In a world where perception frequently trumps reality, Foxtons remains a potent symbol of aggressive and successful estate agency – even if its bottom line suggests otherwise.
Only this month Alan Partridge, the parody TV character now exemplifying Brexit British bluster, demanded that his fictional show be beefed up to become “10% more Foxtons.”
But the facts behind the bravado suggest Foxtons could be facing an existential crisis, irrespective of its bullish image.
It suffered pre-tax losses of £17.2m in 2018 – a contrast with 2017’s pre-tax profits of £6.5m. Last year it closed six branches including flagship Park Lane, while sales plum-meted from an already-low 2,962 to 2,529.
“We need to be 10% more Foxtons” – Alan Partridge
The silver lining of lettings income, described by Foxtons as “resilient” and up from £66.3m in 2017 to £67m in 2018, hides two challenges – one is that the number of units under management actually fell last year, the other is the imminent ban on fees on tenants.
But not everyone has interpreted those figures as poor, with many believing they show a problem that is more to do with London’s market than Foxtons’ strategy.
Anthony Codling – former analyst at Jefferies investment bank and now chief executive of soon-to-launch property portal Rummage4 – says the figures “show the power of agency”. He adds: “The market is down but Foxtons held its nerve and held its fee. Sales volumes are down 15% but the average fee held at £14,324 – the famous Foxtons 2.5%” he says.
Industry expert Kate Faulkner – who runs consumer service Propertychecklists, has written buying and letting guides for Which? and who is a consultant for estate and lettings agencies – says Foxtons still holds firm on traditional values.
“It’s always worked for buyers and sellers combined, unlike other agencies. It’s not always been popular but to get a sale or a rental over the line it’s always worked with both parties. What’s gone wrong is the market. There’s supply, not demand, so the agency can’t always deliver results” she says.
However, is Foxtons’ reliance on tried and tested old-school agency enough to cope with what may be a permanently-reduced level of sales in the capital in the future, especially when many rivals appear to be trying something new? Many of the techniques that characterise Foxtons now actually came about when it launched back in 1981.
At that time it was considered a ‘disrupter’ of the old boy’s club of London estate agency. It opened until 9pm and at weekends when rivals worked 9-to-5; it offered short-term 0% commission when launching new offices, a tactic it still deploys today; and a revolutionary ‘call centre’ structure allowed economies of scale through centralisation.
Most striking of all it employed hungry agents paid low basic salaries and thus relying on heavily-incentivised commission from sales and lettings. The aggressive reputation was created in the frantic years after the Millennium: allegations flew about poaching rivals’ clients, tearing down other agents’ boards, the levying of ruthless fees on landlords and tenants alike – and, of course, those brash, ubiquitous and badly driven green Minis.
“Foxtons taught me discipline, hard work, competition” – Camilla Dell, Managing Partner, Black Brick
Foxtons’ most ruthless tactics have subsided today but otherwise the agency still operates on a model much as it did three decades ago, and people are beginning to question it.
With 61 physical branches, a chief executive’s 2017 remuneration package hitting £914,000 including a £218,000 bonus, and its share price today of around 70p being well below a third of its 2013 stock market launch value, is it really behaving like a lean, mean fighting machine?
“I wouldn’t be where I am today had I not started at Foxtons years ago. It taught me discipline, hard work, competition. It was a breath of fresh air in what was a stuffy and corporate agency world” says Camilla Dell, managing partner of Black Brick buying agency which she founded in 2007 and which is now one of the UK’s leading property specialists.
“But Foxtons is suffering what a lot of big agents are suffering: tough market conditions combined with large overheads. To come out the other side market requires different thinking – a new approach and ultimately some consolidation” insists Dell.
She hints that Foxtons may have been asleep at the wheel, not taking tough decisions and risks like other agents. For example, Knight Frank anticipated London’s slowdown by slashing staff three years ago; Humberts across England and smaller agencies like Orchards in west London have ditched traditional branches; new firms like Harding Green use self-employed freelance agents operating from serviced office ‘hubs’.
Foxtons, it seems, has only latterly adopted a new business emphasis, much of it technology-driven. It has invested in PropTech companies Propoly and Zero Deposit as well promoting its own My Foxtons service, allowing clients to manage and monitor their own portfolios and activities online.
At the same time, however, a telling omission from its recent results were any measures to mitigate income loss from the lettings fee ban: contrast this with Countrywide which says it has eight initiatives prepared over two years to offset the fees income shortfall.
So is Foxtons’ approach good enough?
Industry figures like Russell Quirk, ex-chief executive of online agency Emoov, believes Foxtons should be more aggressive, more radical. He urges it to expand into well-heeled areas beyond London – “I’ve researched 60 towns where the brand ‘works’” says Quirk – and should replace old-style branches with hubs serving wider geographical areas.
“If Foxtons were to embrace this and push themselves out of their comfort zones, they’d quietly evolve whilst driving margins through the roof” insists Quirk.
Recent experience suggests Foxtons won’t take the advice. Once the bad boy of the industry, it now prefers a traditionalist approach: it chose not to take part in this article, and appears uneasy at examination by others within the industry.
Yet it still boasts a brand recognition like no other: can you imagine Alan Partridge wanting to be “10% more Knight Frank”? – hardly.
But it needs a strategy, and fast, to live up to its reputation: without it, Foxtons may yet be-come the crusty old-school agency it once mocked.