(last updated July 2019)
What has been happening in the estate agency sector
For many years estate agency suffered from a dubious reputation, brought about by the activities of a minority of unscrupulous 'cowboys'. Things came to a head during the 'boom' which happened at the end of the 1980s and legislation was introduced in 1991 to prevent estate agents from making outlandish claims about the properties that they sell.
The situation was improved further with the launch of the Ombudsman for Estate Agents scheme (now The Property Ombudsman, which operates alongside several alternative schemes) in 1998. It offers peace of mind and a means of redress to people who use a participating agent. Nevertheless, the Office of Fair Trading (OFT - since replaced by the Competition and Markets Authority) was prompted to investigate the profession in 2002.
The mid and late 2000s saw the introduction of new and tougher powers to regulate estate agents, including a requirement for most of them to belong to an approved redress scheme. The redress scheme membership requirement was extended to letting agents and property managers in England in 2014.
The OFT took another look at the estate agency sector in 2009 and concluded that, while competition in the market was weak, the industry was in the main adequately regulated. However, it did suggest that certain aspects of the law, including rules to cover commission payments from financial services providers, could be tightened up to protect consumers.
In 2014 the OFT was closed, with regulation of estate agents transferring to the National Trading Standards Estate Agency Team of Powys County Council. Responsibility for supervising estate agents for anti-moneylaundering purposes transferred from the OFT to HM Revenue & Customs.
The growth of the internet and the mobile web has been a particularly exciting event for the estate agency sector. Plenty of specialist property sites now exist, while many existing agents have launched their own online property services. Initially it was thought that the internet might eventually 'cut out the middle man' and put estate agents out of business - but it now seems more likely to continue to be a powerful marketing tool rather than a threat. Nevertheless, DIY house sales are gradually on the up, with most of them involving the internet in some way - often a website specially designed to accommodate DIY property sellers. Low-cost 'virtual' web-based agents are also gaining significant ground in the marketplace, with some offering a hybrid model which combines online marketing services and call-centre support with certain services provided by local property specialists.
While the property portal 'giants' like Rightmove and Zoopla work with estate agents rather than competing against them (although they do work with virtual agents too), some agents feel that their fees are too high and their rules unfair. During the mid 2010s some agencies got together to form Agents Mutual, which launched its own property marketing portal - OnTheMarket - in January 2015 in direct competition with the established market leaders. However, although many estate agents welcomed the increase in competition among the online portals and its effect on driving down advertising fees, some complained that OnTheMarket's terms and exclusivity requirements were too restrictive.
Elsewhere, developments in smartphone and mobile internet technology have opened up other opportunities for estate agents. Some agents, for example, include quick response codes (QR codes) on their 'for sale' boards which passers-by can scan to get more information - perhaps a web link - for a property.
In late 2012 the Land Registry launched their electronic Document Registration Service (e-DRS) in an attempt to speed up and streamline the conveyancing process. The service enables users to lodge common application forms affecting property ownership online.
Turbulent market conditions during the late 2000s and early 2010s prompted many estate agents to take a fresh look at the way they operate. Some scrapped their commission charges in favour of a flat fee, while others set up 'matchmaking' schemes to help property owners swap homes. Many looked closely at their costs, with some moving away from expensive property marketing websites and others working as virtual agencies with no offices. Some estate agents moved into the residential lettings market for the first time during this period.
What has been happening to the property market
The 1980s and most of the 1990s saw two decades of 'boom then bust' cycles in the property market. The late 1990s and early 2000s saw greater stability in both house prices and demand. However, the price inflation of the early and mid 2000s proved unsustainable and the market experienced a very sharp downturn in 2008. Things were little better during most of 2009, although there were small improvements in some areas. Although 2010 saw a bit of brightness in the market, the economy stayed very weak and the housing market saw nothing resembling a recovery. Conditions remained very difficult throughout 2011 and 2012. Obviously this hit estate agents throughout the country very hard.
However, in 2013 the market surprised many by showing signs of a real upturn, boosted in no small part by the government's Help to Buy scheme. The upturn was so marked in some parts of the country that experts even began to worry about a new house price bubble. Things continued to pick up throughout most of 2014, although the London market - which really was showing signs of overheating - did start to cool towards the end of the year. New lending criteria brought in during the spring following the government's Mortgage Market Review did however make it more difficult for some borrowers to obtain funding. The lower end of the market received a boost though in late 2014 with the Chancellor's announcement that the Stamp Duty system would change, with lower rates typically payable on many ordinary properties. In Scotland, Stamp Duty of property transactions was replaced in April 2015 by a new Land and Buildings Transaction Tax (LBTT).
