cost of paying NI, pension contributions, mat leave, sick pay, holiday pay, ensuring new starters get minimum pay, HR etc on 650 ish people wouldnt be an issue ?!?!?!”
Make your mind up 🙂
Like I say, most people have better things to do than argue whether they are employed or self employed. Most people stick to agreements they’ve made and if they agree to something and then later decide they actually want a better deal then I don’t think too many employers would be impressed if they are looking for a job anytime soon.
I was in this position myself. I would have considered it dishonest to agree a contract, accept the benefits and then as soon as something changed and the terms no longer suited, go off and claim I was really employed.
I don’t see many following this route and don’t see this being an issue of any significance for PB.
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Cyberduck46
I cant reply to your latest post for some reason so I will respond here.
You are quite clearly an intelligent guy so either I haven’t made my point clearly or you have deliberately misunderstood my post. So I will clarify.
If one disgruntled employee test their employment status and the way PB treat LPEs and a court decides that they are in fact employees it will have implications for all LPEs and PB as a whole not just the one individual.
Which is why other Gig employers have spent so much time and money fighting these cases in the courts.
But I am guessing you knew that was the point i was trying to make.
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Answered above.
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>If one disgruntled employee test their employment status and the way PB treat LPEs and a court decides that they are in fact employees it will have implications for all LPEs and PB as a whole not just the one individual.
So what implication do you see? The case decision will be between PB & the one disgruntled employee you referred to.
Just had a quick look at an article discussing the Pimlico case. This was a single complainant and the case has been ongoing for 7 years. The supreme court justices have made it clear that this judgment is very specific to the unique facts of the case.
I suggest the implication will not actually be significant for the reasons already given. I really don’t see the result of a case brought by a disgruntled employee resulting in 650 “non disgruntled” employees taking action.
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You cant see a court potentialy deciding that the way PB employ an LPE is unlawful and that they are entitled to the benefits of an employee would impact on the way that PB treat the rest of their LPEs…….
Aye ok then….
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Bogus self employment is a tax dodge, having a contract that only allows a contractor to work for a single firm and contractors only having a single invoiced client are strong indicators of bogus self employment.
Given the churn of contractors there might be 630 happy contractors but how many ex-contractors will be eyeing up the Pimlico and Uber cases and thinking, ‘hang on a minute I was only self employed to avoid sick pay, holiday pay and working time regulations’
Staff issues don’t come from those who are happy but those who never managed to bring what they were promised.
I can think of 1 direct competitor who has nothing at all to lose from stirring that particular pot with HMRC
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>I can think of 1 direct competitor who has nothing at all to lose from stirring that particular pot with HMRC
Robert as usual your ignorance has you confused.
The case between the individual at Pimlico Plumbing is a civil case. It has been going on for 7 years and has been funded for the complainant by “The Equality and Human Rights Commission”. Pimlico say it’s not over yet.
The supreme court justices have made it clear that this judgment is very specific to the unique facts of the case so any future cases which laymen like yourself and Chris Wood claim to be similar may not be similar enough and any complainant can expect to have to come up with a lot of money to fight the case.
As for tax, well the HMRC has been on top of the self employed contractor situation for many years now. Legislation was passed some time ago and it affects the contractor, not the company. I believe this is called IR35 if you want to go and do some research.
The way it used to be was that employers paid more to contractors and the contractor had the responsibility of paying any taxes etc. This used to be advantageous to the contractor as they quite legally had the ability to pay some/all of that as a dividend. The benefit to the company was that you could employ people on short term contracts. This benefit for the contractor went some time ago although there might be some other smaller benefits still.
>Bogus self employment is a tax dodge
So in general terms that is completely wrong.
So the only issue is between a complainant and the company in terms of employment status and is a civil matter between any complainant and the company. That is unless the government decide to impose regulations and let’s face it they’ve known about this for a long long time and have never done anything.
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Twas ever thus, anybody running a company in this industry knows they are only ever 3 barren months from death
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Not if they’ve put money away in better times. However, the current Greater London downturn looks to be a long haul and many won’t have enough to endure.
