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Purplebricks: nothing divides estate agency more than this

Few things provoke argument within the industry more than the online v traditional agency debate - and within that debate, nothing at all divides people more than Purplebricks.

So it is fitting that the release of Purplebricks’ full year trading figures should provide the opportunity to launch the Estate Agent Today Panel, bringing together the opinions of some of the industry’s best known figures to comment on major stories. 

The panellists’ views reflect the fierce arguments going on within agency about many key issues: the objective of the Panel is not to force people to agree, but rather to reflect their wide differences as the industry tries to make sense of a rapidly changing landscape. 

If there is a common thread, it is that everyone shares a passion for their work and their industry; and from time to time we will ask the Panel to show that commitment and energy by commenting on stories of particular importance. 

Thanks to them for contributing about Purplebricks and thanks to you for reading - and please feel free to add your own comments too. 

Anthony Codling, equity analyst at Jefferies International:

“The job of an estate agent is to sell homes. In our mind the number one Key Performance Indicator of an estate agent is therefore, ‘how many homes they have sold’. Purplebricks continues to not answer the question leaving us feeling a bit Paxman-esq (asking a question repeatedly and not getting an answer).”

“When asked about the number of homes sold CEO Michael Bruce said that the figure was commercially sensitive, and yet Countrywide, LSL and Foxtons all disclose the number of homes sold, we therefore have to make up our own minds as to why this key metric is commercially sensitive for Purplebricks.” 

Purplebricks: nothing divides estate agency more than this

“The growth in LPE’s is impressive and we admire the Group’s ambition, however we noticed a switch in messaging from being cheaper than traditional agents to being a smarter way to sell your home. Could this mean that prices will be rising?" 

“Our conclusion is that once market share reaches what Purplebricks view as a tipping point instruction fees will rise and we may see regional rather than national pricing, which to us starts to look a lot like commission.”

“The results presentation was light, in our view, on detail about both the Australian and US expansions. We would like to know how many homes they have sold before we make a judgement about whether or not the model works.”

Iain McKenzie, chief executive of The Guild of Property Professionals:

“Selling a home every 9 minutes is a sensational headline that hides a myriad of information. On the recent Guild tour of the UK one member reported that they had analysed data for 12 months and discovered that on average the increase they negotiated on behalf of their vendors from the first offer received to that of the final offer accepted was £16,000.” 

“All of a sudden the cheap online fee looks expensive! Does a DIY seller accept an offer too quickly?”  

“With the listing fee already paid, who is REALLY helping and advising them on the market conditions and the art of negotiation?

Richard Rawlings, industry trainer and founder of EstateAgencyInsight.co.uk:

“Any business model that has so quickly and successfully rattled tradition’s cage should be applauded. Purplebricks, like Rightmove before them, recognised that today’s public want easy, online access to everything; they want it now; they want it cheap and they don’t want to be hassled.”

Purplebricks: nothing divides estate agency more than this

“The real threat probably lies not with Purplebricks, but with how the agency next door will evolve and create delight in order to capture the vast majority of sellers who are not swayed by Purplebricks’ apparently cheap offering? There is still a substantial market for people who would happily pay 1.5-2% for the agent they prefer.”

"The sadness is that many agents have failed to position themselves as the preferred agent of choice."

"They provide the same old service and have shot themselves in the foot by simply chasing fees down to virtually nothing in some cases.”

“Now is the time for gutsy agents to prepare for the real potential threats which, in my view, could be Purplebricks opening 1000 high street offices tomorrow or Rightmove enabling private listings!”

Michelle Niziol, vice president of ARLA Propertymark and director of IMS Property Group:

Purplebricks: nothing divides estate agency more than this

“It is important that consumers have choice and the Purplebricks offering is giving property sellers a platform to enable them to take more of the property transaction into their own hands.  As their results show, there is clearly a place for them in the market.”

“However, I believe that many consumers will still want a face-to-face agent led service and so we won’t see online or hybrid agents dominating the sector any time soon.”

"The industry needs to be mindful of the power of technology and how technology can enhance the customer experience. It's important to move with the times.”

Chris Wood, industry campaigner and managing director of PDQ Estates:

On Purplebricks’ claim that for the year to April 30 group revenue showed a 151 per cent rise to £46.7m - far beyond its 2016 total of £18.6m:

“This fails to recognise a 119% increase in pre-tax losses year on year.”

On the statement that recruitment of LPEs is running ahead of schedule with 448 as of April this year:

“Rumours persist that franchisee turnover is very high.”

