Or is it? We have, of course, been here before and if history shows us anything, it is that budget online agents are not significantly more popular now than at happier economic periods.
For example, just over a decade ago we had the global financial crisis, considered by many to have been more menacing for living standards and the wider economic landscape than the current cost of living crisis.
And at that time there was a wide range of online agencies to choose from - HouseNetwork, Hatched and Housesimple were early examples in the 2000s followed by Sarah Beeny’s Tepilo in 2009 and Russell Quirk’s Emoov in 2010. Shortly after the financial crisis eased Purplebricks arrived in 2012 and then easyProperty in 2014 and Footsteps and Yopa in 2016. There were lots of others, too.
So what happened in the financial crisis? Did anxious cash-strapped sellers rush to online agencies? And did that break the dam allowing a rush of interest from buyers carrying on into the financial glory days of the mid-2010s?
Well, no.
Market share information on a like-for-like basis is hard to come by but research from a variety of reliable sources including TwentyCi, The Advisory, the old Countrywide research team and trade publications suggest that market share for online agents has never exceeded 15 per cent, and even then that was in only some parts of the UK and applying to only some segments of the market.
At the time, around 2010, that seemed a starting point not a career high.
Sarah Beeny, when setting up Tepilo, bravely hypothesised and told me during an interview in 2010 that we would still need traditional agents in the future but that there was every reason to believe online agents would move on to take 50 per cent market share.
Rob Ellice, then chief executive of easyProperty, told a conference in 2014 that in the first four weeks of its online residential sales service, the company listed 1,900 properties for sale, with 30 properties going under offer.
And according to a Property Industry Eye report, Russell Quirk told a (different) conference as recently as 2016 that “incumbents talk about online at only 5%, but if it’s doubled in two years, then where it could get to in 5 to 10 years, then I’d be a very happy individual.”
By this time even the journalistic excitement over online agencies began to fade (dear reader - I admit I too, thought online would be bigger than it was_ and in the past five years it’s become the norm to report online agency failures rather than successes.
So look where we are now, at the end of 2022.
Analysis by TwentyCi has revealed that online agents now take 7.6 per cent of market share - based on exchanges - with Purplebricks, Yopa and Strike responsible for over two thirds of that business.
TwentyCi’s most recent Property and Homemover report says: “The largest market for hybrid/onlines has been consistently in the lower-value ranges as they struggle to convince higher-value sellers of the appeal of their approach. This continued in the third quarter of 2022, where the share was as high as 9.4% in the Less than £200,000 category but decreased progressively in every higher category to a low of 1.2% in the £1m+ bracket.”
There are other measures of online agency failures. It’s impossible not to mention Purplebricks’ share price collapse from an all-time high in 2017 of 525p to under 10p this week.
More anecdotally, just look at the comments left on trade press stories about online agencies. There was a time that the mere mention of Purplebricks would inspire scores of comments; now yet another story of that agency’s problems scarcely raises an eyebrow. If that shows anything, it is that no one - absolutely no one - sees online as a long-term seriouss rival to the dominance of traditional agents.
Of course there will be flurries of success, with the likes of Strike making opportunistic hay when it enters new territories or has a new advertising campaign, although these are likely to be drowned out by the more typical stories of online agencies in trouble - Doorsteps, for example, has recently bitten the dust, just a few years after being heralded as the future of house selling.
I haven’t even spoken of the scale of start-up costs and lost investment that online agencies have incurred - that’s for another day.
I think the point has been made. Online agents have a place in the industry but it’s not going to transform the landscape now having spent almost two decades failing to live up to expectations.
So my next job is to drop a friendly line to the author of that article saying that this is the time of the online estate agency. Because believe me, it isn’t.
*Editor of Letting Agent Today and Landlord Today, Graham can be found tweeting about all things property at @PropertyJourn
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An excellent piece Graham. Lets be honest, most of the original online agencies have gone, despite the big boasts, Strike offers a model that doesn't charge sellers an agency fee - easy to do when it's not your own money and never makes a profit and you only have to look at the performance of PB over the last 2/3 years to see it isn't being run as a great business. That aside, the bigger issue I see now as we head into a severely challenging market is as an agent, you are going to need a much wider marketing mix and not just be reliant on the Portals, as both listings and buyer enquiries drop off significantly, at least for the time being and lets be honest, nobody really knows how long this down turn in the economy and cost of living crisis is going to last. So, good established agents with fluid and well managed databases, social media marketing, face book groups of pre qualified buyers, good old fashioned agency - picking up a phone and talking to people is going to be so important. There will always be those who lured in by the promise of a cheap fee, but they could be throwing good money after bad and ultimately losing more money on their selling price than they need too. Interesting times ahead, but I definitely do not see the rise of online agents in this climate.
