PROPTECH-X ‘Proptech & Property News’: New Housing Minister | Why Purplebricks is Doomed

Andrew Stanton’s daily proptech & property news in association with Estate Agent Networking

Stuart Andrew becomes housing minister. Does it matter?

After Boris Johnson’s latest reshuffle, Stuart Andrew joins the Department for Levelling Up, Housing and Communities (DLUHC) as Minister of State for Housing. He is the 32nd housing minister in 38 years, meaning that the average length of post is just fourteen months. 

Stuart Andrew joins a long line of notable politicians to represent the role, from both sides of the house, starting with the Conservative Graham Page, who held the position in 1974.

Page was then superseded by John Silkin, followed by other prominent ministers like Michael Howard, George Young, Yvette Cooper, Grant Shapps, Alok Sharma, Dominic Raab, Esther McVey and Christopher Pincher, to name but a few. 

George Young managed to stay the course for three years and eight months, but that was over thirty years ago. The more modern trend has been that a housing minister does not hang around. Esther McVey lasted only seven months, for instance. 

Does this really matter though? Is it not just how politics works? 

Well, I think that very much it does matter that something as important as housing, the basic right of every person to have a roof over their head, is serviced in such a way. Of course, we have the housing secretaries, presently Mr Gove is also titled the Leveller also, and their remit is to do the big thinking…or not, depending on which side you sit. 

But the housing minister is the lynchpin in many ways between Whitehall and the public and all the bodies that build relationships within the department. Each time a new minister comes in, typically with zero knowledge of the sector, by the time they get up to speed the revolving door opens and a new incumbent appears. 

What results is a piecemeal and fragmented housing policy, with many stakeholders gritting their teeth thinking “here we go again, another inexperienced minister.”

What I find extremely sad is that with the cladding crisis, fire safety and even the Grenfell tragedy still all very much unresolved, plus rampant housing inflation, economic and wage inflation, and the Bank of England using the blunt instrument of interest rate rises to slow the ineptness of a giveaway Chancellor and his SDLT holiday, a huge swathe of people in the housing nexus will just not be looked after. 

I am sure Stuart Andrew will be a diligent minister like the dozens before him. The fact he is a landlord might temper his boss Michael Gove’s populist view that rogue landlords need sorting, put them on a register and scrap Section 21 as tenants have rights. 

Gove might be told by Andrew that landlords in fact like their tenants because they pay rent. Landlords also like to look after their valuable asset, the properties they let out. And the local authorities not in the PRS have an appallingly high level of substandard housing not fit for purpose, so maybe more focus is needed here. 

Before you know it, I will be reporting on the next housing minister, so the bigger question is will anything substantive have been done with housing in the interim? I think not. Soundbites, red tape and big visions with no follow-through are the most likely outcome.

Why is Purplebricks doomed?

Over the last four years, I have written over ninety pieces on Purplebricks and over twenty articles and analytical reports based on the online agency model. Just to be clear, I do not dislike the concept of the general public having another option to sell and let property which is different from the traditional agency model.

What I have an issue with is that the digital transformation of real estate, the digitising and digital reimagining of how to do things more efficiently using the power of technology and software, falls very short in the present online models of selling property. Purplebricks, as the market leader in its sector, has not upped its game for years.

In fact, it is now moving towards being more of a traditional agency than at any time since its inception. It is ironic that years ago Alison Platt, the CEO of Countrywide Plc, pivoted and thought changing Countrywide’s model to a Purplebricks low fee model would buy the market. It failed.

Now Purplebricks are trying to be a corporate agency, except without the workforce and offices needed. With the introduction of refunds if they fail to sell, PAYE employees may be the final pivot, or perhaps it’s a no sale no fee model, or even buying some offices and cutting that huge media spend.

The one USP Purplebricks had was their anti-agent advertising because they charged a commission, knowing that for the 10% of vendors who are fee sensitive, this would be a draw and a common call to action. 

The hidden dynamic being the LPEs is that they were all earning an instant commission from taking the instruction. A hidden mechanism, incentivise listers to get stock onto the market. The more you list, the more cash for the company and more monthly commissions for the LPEs. 

Do I think online agents are doomed? No. 

Do I think the current online agency model of Purplebricks is doomed? Yes. 

Why? Because they have fallen into a trap. Someone looked at the analogue system of the agency, a paper-based and traditional system, and subtracted as many people as they can get away with. In their place, they’ve added just a dash of technology, thinking that it’s up to the task of replicating the human element and providing enough efficiency and value to keep them coming back. 

The desired outcome was simple – an agency that sells a certain type of property at a certain price point in certain geographic areas, designed with a cost-conscious client in mind. 

However, it’s been far from simple. Purplebricks has burnt through hundreds of millions to keep the dream alive. Just imagine if that had been spent on proptech experts, coding and proper digital transformation to create real proptech solutions for antiquated processes. 

We’d be seeing something very different, that’s for sure. 

“With many sectors and categories having seen a significant shift online during the pandemic the Estate Agency sector has not followed suit with a relatively low & slow rate of growth persisting.”

TwentyCi Homemover Report

If I was in CEO Vic Darvey’s place I would have gone to the general public with a question. In the next five years, how will you be doing property? Buying it, selling it, renting it… letting it out? Also, what technology will you be using to transact in your daily life?

Instead, their bright idea was to sponsor the Olympics and burn cash on television advertising. Pure genius? Or is it pure genius for the coffers of the advertising partners? There is a big reason estate agents in the main do not burn millions in vanity advertising projects, they do not work.  

Where it has all gone wrong is that agile new businesses are outfoxing huge corporate businesses, the type accustomed to peeking at their competitors and then tweaking their business models to make marginal gains. True digital businesses do not play by these rules. 

Digital transformation has changed the accepted rules of business. But some businesses don’t accept digital transformation in the truest sense. By digital, of course, I mean the super-fast and frictionless way insurgent companies burst onto the scene. 

They operate more efficiently, connecting people and products, services, devices and supply chains together. They’re the ones who achieve success through novel business strategies. 

If you want to be an online success then it is time onliners became digital, for real. Purplebricks, let’s not forget, has over 60,000 vendors out there in the UK. It shows that a huge chunk of the public wants to do things differently. It shows that they’re frustrated, too. They see other areas of their life – entertainment, shopping, travel – made a great deal more efficient by technology, not just a little bit. 

What is clear in our shared economy is that a fast and great user experience will drive transformation. People will adopt it. The signals are already there. 

Take the relatively recent rise in micro home deliveries, for example. Paying £1.80 to have a packet of nappies delivered to your door in 10 minutes shows us when, how and where people want to use these types of services. 

Now get some future-focused people and build a proper team to solve the problems that the public have when doing property. To all the bright young people out there, here is your challenge – build that online agency, make it like Amazon, and you will scale the world.

Sadly for Purplebricks, whose stock price is now sub 20p a share, it has forgotten its roots. 

Purplebricks claims to be a digital business, but true digital businesses innovate at scale, use strategy to get to the top quickly and stay there, add value to customers, offer new value propositions, drive significant efficiencies and profit.

Just one year ago, Purplebricks made a profit of £6.8 million after six months for its total operations, now Vic Darvey announces a £20.2 million loss. 

That’s a significant downturn. You do the maths and you’ll see what I’m getting at.

Andrew Stanton is the founder and CEO 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 and editor of Proptech-X Proptech & Property News, where his insights, connections and detailed analysis and commentary on proptech and real estate are second to none.

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