The past period has been a difficult one for civil-law notaries, with turnover and earnings remaining under pressure since the financial crisis in 2008.
Adverse impact on volumes and prices from economic difficulties
Not a single segment was immune. Diminishing volumes led to increased competition, and so to increased pressure on fees. Besides the economic recession, structural developments also affected the sector. For example, calls for transparency increased, and consumers demanded that prices be proportionate to the added value of the services. This heightened the pressure on margins. Despite measures to improve efficiency and cut costs, the profession was unable to save earnings and margins from plummeting, except in 2010. Between 2008 and 2013 profit margins fell by almost half: from 22% to 12%. However, in 2013 profit margins improved slightly relative to 2012.
Economic recovery buoys volumes
ABN AMRO believes that the tide has turned now that the market for notarial services is growing once more. The number of home-related transactions has been on the rise since the third quarter of 2013, for example. Improved consumer confidence has given the housing market an important boost. Although it should be stressed that this market is still recovering in fits and starts, ABN AMRO also expects that more businesses will be set up as the economy continues to recover. These developments will cause the volume of work for civil-law notaries to increase in the near future. Moreover, further increases in consumer spending in 2015 will give family-law practices more breathing space. Despite the improving volumes, fees will not rise immediately: although pressure on the prices for notarial services is diminishing, they continued to fall during the first six months of 2014.
No opportunity to sit back and relax
Civil-law notaries should nevertheless remain cautious for a few years more. They still face a number of structural developments. Non-sector operators from the retail and insurance sectors are joining the market, for example, as illustrated by the notarial services that HEMA and DELA are now offering. Clients are also becoming more knowledgeable, and consumers are arranging more matters themselves.
To compensate for the implications of these developments, the sector needs to increase the volume of work by attracting new clients and/or increasing the volume per existing client. Mediation in conflicts presents opportunities, for example, and improving the efficiency of operations, making more use of IT, will help overcome structural problems. Notarial firms should also invest in innovation and improve their flexibility to enable them to respond promptly to new market developments.