Purplebricks: nothing divides estate agency more than this

On the report that average income per instruction is up 14.8 per cent to £1,035 and that Purplebricks now says it has sold and completed on over £5.8 billion of UK property with a further £3.69 billion in the pipeline:

“Fag-packet maths suggests Purplebricks listed 41,779 properties (earnings per listing) with a stated average selling price of £240,000 this equates to 24,167 completions (5.8 billion/£240,000).”

“A listing to completion ratio of 58% means 17,612 customers lost an average of £1,035 each, having not sold. A total of £18,228,420 down the drain into the pockets of Purplebricks PLC.”

On the claim that Purplebricks agrees a sale in the UK ‘every nine minutes, 24/7’:

“That suggests they agreed 58,400 sales Sold Subject to Contract. So they agreed 16,621 more sales than they listed? That’s quite a churn! However, 34,233 (£8,215,920,000 worth of property) must have fallen through.”

“A purple haze clouds the year-end figures.”

Iain White, industry consultant and mentor at Agency Mentors:

“Yesterday's results from Purplebricks indicate an ever upward spiral of success and on first glance they are impressive. Having paused for thought, though, what is most startling to me is the fact their main traction appears to be taking an ever increasing share of the online market, to an extent where it appears consolidation within the online sector now looks inevitable.” 

“What is a stand out number for me is the number of LPEs operating (448). In my view what Purplebricks have disrupted more than anything else is the working environment model. Whilst we are seeing lots of LPEs who have tried and chosen to return to a traditional model, there is a compelling argument to give being an LPE a go."

Purplebricks: nothing divides estate agency more than this

“Purplebricks’ longevity lies in its ability to attract and retain LPEs. This is the real battleground that will shape the future of our industry. We know LPE churn is considerable but regardless the number grows along with revenue.” 

“If the traditional model stopped to tackle this issue and worked to provide a more modern approach to working environment and contractual obligations, the battle would be won hands down.”

“I believe that most people still prefer the pay on results model, however the significant fee difference means the agent whose pay day comes from achieving my goals has to be the real deal, average won't do anymore. A top quality delivery from a high calibre LPE, on the other hand, would be a compelling argument.”

“Whoever has the best people wins full stop.”

Mal McCallion, startup expert and high growth business specialist at Growtion: 

“Full marks to Purplebricks’ PR team – that's one hell of an eye-catching headline.”

“We could go long into the arguments about whether a ‘sale agreed’ equates to ‘sale completed’ but that's irrelevant right now. What these numbers show is that the public doesn't care for such subtleties.”

“Purplebricks isn’t some magical entity from another planet, it’s a business that needs to be competed with in a structured and organised way like any other.”

There is something that you are doing that is making clients choose you over others – including Purplebricks. If you don’t know what it is, ask your last 20 clients.” 

“It might be your heritage, your signboards, your accessibility, your team. When you find out what it is, don’t stop talking about it. That’s your next marketing campaign – and the one after that.”

“It’s in the white heat of competition that great businesses come alive. This is that time.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman: 

“Purplebricks is certainly not as popular as suggested in this report, at least not in most of the areas I’m involved in.”

Purplebricks: nothing divides estate agency more than this

“Nevertheless, the growing influence of hybrid and online agents such as Purplebricks is a wake-up call for traditional high-street estate agents.”

“Mainstream agents are particularly vulnerable when marketing standardised properties such as blocks of flats or rows of similar houses. In these instances, it may be harder to achieve a sale price significantly higher than the ‘going rate’, restricting the agent’s ability to add value.”

  • Simon shinerock

    PB is a fantastic (short selling) investment opportunity

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    Some of the expert panel members could benefit from the knowledge that not all statements in a companies annual report apply to the financial year. For example it is normal for comments on current trading.

    This could explain why at least one member of the panel finds themselves in a purple haze :)

    The report is for investors but I'm sure PurpleBricks appreciate the extra publicity they are getting from what they will undoubtedly put down to jealousy of their success by traditional estate agents.

  • Rob  Davies

    I think the fear of Purplebricks - and what they represent - is very real, otherwise traditional agents wouldn't get so defensive about them.

    Clearly, they do not herald the end of the high-street agent, but I think they will be the ones to force through a step change in the industry - a move towards a hybrid model, a move towards traditional agents offering online services to ward off the threat of the likes of PB. We've seen it already in recent months, with certain Countrywide brands offering an online service and Savills continuing to invest heavily in YOPA. Not to mention the controversial move to merge the Guild and Fine & Country with easyProperty.

