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Daily bite-sized proptech and property news in partnership with Estate Agent Networking.
Purplebricks throws in the towel to employ staff like traditional agents
In 2012, Michael Bruce had a brave dream, to change how the residential agency was done, shifting to a model light in personnel and heavy on technology. Along the way, there were many victories, not least the trust of 60,000 vendors per year listing with the online agent.
By volume of listed property, Purplebricks dominates the market, typically listing as much housing inventory each year as the top three UK brands combined. But the problem was always the cost base of the online operation, meaning that for every year until this year, they made multi-million-pound losses, despite huge amounts of outside investment and lots of positive cash throughput generated by a pay upfront model.
To give an idea of how the tide has turned for Purplebricks, it has made just over £3.6 million profit before tax this year, its first profit ever, That profit was made up of millions in vendor cash paid upfront, for properties that ultimately never exchanged.
If that was subtracted from the £3.6 million, it could have been a different story, contrasting with the Connells Group’s half-year trading profit of £80.2 million.
Today though, through official channels, we learn that the tiny workforce of frontline agents termed Local Property Agents, who work for Purplebricks on a self-employed basis, are now to be employed just like traditional estate agents.
The downside for the business will of course be an uptick in costs, making its precarious profit situation teeter on negative territory.
Couple this with the recent unveiling of Purplebricks new fee structures (subject to terms and conditions which are not exactly tipped in the vendors’ favour) and we have the ingredients for a perfect storm; increased overheads and less cash in the bank amounting to a high cash burn rate.
For me, as a proptech and real estate analyst, the share price tells all. When Purplebricks was listed on the Alternative Investment Market in December 2015, its share price was 95.5p, rising to 498.5p in July 2017. Now it is 71p.
Purplebricks has been going since 2012, so after nearly nine years and the best housing market in memory, plus the right conditions (read: pandemic induced lockdowns) for an online model to thrive, it managed only a £3.6 million pre-tax profit.
It could be argued that any new venture requires cash to build a new model, but if it pivots its model to having to absorb the cost of employing staff, added with the ‘no sale, no fee model’ losses, you are probably looking at £4 million to £6 million in the red.
So, maybe this is an Uber moment, where businesses giving people the freedom to earn but still sidestepping traditional employment obligations like holiday, sick pay, etc. Is this finally being seen as a great model for employers to keep costs off the books? Whatever the case, it’s not great for those actually doing the work.
Or maybe it’s more akin to an Alison Platt moment. The former CEO of Countrywide, lest we forget, oversaw a 90% fall in the company’s share price in three short months when trying to steer Countrywide’s gargantuan fleet.
The Purplebricks C-Suite are surely thinking long and hard about the runway ahead of them, asking “how long can it last?”
TikTok comes of age as a medium to sell property
In other news, as reported by Nigel Lewis in The Negotiator, hybrid estate agency Hortons has had over a million views of its property inventory placed on TikTok, garnering 72,000 likes and over 7,000 followers.
On 15th January 2021, I was quoted in The Times as saying: “I encourage all estate agents to use TikTok…agents need to be in that space. If you are not in that space, you will die.”
Since that national feature in January, TikTok’s demographic has moved a long way. Older people are all over it and property is exploding on the video-sharing platform.
I know I’ve been beating the technology and social media drum since 2016, but has anyone been listening? Given the average age of an estate agent is 23, why are we so amazed that software runs our lives?
Maybe time to get aboard the digital express or face the end of the line.
Trading Standards back ViewRabbit’s “optional fees”
Michael Riley has been receiving a lot of brickbats, mostly from the very people who stand to gain under a pay-per-viewing concept put forward by ViewRabbit.
Now, Trading Standards seems to think the concept is above board, as those wanting to view have a choice; go the free route and arrange a traditional viewing or choose to pay £30 and get a confirmed instant viewing.
It appears that there has not been a widescale canvassing of what the public want yet, but given 72,000 people a year use an online agent to market their home, it seems there may well be a lot of folks who might like the idea of paying to hop to the front of the queue, given the present scarcity of property.
This is a news story that’s going to run, rabbit, run, rabbit, run, run, run.
Andrew Stanton is the founder of Proptech-PR, a consultancy for Founders of Proptechs looking to grow and exit, using his influence from decades of industry experience. Separately he is a consultant to some of the biggest names in global real estate, advising on sales and acquisitions, market positioning, and operations. He is also the founder of Proptech-X Proptech & Property News, where his insights, connections and detailed analysis and commentary on proptech and real estate are second to none.