Should Rightmove share its profits with estate agents?
2023 looks like being the first year that property sales completions will be under the one-million mark since 2012. In contrast to last year when 1.25 million homes were sold, and the 1.48 million high of 2022. With high interest rates and CALC, the steam has come out of the market and it is predicted only 930,000 will be on the move by the end of December.
For estate agents who rely on making a profit to survive, a reduction in the volume of completions directly hits them in the pocket, so a 30% drop in revenue is really going to bite. In contrast whatever the housing market climate is, Rightmove with its Saas model of monthly fees, plus add on services seems to be bucking the trend announcing a healthy 10% increase of revenue up to £179.5m, with an underlying profit of £133.2M.
So the big question is with agents clearly in need of help, could Rightmove offer a helping hand? Well some agents think so, and they are not talking about a reduction in fees, no some agents are openly talking about sharing some of the income streams that Rightmove is keeping to itself.
The dissent seems to be around redistributing some of the cash that Rightmove seem to be scooping up in an industrial manner around the ‘mortgage’ part of their business, where fresh buyers possibly are being taken out of play and pushed to a specific lender, meaning that down river an agent can not monetise that buyer as they are already sorted when it comes to property finnace.
As stated in the recent Rightmove report accompanying their glowing financials, it is clear that cash strapped estate agencies may not benefit from the ability to be the first point of contact from fresh applicants driven to the Rightmove site by the agents listing their properties for sale. For anyone who missed it, here is the extract from the recent company report that has raised a few eyebrows in the property community,
‘Consumers turned to our Mortgage in Principle journey in increasing numbers during the first half (of the year) to help them to understand their borrowing capacity and mortgage affordability, especially amidst the prevailing interest rate uncertainty.
We expect this to continue in the second half and therefore for the revenues in this area of our business, which we earn in partnership with Nationwide, to increase on 2022’s revenues’.
The point agents make is that it is the new listings that the agents supply that attracts the millions of pairs of eyes each month to the portal, so without the housing stock, the Rightmove model falls over. But if Lenders and Rightmove are collaboarating and signing up buyers for mortgages ‘upstream’ of the agents who pay to be on the site – well is it not a case of taking the bread out of the agents mouth?
I am sure the Nationwide is an appropriate lender, but for example if over a year just one agency lost two mortgage sign ups a month, their inhouse broker failing to convert a buyer as they were already using Nationwide direct, what would that mean in terms of lost income for that agent?
And I think this is the property portals existential problem, the second it starts to do ‘agency stuff’ it takes revenue out of the hands of its estate agency partners, who help them with their eye watering profits. So maybe it is not a ‘Say No to Rightmove moment‘, perhaps more an Oliver Twist bowl in hand asking for ‘More‘ of the gruel please moment.
Very few people feel that the Bank of England will not raise the base rate by at least 250 points in two days time, the unknown is what this will do to the housing market which has already stalled, and is technically catching its breathe as the UK goes on its annual holiday.
Agencies are still selling well priced property in key areas and at popular price points, but there now seems to be a two tier market dynamic at work, with four-bedroom detached residences and property stock that is in need of work sticking.
What is clear is that it is now fast becoming a buyer’s market, which is all well and good as many selling do become a buyer, but with second steppers selling at lower figures to secure a sale, the gap to that bigger home is still large, and with mortgage finance no longer a case of cheap money, it is possible that come September the market will stagnate as a mexican stand off plays out.
A lot of what will come to pass will hinge on if the rate moves up, and by how much, also the wording and the sentiment of the ‘wise’ panel, if they are talking of further rises this year, this could stun the market completely.
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.