Swiss bank UBS has given an upbeat assessment of online estate agencies in the changing housing market - but it warns that Purplebricks may be over-valued.
UBS says it expects all residential transactions across the UK to drop six per cent this year and five per cent next year following the Brexit referendum result - and London will fare worse, with a 10 per cent drop next year.
The bank says online agencies are structurally altering the landscape of how homes and sold and let, and are gaining significant market share "as consumer awareness and willingness to consider using them grows.”
In its analysis of major traditional and online players who are quoted on the London stock exchange, UBS noted that Foxtons and Savills were probably well-placed to survive any restructuring of the industry and downturn in transactions.
The UBS assessment says Foxtons is clearly vulnerable because of the Brexit effect on London, but it claims the agency has powerful growth potential with several new branch openings each year. Savills - which has recently invested in online agency YOPA - is a premium brand that has a degree of insulation from mainstream downturns, it says.
But despite its optimistic assessment of the online future, UBS is warning on the possible overvaluation of Purplebricks.
Its note says: "With the business not yet in profit and on enterprise value/sales of 18x, we see valuation risks. The model has been proven fit for growth, but the self-employed nature of franchisees, as well as the large revenue cut that Purplebricks takes from its franchisees, for us creates question marks around scalability. There are also significant costs associated with growing a web-based company."