Friday, 13 September 2013

Dead Weight Cost of Estate Agency.

The just released ONS Labour Market Statistics  here, shows an increase of 15.9% in one year, in the number of people working in real estate activities. The total now standing at 562,000.

Tracking back further to 2001, it seems this figure is twice as high now as it was then. Property values have nearly doubled in this period. Coincidence?

How is it the the free market hasn't competed away the extra commission by the lowering of fees? It appears that estate agents must content with less turn over.

If we had a 100% LVT what would this do to the number of estate agents/property management companies?

4 comments:

Lola said...

Five hundred and sixty two thousand! Cripes. Say average £20,000 each p.a. = £11.24Bn per annum. Gulp.

That all comes from either sales fees or lettings fees.

I bet MW could do a cracking analysis on this - I don't have the time,or to be honest, inclination.

QP said...

I like this neat summary of the UK labour market.
http://leftoutside.files.wordpress.com/2013/09/builders-per-estate-agent.jpg

Mark Wadsworth said...

L, as BJ hints, the number of estate agents has little impact on turnover in the housing market, it is simply more estate agents chasing larger commissions* on the same number of houses.

Turnover in the housing market is 1 or 2 million sales a year, so assuming one estate agent can handle twenty sales a year, we don't actually need more than 100,000.

* The next question is, why are commissions fixed at 1.5%? Why don't they go down when prices rise?

QP, thanks. You do have posting rights on this blog, you know, feel free to post the actual chart.

The Stigler said...

* The next question is, why are commissions fixed at 1.5%? Why don't they go down when prices rise?

In the boom years, I don't understand why people use estate agents. Stick a white board outside your home and when people go to visit a house nearby, they'll also see yours.