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Estate agent business to go into deep decline as buyers and sellers deal direct over the internet?
With over 1 million of the 1.4 million homes sold in the UK each year being viewed online, how long before the estate agency business goes into deep decline as buyers and sellers deal direct over the internet? Very soon according to IMRG who forecast at least 700,000 homes being sold in the UK each year without a traditional estate agent by 2010.
When the dotcom bubble was first rising, the prediction was that estate agency business would go the way of the travel agency business into deep decline. Why drag yourself around estate agencies offices when all the property details could be found on the internet, and why pay estate agents thousands of pounds in commission when you can sell direct?
The reality is that the internet is already well on the way to transforming the way houses are bought and sold. According to Rightmove's research, over 75% of successful home movers use the internet to search for property and therefore already the internet is used to view over 1,050,000 of all the properties sold each year in the UK. This % will undoubtedly increase further. Therefore the internet has already removed the need to drag yourself around estate agency windows to select the properties that you want to view. But for how much longer will agents continue to hold their dominant brokerage position when you can sell direct online and save thousands of pounds in commission?
Also how much longer will the agents dominance continue when the BBC's Whistleblower TV program unearthed supposedly reputable estate agents overvaluing properties, reporting low false offers, lying to customers, faking signatures, and taking back handers to enrich their own pockets at the expense of their clients. It is clear that agents do have a conflict of interest in that they only get paid if they secure a sale irrespective of whether the price represents fair value or not, and the more quickly the sale occurs the better. The owner on the other hand only achieves real success if he secures the proper market value for the property however long this takes.
What is becoming increasingly clear is that there is no conflict of interest if the owner chooses instead to use one of the new and innovative property sales websites. Their internet marketing packages ensure that any property can be seen by millions of potential buyers. All offers can be made directly to the owner via a secure email or SMS text system that completely bypasses the agent. The best of these sites also provide services one would expect from a traditional estate agent, such as the installation of 'For Sale' boards and local press advertising. This provides a complete alternative to the traditional agent but with the added bonus of no agent taking a commission based fee and no conflict!
The advantage of this proven selling process is that the owner is not only in complete control and will save thousands of pounds in estate agency commission, but also they will not be at risk of losing thousands more pounds if an agent tries to encourage a sale to go ahead at below the market value. Clearly not all agents will act in this way but how do you know whether the agent advising you as to whether you should accept a particular offer needs desperately to secure your sale to pay his mortgage this month?
Traditionally home owners have perceived estate agents as synonymous with property selling and instructing an agent was seen as the only way to ensure that a property could be effectively marketed to as many potential buyers as possible. The internet is now changing this perception and the realization that home owners can just as readily sell their homes themselves if they are given the right marketing tools and full back up support to do this.
Currently over 1 million of the 1.4 million homes sold in the UK each year are viewed online although over 90% of the buyers and sellers are then tied in to negotiating through the estate agent. This change in perception will break the mould as to how people buy and sell their homes such that by 2010, at least 50% of all homes sold each year will not involve a traditional estate agent.
50% of homes will be sold online by 2010 without the vendor using the services of a traditional estate agent.
The use of the Internet and the take up of broadband is fundamentally changing the way that the British public buys and sell goods and services. This fundamental change in buying and selling behaviour is forecast to change the accepted methodology of buying and selling houses in the UK such that, by 2010, 50% of homes will be sold online without either the vendor or purchaser using the services of a traditional estate agent.
Main points of research
- The UK is now the biggest broadband country in Europe
- Growth in online buying and selling is growing substantially year on year
- Cost savings, Convenience, Control and Familiarity is driving internet growth
- Information is an important driver in buying and selling a property
- The wide availability of information on properties for sale on the internet will change buying and selling habits which will unlock the dominance that traditional estate agents currently enjoy
- Like changes that have occurred in other businesses, the method of selling properties will change such that 50% of homes will be sold online by 2010 without the vendor using the services of a traditional estate agent
Increasing use of the Internet
The use of the Internet and the take up of Broadband is now well established in the UK. Point Topic (ref 1- 29.12.05) estimated the UK will have 9.8m broadband lines at end-2005 and notes the UK has now overtaken France as the biggest broadband country in Europe. This increasing broadband penetration has provided a genuine alternative buying and selling medium to consumers in the UK. As acceptance and familiarity of this medium continues to improve, an ever-increasing percentage of goods and services will be bought and sold online.
This has been demonstrated most recently over the Christmas period with consumers shopping online en masse in November and December, as half the adult population clicked online for some - and in many cases for all of their shopping according to IMRG, the industry body serving e-retail (ref 2 - 20.01.06). Internet shopping soared almost 50% during the 10-week run-up to Christmas 2005. Shoppers spent £5 billion online, compared with £3.33 billion during the same period in 2004, IMRG confirmed.
Changing perception about buying and selling goods using the Internet
This ongoing growth in the use of the Internet is changing perceptions about the buying goods and selling goods. With regard to buying goods, it is now possible to purchase high value items online at a substantial discount to store prices in the high street. This is encouraging many consumers to visit stores or even car showrooms to view the goods in person and then go back home and buy the same goods on the Internet at home at a considerable discount. (ref 3 IMRG Nov 2005) As well as Cost savings - Convenience, Control and Familiarity with what can be achieved through the Internet are also important factors, which are persuading consumers of the merits of buying on line at the expense of buying in store.
These four benefits of using the internet - the three Cs and an F - Cost savings, Convenience, Control and Familiarity are the prime drivers leading to changes in the way goods and services are sold in the marketplace.
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