Online like PB that charge up front and don't give the service I agree with you.
However the best model format is self employed Hybrid model, you get a motivated, professional, great service at a lot less fee than the high street agents. Its not suited to everyone, but the right person does it it flies.
17 years on the proof is in the pudding....
I think that if I ever did mastermind my specialist topic would be online agents, here in the UK and globally, having written nearly 100 pieces of research / articles on them starting in 2017 with a piece you part published Graham in 2017.
Being a traditional agent for 32-years, in my former life up to 2016, many think that I 'dislike' online agents, in fact I do not, I just do not think they are anywhere near a digital model that works for the stakeholders and end users.
Purplebricks is not really an online agent, they just cut out the normal agency team, retained 'listers' and allowed the general public a low cost entry model to list on the major portals, with a DIY model once a sale was agreed.
Hardly an advanced digital transformation of the real estate model, which is why it can never make profit - yes it generates cash ... but all that cash goes out the other end and some.
Where I take a different view to you Graham, about online agents being the future - well it will be a case of the public embracing the model, not the model forcing itself on the property consumer. There will be a light bulb moment, and the old agency model will change.
Let me explain, yesterday I spent a few hours Christmas shopping - deep joy - and as I queued at the checkout, I wondered why I was queing to talk to a human, and swipe my smartphone to pay?
The next shop I went into had six payment points and not one human in site, everything was self serve, there were no queues. For me it was that light bulb moment; I went out of one shop feeling low UX, and the shop next door allowed me to just scan, pay and walk away.
Now I know that self scanning has been around for many years, growing in the grocery space first, but to walk into just a normal shop selling various consumer goods, and no queues, and just self service, well no doubt the cost of setting up 6 paypoints is not cheap, but the saving of wages, speed of sale and UX was for me - excellent.
At present the online agency journey runway is clunky and full of craters, but as time moves on, an onliner will actually build a journey that nurtures a vendor, landlord, buyer and tenant, and the other stakeholders. And very few humans will need to be in the process.
As the flipside - the traditional agent - well, in the past three months I have 'attempted' to buy about a dozen properties in various locations around the UK, and the service level has been 1 out of 10, and I am being generous, I feel very sorry for the vendors who entrust these agents with their homes to sell. The lack of communication, depth of knowledge about the property asset being sold, or just a wall of silence that is a typical experience, punctuated with a random automated email is the best I am getting.
Online agents are not the traditional agents enemy or opposition, the biggest enemy that faces agents is their inability to modernise their operations and business model, and I do not mean a new CRM or website.
Put another way, imagine for a second estate agency did not exist, and in 2024, a new industry came into being the ability to buy, sell and lease property, what would be the best way to do it? I guarantee that it would not look at all like our present glacially slow processes built upon the crumbling business models of the last century.
It would probably start with all land and property having a centrally held digitally forensic record that all stakeholders 100% could rely upon. Then lending, sale and lease could be achieved in hours rather than months. It might not be tomorrow, but it could well be far sooner than you think.
I think it is now clear that the market share for online agents is nowhere near what was predicted some years ago. There will always be a certain percentage of people who put more emphasis on costs than the comfort of having an estate agent. I don't think it would be unreasonable to think that 10-15% of all sellers would be of this mindset. The current figure is approximately 7%. There is no doubt that technology will assume the communication and administration roles within the transaction in the coming years thus allowing the agent to do what they do best - value, hand hold and manage property sales . Be under no illusion this shift will not be agent led. It will be driven & demanded by the consumer just like what has happened in every other industry. Agents who do not facilitate this will be left behind. Another shift in agent behaviour will be the gradual move off the High Street allowing the smaller independents to deliver a leaner, streamlined, tech enabled & cost effective service. Why have a retail office when footfall in no longer relevant? All agents need in their primary area of activity is a strong visual presence.
Online estate agency can work - just not with the model, or the people that have pioneered it.
They are backward thinking and have relied on what other agencies have done. A USP of being the cheapest isn't attractive.
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