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Gove the great leveller is not levelling up the lettings sector
The National Audit Office (NAO) has just published its thoughts on the current state of affairs in the private rental sector. Its so-called regulation of private renting report. And it does not pull its punches saying that the sector is still a shambles and that the government needs to make a decisive intervention…although it can’t, owing to a lack of meaningful data and insight.
Most worryingly it puts great emphasis on the fact that the actual housing stock is itself not secure or safe, which clearly should be a fundamental given. After all, tenants pay cash to live in proper accommodation.
The report also states that the whole of the 4.3 million tenancies that make up this sector are subject to a very shambolic and antiquated layer of regulation which often does not have joined-up thinking, leaving those most in need at the bottom of the pile.
Ben Beadle, CEO of NARLA, supports the findings of the NAO, saying the PRS “needs to ensure that homes are safe and meet all required standards.
“Too often the approach to this has been piecemeal. It has led to a proliferation of initiatives such as licensing, banning orders and a rogue landlord database with little evidence to show they are working.”
Beadle also feels that there needs to be a more fundamental change. ‘‘We support the NAO’s call for a more strategic approach,” he said. “There is a pressing need for a better evidence base to ensure the system focuses on rooting out criminal and rogue landlords who bring the sector into disrepute.”
On balance, the Department for Housing and Levelling Up Secretary Michael Gove will, in the new year, be reporting on ways to help this sector, but many feel that the government are really trying to squeeze the independent landlord and replace them with larger institutional type landlords who can look after tenants at scale.
My worry is that many of the local authorities who themselves are huge landlords providing social housing, are often providing substandard accommodation and are as culpable as supposed ‘rogue landlords.’
So, are large institutional landlords backed by pension fund cash the silver bullet to the very real problem of how do people rent suitable, safe, and proper accommodation? Let’s see.
Is Purplebricks on the edge of collapse as share price drops 20% in a day?
All signs point to the fact that Purplebricks may be set to fail. Yesterday its share price tanked.
This is a shame because as a concept Purplebricks, an online national agent with no physical offices, a tiny workforce and a cash upfront fee model is a cash cow that cannot fail. Low running costs, and instant cash each time a property lists.
After obtaining close to £460 million of investment and cash from customers flowing through it since it started trading, its share price has gone from 96p to 568p to 25p yesterday. And its cash at bank has dwindled from £180 million to around £56 million at present, with looming liabilities that could eat all of that cash if the litigation that seems imminent comes to pass.
Yet it consistently lists more property than any other agent annually in the UK, so clearly it has a market, and yet it is on its knees…why?
In my opinion it has had no clear strategy for the past four years. Low spend on technology which should have been the key area of expense, a propensity for vanity projects, and worst of all a perceived indifference to the needs of the vendor client.
From my viewpoint, big businesses often fail due to the incompetence of the C-Suite, lack of planning, lack of leadership and lack of knowledge. Purplebricks was a digital business, with a great concept behind it. It looks likely to fail because the wrong people have been running it, thinking that investment would always cover their mistakes.
Pouring more cash into an enterprise with a CEO who has never sold a property in their life is questionable. Agency is a complex business, the top operational person should know that business backwards. Countrywide Plc. made the same mistake with Alison Platt.
Some pundits say that Purplebricks can weather the present storm, due to its £56 million reserve, but if its revenue (cash from instructions that it lists) drops by 40%, as nationally all agents have seen a 40% drop in instructions, then in six months it will burn another £6 million.
Add in the potential £9 million lettings liability due to the deposits scandal, that leaves £41 million of cash. But if the self-employed LPEs are really PAYE employees, and Purplebricks has to settle back payments to them and HMRC, they may have an extra liability of £20-£35 million, leaving very little cash to trade forward.
Purplebricks’ biggest problem is its 25p share price, which in turn affects its market capitalisation value. Add in the lack of C-Suite and Board governance, its mounting litigation problems, compliance problems, senior staff leaving and potential lack of revenue and it is easy to see why it has delayed reporting its latest standing to its shareholders.
Sixty thousand vendors a year use this company, which is huge. But the customer UX (vendor and landlord, buyer and tenant) is typically low, and that is what tech is meant to handle, but where is the high-level tech in this online business?
There is more tech on the apps of most ten-year olds’ mobile phones than in the Purplebricks empire. My advice to Purplebricks: Go truly digital or go home.
Estate agents working from home: is it Plan B or a future trend?
