On­line es­tate agents shake the in­dus­try’s foun­da­tions

On­line por­tals are gain­ing on their bricks-and-mor­tar ri­vals by un­der­cut­ting them on cost and de­liv­er­ing the flex­i­bil­ity cus­tomers want, writes Rhi­an­non Curry

The Sunday Telegraph - Money & Business - - Front Page -

If you have used De­liv­eroo to or­der a take­away, Airbnb to book some­where to stay, or Uber to or­der a taxi, it will come as no sur­prise to find that the use of on­line es­tate agents is on the rise. Prop­erty search web­site Right­move says that the ma­jor­ity of its traf­fic oc­curs be­tween 6pm and 10pm, as peo­ple make the most of the fact that hunt­ing for a new home is no longer re­stricted to of­fice hours.

To­day around 7pc of homes listed for sale on the site are with on­line agents, an almost tre­bling from 2015 when that num­ber was just 2.4pc.

So while the mar­ket is still rel­a­tively small, it is grow­ing at a rapid pace. Last month Emoov and Tepilo an­nounced that they were plot­ting a £100m merger to cre­ate the sec­ond largest dig­i­tal es­tate agency in the UK, be­hind mar­ket leader Pur­ple­bricks, sig­nalling a new era of dom­i­nance for the sec­tor.

Some might say that it is not be­fore time. Tra­di­tional high street es­tate agents have a bad rep­u­ta­tion for poor ser­vice de­liv­ered by men in shiny suits who charge an ex­or­bi­tant fee. They have suf­fered as rents and busi­ness rates in­crease their over­heads, amid wider tur­moil on the Bri­tish high street that has seen shop­pers move their busi­ness on­line.

And go­ing on­line has fi­nan­cial ben­e­fits too: con­sumer or­gan­i­sa­tion Home­own­ers Al­liance es­ti­mates that UK buy­ers save an av­er­age of £2,500 by us­ing an on­line ser­vice be­cause those com­pa­nies’ costs are so much lower, en­abling them to un­der­cut tra­di­tional agents.

“The process of buy­ing and sell­ing houses has not changed but con­sumers now have much greater ac­cess to on­line in­for­ma­tion and are far more in­formed about prices, mar­ket­ing and sell­ing times,” ex­plains Mark Read­ings, who founded the first on­line es­tate agency House Net­work 15 years ago.

“They want lo­cal knowl­edge and ex­pe­ri­ence but above all they want value for money and a much bet­ter ser­vice – they are not pre­pared to pay the fees and not get the sup­port they want.”

Sa­man­tha Hughes was keen to save money when she in­structed Pur­ple­bricks to sell her four-bed­room home on the Sur­rey/ Hamp­shire bor­der ear­lier this year.

She had baulked at a quote from her lo­cal es­tate agents, who charged 1.5pc of the sale price. Pur­ple­bricks said it would charge her a flat fee of £849. The house even­tu­ally sold for £819,000, mean­ing Hughes saved more than £12,000 with Pur­ple­bricks.

The com­pany also of­fered her ac­cess to a phone app, which al­lowed her to see feed­back that view­ers had left, as well as book or can­cel view­ings at any time.

“I liked the idea of be­ing in con­trol my­self and be­ing able to han­dle view­ings and talk to prospec­tive buy­ers,” she ex­plains.

Pur­ple­bricks’s lo­cal ex­pert came to the house to value it, and ne­go­ti­ated with sev­eral po­ten­tial buy­ers on her be­half.

“We dealt with a real per­son who was lo­cal and our house was pro­moted on the in­ter­net, which is where ev­ery­one looks these days. The process gave us con­trol, ev­ery­thing was ex­plained to us,” Hughes says.

As on­line es­tate agents have grown, more tra­di­tional firms have floun­dered. The share price for Coun­try­wide, whose high street brands in­clude Hamp­tons, Bairstow Eves and Tay­lors, has lost almost 80pc of its value in the last five years, while Fox­tons’s value has plunged almost 71pc since it floated on the Lon­don Stock Ex­change in Septem­ber 2013.

