Property News: September
I heard the news like everyone else last week that Foxtons had applied for planning permission for change of use of the old Post Office. Not surprisingly, my immediate thoughts were also like most residents – not ANOTHER estate agent! I then read, more recently, that there had been 20 complaints registered with Camden planning against the opening on the basis of too many estate agents in the high street (staggeringly, there are 29) and that the area does not need ‘the kind of business’ that Foxtons are.
But, can Foxtons really be blamed for all these estate agents? And what can be so bad about a company that is listed on the stock exchange and has made its original owner somewhere in the region of £925m (Sunday Times Rich List) based on the principle of making more money for home owners? It occurred to me that the issues communities like West Hampstead and other high streets face are much greater than stopping the opening of another estate agent will solve.
Firstly, the reason there are so many estate agents on London’s high streets is simple – easy money. When I say easy, I mean that there are very few barriers to entry. Anybody can either start their own agency or start work immediately without any formal qualifications or membership of a governing body. On top of this, most small to medium agencies provide no initial or on-going training meaning that your property could be sold or let by someone who has very little experience or knowledge of the conveyancing and letting process (even in the bigger brands). Since the 1960s house prices have climbed inexorably skyward significantly outstripping real earnings along the way. As estate agents are paid on a percentage of the sale or lettings figure this has meant that the lure of large fees with no barriers to entry has attracted so many agents to our high streets.
Although these large numbers have created some downward pressure on fees, they still remain largely the same as they have for many years, that is between 1% and 2% for sales and 9% to 10% of the first years rent for rentals, meaning that a 3 bedroom maisonette in West Hampstead of say, £750,000 (average for the area) or £600 per week will command fees of £7,500 to £15,000 for sales or between £2,800 and £3,120 for lettings. As of today’s date there were 648 properties listed for sale on Zoopla and 1145 for rent in NW6 so it’s easy to understand the attraction of claiming a piece of this potentially rewarding market without too much up-front investment.
There is an Ombudsman scheme for sales agents but membership of this is not compulsory and the punitive powers are very limited. A better scheme exists for lettings agents called ARLA, which provides guidelines and ethics requiring qualifications to be a member of, but again, is not compulsory.
I would like to see the introduction of a licence system similar to that operated in the US. This requires completion of nearly 100 hours of study of the sales and lettings process along with conveyancing law and ethical conduct guidelines in order to gain a licence to operate. Complaints would be dealt with by the overseeing body which has the power to revoke any licence. I believe this would go a long way to reducing the number of agents on the high street and also provide the consumer with some much needed comfort that the process was being handled by a qualified agent with an independent and impartial point of contact for redress if things do go wrong.
Secondly, the problems of the high street have been well documented recently, especially in the Portas Review conducted for the coalition government. The changes in the way we shop by either going on-line or to out of town shopping areas where access and parking are easy, has meant that fewer businesses are attracted to high street premises, especially when their rivals are not present. High rents, rates and generally outdated buildings requiring expensive repairing lease obligations in high streets where there is only passing footfall on the way to transport links (especially in West Hampstead) and nowhere to park, make these very unattractive to most retailers. Resulting in a high street typical of West Hampstead, with coffee shops, estate agents, charity shops, betting shops and fast food restaurants where convenience and turnover is key, not dwell times or pleasant shopping experiences.
The juxtaposition of this situation is that the coalition government is focussed on a planning policy of ‘Town centre first’ planning as outlined in the NPPF (National Planning Policy Framework). Developers are forced towards town centres by planning policies which involve passing centric and impact tests for any developments which are outside of the town centre. This is making it even harder to redevelop existing sites, which in some cases are empty shops, as developers are reluctant to invest in these sites as things stand.
Isn’t it time to accept that town centres in the traditional mould are no longer viable? Many of those who protest that the protection of our ‘village feel’ is paramount are perhaps missing the point. With residents who are only in transition through the high street shouldn’t we be developing new mixed use sites that incorporate leisure facilities with retail outlets making the town centre a more pleasant destination of choice which would more accurately reflect a village feel? The success of the O2 centre and JW3 go some way to demonstrating the popularity of this mix. The West Hampstead Square development also offers a mix of leisure facilities close to transport which has been incredibly popular and now sold out. Until the focus of change for our high streets is different premises like the Post Office will only be attractive to those businesses that can be profitable in the existing high street. Initiatives to regenerate the high street as a retail destination have so far stalled. In West Hampstead the Farmers market and food stalls although popular, demonstrate the transitory nature of passing trade rather than a shopping destination.
Perhaps the biggest conundrum of Foxtons is that most people I speak to seem to agree that buying, renting or selling through them is a pressured and uncomfortable experience. Phrases like ‘not the type of business West Hampstead needs’ are bandied about, but the reality is that when it comes down to it, people choose to use them. It’s not a ‘Marmite’ company, where you either love them or hate them, but a company which most seem to hate but secretly use. Like a dirty little secret, or an R Whites Lemonade drinker, for those of you who remember. It’s a simple model; win instructions with the promise of higher prices and then generate large numbers of viewings. In other words, more cash for you. The model works because it has enough success to justify its promise to other sellers or renters.
Arguably, Foxtons have made a large contribution to the London price boom over the last 20 years which has benefited many owners and Landlords in the process. Whether this is good or bad is another discussion. Of course, if you would like to achieve the same results with a more accessible and personal service please feel free to get in contact.
The other potentially good news for all naysayers is that industry experts predict the death of the high street agent in the next 20 years with agents moving to the on-line model. I’m not sure what high streets will be looking like then though?
Naturally, I am not looking forward to their arrival, but if we want to reclaim the high street we need to rethink our strategy for the future.
Benham & Reeves
020 7644 9300