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."
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The low cost listers will see other agents and bare bone 'just listing' services evolve in the coming 24 months to 2-4000 operatives. My guess is the low cost listers of £499 (HouseSimple to easyPs and Purple will see head competitors go head on dropping to £200-£300 poss £99.
Current low charge operatives spending £1m pcm in a 8-10 budget lister arena I predict will have to raise to £1.5/2m pcm in an arena come 24 months of 3,000/4,000 cheap listers.
***(Note I dont call them estate agents).
But this gives others great opportunity to use good negs who can really negotiate + easy to understand comsumer wants as upsells.
The Purple's, YOPAs, HouseSimples and like constant pitch of 'we do the same as hg st agents but save sellers £housands' will be compared on par to cheaper offerings from other budget listers at lower costs.
Additionally those cheap listers getting sellers to sign up loan agreements will start to get bad comments when sales dont happen, yet theres a seller bill to pay regardless.
True service should then be able to be identified as premium and higher just cost.
Traditionals should be able to switch their pitch to 'we can offer silver and gold. And we can also offer a (cheap nasty and crappy) lead or tin or plastic service alike many of todays budget models etc.
When traditionals for too long have offered just sole. The budgets have had an easy target.
If traditionals offer medium and upper better. Traditionals/chimeras can show a low cost (crap) list only offering available. But of little value to sellers who really need hand holding and a professional to achieve a best offer via negotiator skills over just a budget lister.
As the saying goes. Be careful what you wish for. It might just happen..........
As such others will soon be saying we can do what the low cost listers can do. But much, much cheaper and save sellers £100's. Basically go head on with the pitch budgets have been bleeting for the last 3-4 years.
Budget listers will also open opportunities as many will employ poor grade staff who wont have negotiation training.
The low cost order takers will be poorly placed to best serve sellers to negotiate best offers. As such poor grade lister only services may become very costly for DIY vendors where negotiators representing buyers may screw sellers down. Because as experienced negs they may be able to save buyers £housands.
There are high street agents available that charge 0% to the seller and 2% to the buyer ( includes all the searches etc). A few vendors use them. Not many. It's never about the fee and whether it's high or low. The online/hybrids don't get that! Never interrupt a competitor when they're making a mistake. You only have to look at the sad excuse for a marketing campaign that PurpleBricks and others waste money on to realise they are clueless.
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