Bloodbath in Traditional Estate Agency

It seems unbelievable given the apparent health of the industry last summer (2007), but there are now clear signs that the traditional model of estate agency is breaking down much more quickly than we anticipated. We have always assumed that eventually estate agency would move towards better value, more customer choice and better service by embracing the internet and jettisoning its outdated practices in the same way that travel agency and conveyancing did some years ago. But it seems the pace may be picking up. The culprit, of course, is the imminent house price recession – as well as competition from online agencies like BrightSale.

Yesterday’s trading statement from traditional national estate agent Humberts will not make the national press as Northern Rock has done. But in our ‘little’ world (although commissions from estate agent fees reached £4.4 billion in 2006) this was quite a bombshell. Humberts said it needed an urgent recapitalization and would make a loss for the first half of the year. Its Chairman and CEO resigned and its stock plunged 44% on AIM to just 14p (it had been well over £1 in early summer 2007).

Humberts is the UK’s 10th largest estate agent. If it is in this much trouble then the pain in traditional agent land must be pretty severe. Humberts is a good barometer because it has been a model of how ‘traditional’ agency has been done for a long time. It boasts a 150 year history and has been busy buying up other high street estate agents right through the top of the market. It made at three major acquisitions in September 2007 alone - in the West Midlands (Halls), London (Thomson Currie) and Kent (Fox and Manwaring). Humberts was aiming to have expanded to 90 branches by the end of 2007. All these firms have the same very long history going back many decades.

The result of this spending spree on traditional assets appears to have been that Humberts has saddled itself with a large cost base just at the top of the market. With revenues from these assets declining, the market’s judgement was severe indeed.

It will be very interesting to see where Humberts gets its needed injection of capital from, but it would be amazing if the new management did not reconsider the ill fated dash to buy up high street firms and look more creatively at the business of buying and selling property. If that happens, perhaps we may see the first traditional agent jump across to a more internet-based model. We would be delighted to see this, and it would certainly not be the first time that innovation had sprung from adversity.

But either way, as the old Saatchi and Saatchi poster had it, traditional estate agency isn’t working.

See Humberts trading statement at:

http://www.humberts.co.uk/p.dtx?c=about.relations.news