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I can remember many moons ago staring agog at our bank account showing in excess of six figures and thinking we had it made, taxman then decided he was entitled to nearly 70k ( we were a partnership at the time ) and the VAT man wanted 18k, suddenly we didn’t feel quite so chipper 🙂
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I do agree that the online agents have had some impact especially on fees but as the market toughens up I believe they will lose what market share they have as it will come back to basic estate agency ability. Connect with client, search database of purchasers and speak to them, booked viewing and NEGOTIATE something the on liners don’t offer and homeowners are reluctant to do.
I was always told the majority of home seekers don’t really know what they are looking for and need a little guidance and a push, what may not seem right on paper can be perfect in reality.
Just my two pennies worth 🙂
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The problem has a lot more to do with affordability than online agents, hardly anyone in my area tries online agents. In areas that have seen bonkers price growth, the gap to trade up is too large, not to mention the stamp duty burden, so volume has fallen, pressure on fees has increased and builders are having a good time of it.
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He said: “Clearly online competition has had a dramatic impact on the high street with its lower cost base and its generational and cultural shift from on-street to online shopping.” He added: “The generational and cultural change is enormous. For most people under 40 the idea of wandering from shop to shop in city centres is alien to them and they conduct many of their purchases on their phones, tablets or computers.
Home buyers do not go shopping for a property, they do not go from ‘shop to shop’! They clearly search online for properties (where we all advertise by the way), but they don’t then pick one and pay for it by pay pal.
Home buying should never be compared to a shopping experience. It is a legal process that requires professional people to put a transaction together, then professional people to progress through to completion. We work in a professional office environment, offering a first class service; we are a service industry, we are not a retailer. The internet is a marvellous marketing tool, but it is not where everything starts and stops.
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As frustrating as this must be for agencies, it isn’t too late. The company I work for deal with frustrated Estate Agents daily who are on the verge of going out of business. We manage to provide a service where they are not only surviving they are thriving! If there are any frustrated estate agents reading this who want to be successful again. Let me help you.
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Ostrich 17
64376 x £332 = £21.4 million ‘total marketing cost including portal fees,’ Aarrrgggghhhhh!
Is ‘total marketing cost’ rather than the actual cost to market a similar play on words for investors as instruct us to ‘sell’ for £849 was to PB users?
Does £332 ‘total marketing cost’ stack up if you include their LPE’s ‘marketing’ fee and all other costs to market to include HQ, staff wages, refunds, capital introduced etc?
If not, what is the actual cost to market, I consider this is the figure that their investors would really like to know but suspect that this would be as closely guarded from investors as their listing to completion ratio is to their users?
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TF
“The majority of cost of sales is represented by amounts paid to LPEs”
Admin costs will include all other staff/office costs.
I find the KPIs the most interesting, as this will be management information measured monthly, and the drop in instruction revenue to £ 666 per listing is a bit of a shocker.
Perhaps their new “invoice factoring” arrangement is taking a large chunk –
“during the year the UK deferred payment provider was changed for commercial reasons. Due to differences in the arrangements with our new deferred payment provider, £1.7m of costs associated with the new agreement are recognised within interest payable (as invoice factoring costs) rather than within cost of sales as was previously the case”
Oh look, another £ 1.7m to improve the EBITDA number !
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Ostrich17
Thank you for that insight.
So, in addition to £332 ‘total marketing costs,’ you have to add a higher ‘majority’ cost paid to LPE’s plus admin costs to establish the true total cost of marketing for which is likely to exceed the drop in revenue to £666 per instruction that you calculated?
That is not a business! No wonder they are looking at much higher ‘commission’ markets abroad?
Posted Warren Buffett’s thoughts on EBITDA previously, in case you missed it:
”It amazes me how widespread the use of EBITDA has become. People try to dress up financial statements with it.We won’t buy into companies where someone’s talking about EBITDA. If you look at all companies, and split them into companies that use EBITDA as a metric and those that don’t, I suspect you’ll find a lot more fraud in the former group. Look at companies like Wal-Mart, GE and Microsoft — they’ll never use EBITDA in their annual report.
People who use EBITDA are either trying to con you or they’re conning themselves.”
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TF
PB average revenue per instruction is £1168 of which 57% is listing fee = £666 and 43% is ancillary income = £502 (viewing fees + conveyancing referrals etc)
The fall in average listing fee indicates an underlying problem, which we can only speculate as to what the cause might be.
I was hoping someone would be able to throw light on the accuracy of the 64376 listings – are they all current or do they include several thousand re-listings from previous years?
Warren Buffett is bang on the money as per.
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