A slow and painful death was predicted for conventional estate agency when online competitors, such as eMoov and Purple Bricks, opened their virtual doors and began shouting very loudly about their cut-price fees.
There’s no doubt that they have taken a share of the market, about eight per cent according to recent figures, and that, combined with a slowdown in activity, has taken its toll on high street operators.
But Will Linley, who co-founded sales and lettings agency Linley and Simpson 21 years ago, believes that there is life in the old model yet and adds that online agents are now struggling to survive.
To prove it, his firm has spent the last five years expanding through acquisition. The growth strategy bucks the trend and continues despite the dampening effects of Brexit.
It is underpinned by a belief that good, traditional agents, who do both sales and lettings, are still vital. He believes they can still be profitable despite the government’s ban on tenant fees, which looks set to come into force in Spring 2019. This will see lettings agents lose between 20 and 30 per cent of their income.
One of the keys to success, he adds, is critical mass, hence the Linley and Simpson shopping spree.
“The tenant fee ban will make life more challenging for smaller agents so to remain a strong, profitable business we are adding to our managed lettings stock. The demand for rented property is growing but there is need for consolidation in the industry,” says Will, whose latest purchase was announced this week.
Linley and Simpson has bought Dale Eddison, which has offices in Ilkley, Otley, Guiseley, Skipton and Silsden. Dale Eddison will retain its name and its staff with founders Bill Dale and William Eddison still involved but they will be part of the Linley and Simpson group, which now has 16 branches in North and West Yorkshire.
Acquiring established agencies has been crucial as it provides a ready-made lettings portfolio and a steady, reliable income to see them through the ups and downs of the sales market. Linley and Simpson now has 6,700 rental properties on its books.
“It’s hard to start a lettings business from scratch now because you rely on organic growth, which is very difficult because there are fewer new buy-to-lets and more competition, though we have seen very little evidence of existing landlords selling up,” says Will, who adds that embracing technology and creating a hybrid model of selling and letting is also a big part of his firm’s plan.
“We think that online agents’ days could be numbered and that we are probably part way through a cycle where people try them but don’t go back to them because the offering from a full service agent is far superior.
“A hybrid of high street agency and online is the way to go so we will enhance our offering using technology to create more online interaction with customers. It will be the best of both worlds.
“The problem for smaller, high street agencies is that they can’t afford to invest in that way.”
As for fees, he says the online and traditional agency prices have been moving closer to each other.
The strength of his arguments about the future of the industry were tested by Linley and Simpson’s financial backer Lloyds Development Capital, which spent seven months doing due diligence before agreeing to invest in the company and its ambitious expansion.