Boris Johnson’s government is now saying that if workers can work from home they should, which means many agents will be doing just that. Perhaps the bigger question is whether this is a sustainable model, and could it be best practice?
When Lockdown 1.0 occurred in March 2020 and agents were forced to shut up shop, thousands of estate agents and lettings agents suddenly realised that their business was very analogue and based on paper systems.
At least one large corporate agent and numerous independent agents found that basic communication tools like their telephone systems could not adapt to routing the public’s calls to its staff at home, and vast cash was spent to deal with this weakness.
Then as all agents understood that the lockdown was not going away, piece by piece agents put together strategies for running the business not from the high street but from workers homes in their own street. This meant that automation of processes and the utilisation of digital solutions overnight became front and centre.
Of course out of the eighteen thousand agents, some were already very tech-savvy, having invested in many property technology services to run their systems. So when the office doors were locked it was pretty much business as usual.
In fact many rentals businesses that had huge portfolios that were using advanced software, realised that they did not need their teams in the branch at all, as long ago were the days when a tenant or a landlord wandered into the branch to do business.
As we moved out of the first lockdown, and into subsequent lockdowns, the adoption of other technologies became prevalent, especially the concept of viewing digitally via virtual reality or video streaming, cutting down the amount of physical viewings.
Agents started to say that adoption of this meant for less physical viewings, typically four or five had to take place to secure a sale, down from the usual pattern of twelve to fifteen.
Regarding anti-money laundering and proof of identity, the pandemic saw a flurry of smart solutions being adopted, also spurred on by the adoption of open banking allowing a real look into a person’s financial make-up. Making better decisions for letting agents and estate agents about who was suitable to do business with.
Many people say that agency is a ‘people business’ as if having a high street office where people can meet face to face is an essential tool for looking after clients. In 1985, that might have been true, but the customer of 2025 wants fast efficient solutions to their buying or letting needs, and they expect to do this instantly and digitally from their sofa, morning, noon or night.
Since 2016, over 3,000 high street banks have shut, and nine still shut every week in the UK. The fintech revolution is ten years ahead of the proptech revolution in real estate, with very few people now, not banking online.
So as the UK eases into a soft ‘lockdown’ which may harden in the weeks ahead, ‘the need for physical branches for agents is at tipping point,’ and the true battle is understanding how to digitally transform estate agency businesses for the future.
So that if Plan B becomes the norm, and offices have to close their doors and leave offices empty, their businesses can still thrive as software is working 24/7 alongside the human workforce. Efficiently enabling the commercial functions of agents up and down the country.
Over £1.6 billion invested in UK proptech companies in 2021
Second only to New York, London is the global centre of the proptech space, and now it has been reported in The Times that in 2021 alone over £1.6 billion of capital was put into property technology companies in the United Kingdom. 68% of that in and around London.
This comes as no surprise to me, as I have seen in the last five years a huge amount of cash being pumped into the whole proptech start-up, scale-up and exit markets. To give some idea of how huge the digital transformation of real estate is, in 2017 when I first became an analyst and consultant in this sector, investment was around about £120 million in the UK.
We now have seen a lot of VC concerns set up accelerator programs to superpower maturing SMEs, all solving different problems in the plan, build, sale, lease and asset management verticals.
Including ESG and sustainability within contech, grappling with the remediation issues caused by the cladding problems, the list of issues that real estate faces is infinite, and a whole new generation of bright minds are using code to deliver commercial answers.
Recently we saw the very first SPAC, or blank cheque company, being formed in the UK. Its purpose is to acquire and provide the working capital to scale up property technology companies. This is a clear sign that what is happening Stateside, and across the world, is now happening here.
Proptech of course touches many sectors. It is not just the commercial real estate sector or the residential housing market, which itself is only a £6.5 billion annual industry – it covers every vertical that touches the property asset in some way.
At present in the UK and around the world the real estate sector is pouring investment into: Artificial Intelligence (AI), Big Data, Building Information Modelling (BIM), Internet of Things (IOT), Virtual Reality (VR), Augmented Reality (AR), Shared Economy.
In addition, as a bit of a side bet, capital is being spread around on anything else that is scalable and might be the next big thing. And if we look just at the residential and commercial sector, proptech investment is pouring into the following list.
By 2030, most of the analogue practices in real estate will have undergone a digital transformation that will power the way we relate to property, utilise it and transact and build it, and most importantly how we do all of this within a framework of looking after the planet too. Software really can leverage good outcomes for all stakeholders, and that means people and the environment they live in.
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.