Nearly two thirds of estate agencies in the UK plan to raise their commission rates in 2026, according to a new industry report, marking a potential shift away from the long-standing trend of declining fees in the residential property sector.
The report by iamproperty, which surveyed estate agency leaders, found that 64% of respondents intend to increase their sales fees this year. A further 31% are exploring alternative business models, including performance-based fees and retainer structures, whilst some agencies are considering withdrawing from ‘no-sale, no-fee’ arrangements in favour of upfront payment models similar to those used in property auctions.
Rising operational costs
The primary driver behind the planned fee increases is escalating operational costs, particularly National Insurance contributions and other payroll-related expenses. One agency reported that recent NI increases have added £350,000 annually to their costs, representing 10% of total turnover. Many firms have also begun charging separately for money laundering compliance checks, a cost previously absorbed to remain competitive.
The findings highlight broader challenges facing the sector, which has experienced sustained pressure on commission rates in recent years. Rising property costs and market volatility have intensified competition amongst agencies, contributing to what industry participants describe as a ‘race to the bottom’ on fees.
Industry challenges
The report identifies a perception gap between agencies and vendors regarding the value of estate agency services. According to iamproperty, many property sellers lack understanding of the work involved in marketing and selling properties, a criticism historically leveraged by online competitors such as Purplebricks in their marketing campaigns.
Ben Ridgway, co-founder at iamproperty, stated: “We were able to explore big topics like AI, regulation, data security and fee models, but through the eyes of agents, to really understand the future they want and understand how they are balancing people, tech and tools to stay resilient day to day.”
The report also suggests that whilst technology has been promoted as a means to improve efficiency, it may have inadvertently created a narrative that property sales are driven primarily by digital tools rather than agent expertise. This perception could be contributing to broader challenges in the property market, where professional services are increasingly scrutinised on cost grounds.
Market implications
For property sellers, the planned fee increases could add to transaction costs at a time when buyers face various financial pressures. The shift towards alternative fee structures may also require vendors to adapt to new payment models, potentially including upfront costs regardless of whether a sale completes.
The move by agencies to raise fees represents an attempt to restore margins in a sector that has seen sustained pressure on profitability. Whether the market will accept higher commission rates remains to be seen, particularly if economic conditions continue to constrain property transactions.
