New property legislation kicked into the long grass
Following a weekend of Wimbledon excitement, Monday has hit with the reality that Greg Clark has become the new Secretary of State for Levelling Up, Housing and Communities in the wake of Boris Johnson’s resignation. Under Clark will be two new ministers for housing, Paul Scully and Marcus Jones.
We know that Mr Clark has some grasp of housing due to his prior experience as Secretary of State for Communities and Local Government, which held for just over a year before being replaced by Sajid Javid.
However, ministers Scully and Jones have virtually no background in this sector. Is this a problem? Well, not entirely. The likelihood is that when the new Prime minister is installed a new Housing Secretary will be put in place. Should they choose to d the levelling up slogan and face the hard facts? Let’s see.
Depending on how this week pans out we could be waiting until September to find out who the new Prime Minister will be, which means that everything in the recent Queen’s Speech is on ice for the time being. Ultimately it will be subject to the views of Boris’ replacement and their team.
This itself begs some questions. If Priti Patel takes the pole position, will rogue landlords be on a one-way flight to Rwanda? If Jeremy Hunt gets into power, what big ideas does he have about the housing sector? Will he be adversarial, as he was while the Health Secretary? Or, if the giveaway Chancellor Rishi Sunak takes office will he tinker with SDLT again?
In an uncertain world, with the cost of living crisis being mentioned as a soundbite by all politicians, rampant inflation, and the likelihood of regular monthly upward interest rate rises from the Bank of England, we may well see a very different landscape in the property sector come September.
Add in the holiday season that is upon us, it seems to me that we all could be in for yet another bumpy ride this autumn, and in more ways than one.
Purplebricks increase fees by 30%. Will this kill them off?
The business model of Purplebricks was founded upon a simple idea – take cash upfront to list and sell low-value property at colossal volume. This appeals to cost-conscious sellers and those who enjoy do-it-yourself property selling. Why? Because much of the work involved in actually getting to exchange is carried out by the owners.
The model works well in the sense that although the company has only made a tiny profit in all the years that it traded, Purplebricks is set this year to list probably 80,000 plus properties in the UK, making it the largest lister of properties.
Critically, Purplebricks generates a lot of cash up front. Those 80,000 listings will generate nearly £90 million in revenue. A nice little earner.
But Helena Marston, the incumbent CEO with zero knowledge of the property market, or of being a successful CEO, has the brilliant idea of increasing Purplebricks fees by up to 30% starting on July 25th.
“…the unique selling proposition of Purplebricks, the most compelling virtue of ‘we are cheap’, will no longer ring true at a time when everyone is counting their pennies.”Andrew Stanton
So, the unique selling proposition of Purplebricks, the most compelling virtue of ‘we are cheap’, will no longer ring true at a time when everyone is counting their pennies. In fact, in some areas, it will be a more expensive alternative to a local traditional agent.
In my view, it is like saying we are rebranding Poundland to Onepoundthirtypenceland – not what you want to be doing in the middle of a cost of living crisis. It’s a bit of a shocker for loyal customers who know and understand the brand, too.
The bigger problem is that increasing a fee from £1,499 to £1,999 overnight makes it harder for the frontline listers to secure instructions in an ultra-competitive listing market, where stock is down by 27% nationally.
Maybe Helena Marston would do well to go out with some of her frontline troops later in the month to see how potential vendors take to being charged an extra 30% upfront.
I know from training over 200 agents across 30 years in the business, upselling the associated fees is always possible. However, increasing an average fee from say 1.6% to 2.4% overnight with no add-on service is commercial suicide.
In many ways, Helena Marston reminds me a lot of another CEO, Alison Platt, who in four years mismanaged things at Countrywide PLC so poorly that the share price fell by 90%.
One of Platt’s bright ideas was to try and imitate Purplebricks, offering low fees for a traditional agency service – madness. Had she looked at the Countrywide business model and realised what fees were needed to break even and make a profit, she would have soon realised her folly of charging vendors a loss-making fee.
Purplebricks is expected to announce an £8 million loss for last year. It might be for this reason that the former CEO Vic Darvey decided to pursue new opportunities.
There’s always a bigger question, though. Over the coming years, what will the annual results look like under Helena Marston’s stewardship?
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.