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Why has Countrywide purchased Hamptons International?
It now has 10,000 employees, 1,200 branches, 44 brands and sells 10 per cent of all homes in Britain; some call it the Tesco of UK residential property. Yet its latest acquisition is not just another expansion – it indicates that Countrywide, like many residential players, wants to move upmarket into Waitrose territory.
A telephone conversation I had with a Countrywide spokeswoman proves the point. Hitherto, the firm was proud to be seen as a champion of the mid- and low-range of the market with only a few top end brands within its portfolio. But this conversation was all about how important it was for Countrywide to have branches in key central London postcodes and well-heeled parts of the Home Counties.
The PR aspect is a symbolic example of that shift of emphasis. Just two Countrywide PR people take care of 41 of its agency brands but the three most upmarket brands – Sotheby’s Mayfair office, John D Wood and now Hamptons – have their own PR efforts. Each of these three PR teams is as large or even larger than the central PR team servicing the other 41 brands and Countrywide’s corporate side.
So Countrywide wants to move into the top end, and you can see why.
Firstly, Hamptons has looked fragile for some time so is an 'easy' purchase to give Countrywide a foothold.
Hamptons is 140 years old but has had a difficult last two decades in the ownership of Bristol & West, Cluttons, Wheelock and then Dubai-based Emaar Properties. The latter deal occurred just before the global property market downturn: and which location has seen one of the sharpest downturns? That’s right - Dubai.
Secondly, the mid- and lower-range of the market is producing lower profits now.
High Street agents dealing with average-priced homes, especially those outside of central London, are being driven into lower fees to survive and, in some cases, they are changing their business models to offer online or no-office franchise sales operations – look at what the enterprising Kevin Hollinrake is doing in this regard. Generally speaking, these new business models offer lower returns than the old model, and transaction volumes are doing because of mortgage restrictions.
The top-end agents are, as ever, the more conservative and still charge top whack commission on the sales and management of properties that, in London and the south east, are amongst the most expensive in the UK. So this is where the big fees are, and it’s this action that Countrywide wants.
Look, too, at the wider market conditions.
Possible mortgage caps mean first time buyers will be thinner on the ground, and those existing owner occupiers who move “just for a change” seem a thing of the past. Meanwhile the capital’s and the Home Counties’ markets, heavily influenced by cash buyers and foreign purchasers, are steaming along relatively well.
Getting Hamptons’ 23 London offices and its 41 branches across mainly-rural southern England is good news for Countrywide. And surely no one thinks it's going to stop there….
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