The market received a further boost in 2015 from the introduction of a new Help to Buy ISA, although the announcement of a hike in the rate of Stamp Duty on buy-to-let properties and second homes did hit this sector of the market. March 2016 saw a surge in property transactions as people rushed to beat the Stamp Duty increase in April. The market slowed during the rest of the year and house price growth also stalled. Some commentators consider that the UK's vote in June 2016 to leave the EU contributed to the weakening of the market.
However, the 2016 Autumn Statement confirmed the government's continuing support for house owners through the Help to Buy scheme and the Help to Buy ISA.
Nevertheless the property market continued to falter during 2017, with both house price inflation and the number of transactions at low levels. The 2017 Autumn Budget abolished stamp duty for first time buyers on properties up to £300,000 but by the beginning of 2018 this had not made much difference.
The October 2018 Budget exempted from stamp duty all first-time buyer purchases of shared equity homes up to £500,000. However the market remained lacklustre, with low transaction levels and very little growth in average house prices.
Property market matters
Issues like 'gazumping', the number of sales falling through and the slow speed of transactions have long been concerns. In 2000 the government announced its intention to reform the house buying process and, after years of pilot schemes and heated debate, settled on compulsory home information packs (HIPs) in England and Wales as an answer to the problems. The idea wasn't very popular with the industry though, and HIPs were watered down before they were even launched - when the home condition report (HCR) was made optional - and then at the last minute they were postponed for several months. In what many described as a fiasco, mandatory HIPs were finally introduced in August 2007 - but only for houses with four bedrooms or more. September 2007 saw HIPs introduced for three bedroom houses and the requirement was finally introduced for all homes in England and Wales in Mid December 2007. Even so, it was April 2009 before the scheme was fully implemented and home owners had to get a HIP ready before they put their property on the market.
However, the then newly-elected coalition government scrapped HIPs with immediate effect in May 2010, keeping only the energy performance certificate (EPC) as a requirement for domestic property sellers. While most estate agents welcomed this move - even though it did away with a potential source of extra income - the HIP provider industry was effectively wiped out.
2014 saw a number of lenders introduce affordability caps on larger mortgages, and in February 2015 the Financial Policy Committee of the Bank of England got new powers to cap the amounts lent by mortgage providers based on affordability and the value of the property being purchased.
Residential lettings
As house prices have gone up, but wages have stayed relatively low and mortgages have become harder to obtain, more and more people have turned to renting as a more accessible alternative to buying their own home.
There have however long been concerns that the private residential lettings market is not sufficiently regulated, with unscrupulous landlords and agents ripping off tenants and providing sub-standard accommodation.
In 2013 the EPC requirement for rented accommodation was tightened up, with landlords and agents being required to show the EPC rating clearly on all advertisements for rented property. Landlords must now give an EPC to all new tenants, and if a tenant asks for energy-efficiency improvements to be made to the property, landlords can't unreasonably refuse to agree.
Towards the end of 2014 a new legal requirement was introduced for all residential letting agents in England to belong to an approved redress scheme such as The Property Ombudsman.
Also at the end of 2014, a new requirement was introduced for landlords in some parts of the country to carry out 'right to rent' checks on prospective new tenants to make sure they are living in the UK legally. A statutory code of practice was produced for landlords in other areas to help them make sure that they don't inadvertently breach immigration laws by enabling tenants to live in the UK unlawfully. The right to rent check requirement was extended to all landlords in England from February 2016.
New legislation introduced in 2015 requires letting agents in England and Wales to publicise clear details of the fees they charge. The 2016 Autumn Statement promised to ban letting agents' up-front fees to tenants in England at some point in the future and legislation to implement this was published in November 2017.
Landlords in Scotland must register with their local council before renting out their property. You can find out more on the mygov.scot website.
In 2015 a new registration and licensing scheme for residential landlords and agents was introduced in Wales. Under the scheme, which is administered by Rent Smart Wales, residential landlords who have tenants on assured, assured shorthold or regulated tenancy agreements must register. Letting agents, and landlords who manage and administer their own lettings, must obtain a licence. There is more information on the Rent Smart Wales website.
Staying up to date with developments
Joining a trade association is an excellent way of keeping up to date with developments in your industry. Two of the main industry bodies representing estate agents in the UK are the National Association of Estate Agents (NAEA) and the Royal Institution of Chartered Surveyors (RICS). There are also specialist professional bodies representing letting agents, valuers and conveyancers. Many of these joined forces with the NAEA in 2017 to set up Propertymark. Members comply with Conduct and Membership rules and are expected to maintain high professional standards.
Subscribing to a trade journal is another good way of staying up to date. The Negotiator is one of several trade journals published specially for professionals in the property industry.
