More estate agencies will close as transactions stay at drought levels, Winkworth has told its shareholders – whilst also revealing that it has had approaches from 35 agents this year which want to sell up.
The firm is predicting just 575,000 housing transactions this year.
Reporting on its results for the first six months of this year, CEO Dominic Agace said that the downturn would lead to consolidation and benefit Winkworth.
He said: “UK residential transactions fell in the first half of 2011 on mixed sentiment towards the housing market but are still set to match 2010 levels for the year as a whole, with the prime central London market outperforming national trends.
“The market share gains that Winkworth has made in prime areas have offset a reduction in overall transaction numbers and supported commission income.
“Low volumes are expected to continue, particularly outside of London, and we expect this to lead to further branch closures by over-extended competitors, offering managers or owners of existing, successful businesses the opportunity to join Winkworth, allowing them to make progress in a flat volume market and position themselves as market leaders in the next upturn.”
The interim results report says: “We have seen a trebling in the number of existing businesses approaching us to convert, with a total of 25 applicants in H1 2011 compared to eight in H1 2010, as these seek to use our systems and network to grow their market share and attain sustainable profitability in a low-volume market place.”
Winkworth increased its revenues by 6.5% compared to the first six months of last year, up from £1.68m to £1.79m, while pre-tax profits crept up from £563,345 to £564,846 – this year’s figures boosted by record rental income, while sales volumes fell by 8.5%.
Winkworth also opened five new offices in the first half of this year.
Simon Agace, non-executive chairman, spoke in the report about the loss of ‘many’ deals because of conservative valuations.
He said: “A vendor will often be taken aback by the conservative valuation placed on his or her property by a mortgage surveyor, concerned by the risk of litigation that became a reality following over-enthusiastic valuations in prior boom years.
“The over-reaction to this in central London has caused the loss of many sales, not necessarily because buyers are disputing valuations, but because they are being influenced more by valuation agents than by underlying market conditions.”
He added: “We start the second half of this year with the expectation of adding further franchises as small, well-run, niche companies are attracted by the strength of the brand which is so important in this type of market.
“We are confident that Winkworth will grow throughout the rest of the year and into 2012, benefitting from the difficult economic conditions which currently beset the market.”