A leading digital analyst says Purplebricks’ success in the US market is not assured and has expressed concern over whether it is the right fit for some of the locations in which it has launched in the States.
Purplebricks’ long-term viability is under scrutiny now in the UK, with trading figures scheduled to be released next week and the online sector still reeling from the collapse of Emoov.
Mike DelPrete - former head of strategy at the property portal Trade Me in New Zealand and now a respected international real estate consultant - says on his analysis of Purplebricks’ full year figures in the summer, he estimated it had spent around $21,000 per listing.
Now DelPrete has now looked particularly at Purplebricks’ activities in Pheonix where, he says, the agency had a slow start when it launched in June.
He says it is averaging “a few dozen” new listings per month. “With a listing fee of $3,600, that's around $75,000 in revenue for November.
He notes: “Purplebricks is also struggling to recruit and retain brokers in Phoenix. Agent numbers are stagnant, and the average number of listings per broker is two. If we assume a broker is paid $1,000 of the $3,600 listing fee, that's a very low effective annual pay package.”
However, he still believes that Phoenix is the right market for Purplebricks and is possibly better suited than some other US locations in which the agency operates. He insists that the housing market and demographics for Phoenix make it “the sweet spot for the fixed-fee proposition.”
But he cautions that Purplebricks is just one of a number of new disruptive forces in the US residential real estate market,
“After five months in Phoenix, 75 total listings is a comparative drop in the bucket. If Purplebricks wants to make a dent in the US, these numbers need to be in the hundreds and thousands” says DelPrete, adding that there agency’s success Stateside is not guaranteed.
“Raising a lot of money doesn't guarantee success. And an organic pathway to growth takes large amounts of time, patience, and capital. Execution of this model is very much market-specific, and a lot of hard work. The business model scales linearly with people; technology is just an enabler” he insists.