    I was always sceptical about the influence of online/hybrid agents and their impact on the estate agency market, but PB - with their significant backing, significant investment in PR and excellent brand awareness - look set to change that. They have seeped into the national consciousness - thanks to the distinctive brand colour, the boards, the TV adverts, the hefty marketing drive - in a way that other online offerings haven't managed.

    They might have only turned a small profit, but they now have a presence - and the investment to push forward again - to really cause an earthquake. They already have a sizeable share of the online market, I expect that to grow even further. If the online market gets bigger, reaching, say, 10% or 15%, trad agents will have to sit up and take notice.

    We can all criticise PB till the cows come home for their business model, their approach and their refusal to disclose how many sales they have actually made, but that doesn't matter to the public at large, to buyers and sellers who see the boards and the adverts and believe they are getting a great deal. It's this that needs to be challenged.

    I have issues with PB, but they're not going away. Far from it. And they need to be taken seriously. It was easy to ignore and dismiss the likes of eMoov, Housesimple and even Tepilo, because they didn't have national brand awareness or instant recognition. PB has that. It was always going to happen at some point, an online brand filtering through. If traditional agents try to go on the defensive, and continually attack, demean and dismiss PB, they'll just get stronger and stronger. An awareness of changing consumer habits, the power of the internet and the power of branding will all be needed to face the challenge head on. By all means criticise PB for what they do (or more to the point don't do), but don't underestimate them. They're in this for the long-haul.

    People wrote off RM and Zoopla - how did that work out?

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    Two comments, one re disruption and one re real estate marketing.

    In Sweden we talk about ' a storm in glass of water' - this article in the traditional reaction in any market vertical that suddenly is getting digitally disrupted - the real estate is late in the cycle. Traditional UK agents react like the major players in the music industry did in late 90's and 00's. Today the major players are embracing Spotify & couldn't. Same thing will happen in real estate agency business. One should always go for what the customers desire - nothing else. Purplebricks have smart marketing wise and with the necessary LPE concept, a rruely hybrid model. Eprop (EasyProperty) is taking a smart step in merging to also become a true hybrid. What are major players doing - better join the trend and evolve than fighting ...

    On another note the UK market is underdeveloped in terms of 3D visualisation marketing - only pics and possibly a bad floor plan - no interactivity as today's, at least young, consumer expects. Take a look at Diakrit.com - they supply digitally advanced products globally, especially in Scandinavia, the US and in Australia. I used to be a board member but the company is since two years owned by News Corp. Here you as an agent or builder can find all modern tools to compete and differentiate.

    In summary - if the world is changing - you have to board the journey or slowly starve...

    Hans En

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    Continued
    Hans Netbook, retired VC & Now investor - seed investor in Eprop

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    "the real potential threats which, in my view, could be Purplebricks opening 1000 high street offices tomorrow or Rightmove enabling private listings!”

    Trad agents be prepared. Most of the above WILL eventually come about - especially Rightmove enabling private listings.

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    The fundamental business model of what the likes of PB are doing is not new and has been around almost since the internet had been fully adopted by the property market. What is new is the huge amount of money being thown at it despite most of such enterprises still struggling to turn a profit which reminds me of the dot com bubble. House sellers are notoriously reluctant to pay significant up front expenses to market their properties (as was amply demonstrated by the home information pack fiasco). Clearly there will be some sellers willing to risk a few hundred pounds upfront if they are confident their house is more likely to sell than not, but I would suggest that far fewer are likely to take that risk in a sellers market, however in a buyers market which sooner or later will return, then even those who would risk a listing fee at the present time will be far more reluctant. Further, unlike a good local agent who has strong roots in the local community and can grow organically PB can not, as it relies almost entirely on massive TV and Radio advertising, take that away tomorrow and they will quickly disappear from view and in this respect their self employed LPE's are particularly vulnerable and are very unlikely to hang around. I am not suggesting that traditioal estate agents have cause for complacenc, just merely that given a significant change in market conditions and investor sentiment will be a game major changer for the online only agents.

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    James,

    Is there any reason you can think of to stop PurpleBricks switching to a commission basis and undercutting traditional agents?

    As a company they seem to me to be in a position to trim the number of LPE's back if the demand is not there.

    The current marketing campaigns are fueling close to 100% per anum growth in listings and that marketing has already created the most recognised brand in the Estate Agency sector. Perhaps they could also trim back marketing costs and be able to at least tread water if market conditions changed?

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