In con­trast, Pur­ple­bricks’s shares are worth more than 250pc more than when the com­pany first listed at the end of 2016, at a price of £1.

That’s not to say that tra­di­tional es­tate agen­cies don’t still have their mer­its. Sarah Quin­lan, who lives and works in Lon­don, bought her first flat in Stock­well through her lo­cal firm, Oliver Burn.

“I did all my flat hunt­ing through Right­move and even­tu­ally put an of­fer in on a flat,” she ex­plains.

“That fell through but Oliver Burn, who had been mar­ket­ing it, found me an­other flat and my of­fer on that was ac­cepted.”

She was pleased that the agents’ lo­cal knowl­edge meant they found her some­thing else quickly, but says she wouldn’t have con­sid­ered trawl­ing the high street look­ing in es­tate agents win­dows.

“It’s too much of a faff,” she ad­mits, say­ing that she used Right­move to find prop­er­ties ini­tially and paid lit­tle at­ten­tion to which agent was be­hind the list­ing.

For most es­tate agents, the ma­jor bar­rier to in­creas­ing mar­ket share is cus­tomer visibility. With­out a shop front on the high street, it is harder for brands to make po­ten­tial buy­ers or sellers know who they are.

Yopa, which was set up by en­tre­pre­neur Daniel At­tia in 2015, en­listed Sir Mo Farah to star in its lat­est tele­vi­sion ad­ver­tis­ing cam­paign in a bid to in­crease aware­ness about the com­pany to po­ten­tial house sellers sat on their so­fas.

The com­pany works on a no sale, no fee ba­sis, only charg­ing cus­tomers when their home sale com­pletes. It says on av­er­age its sellers find a buyer in less than 28 days, and achieve 98pc of their ask­ing price.

Last year, es­tab­lished agency LSL Prop­erty Ser­vices bought a stake in Yopa, and Sav­ills also owns a share of the busi­ness, sug­gest­ing that even the tra­di­tional brands have be­gun to see the value in have skin in the game. High street chain Con­nells, one of the UK’S big­gest agents, bought on­line agency Hatched in 2015.

Russell Quirk, the founder and chief ex­ec­u­tive of Emoov, said that the com­pany merged with Tepilo be­cause “the mar­ket needed to con­sol­i­date”.

“A lot of in­vestors were only in­ter­ested in backing one or two com­pa­nies, and from a con­sumer point of view only the big­gest firms com­mand that cred­i­bil­ity and trust,” he says. The deal also in­cluded ur­ban. co.uk, an on­line let­tings agency.

The tie-up has had the added ben­e­fit of giv­ing him ac­cess to Tepilo’s high pro­file back­ers, in­clud­ing news­pa­per baron Richard Desmond and Dragons’

Den in­vestor James Caan, he says, who have given him busi­ness ad­vice.

But Quirk is con­scious that the dig­i­tal play­ers need to stay one step ahead of their high street com­peti­tors on more than just price. “The con­sumer’s first in­stinct is that they want to save money,” he ex­plains. “And yes, we charge the con­sumers less and we’re bet­ter value but we need to pro­vide the same ser­vice and out­come – if not bet­ter – than a high street es­tate agent.”

This could be­come more im­por­tant if the num­ber of peo­ple mov­ing home de­clines. Fig­ures re­leased on Thurs­day sug­gested that al­though house prices had re­turned to growth in May, ris­ing 1.5pc, the hous­ing mar­ket is be­com­ing more sub­dued.

Bri­tain’s big­gest build­ing so­ci­ety Na­tion­wide re­cently warned of a ma­jor drop in mort­gage lend­ing.

Pur­ple­bricks re­cently ex­panded into Aus­tralia and the US, and has a £150m war chest ear­marked for growth. Lee Wain­wright, who heads up the UK busi­ness, thinks the scope for tak­ing mar­ket share could be sig­nif­i­cant.

“I don’t think it will ever be 100pc on­line and I do think there’s room for high street agents, but we think it will be 30-40pc in the near term,” he pre­dicts.

The lat­est fig­ures sug­gest that at the end of last year it had more prop­er­ties listed on­line than many of its bricks and mor­tar ri­vals, al­though it does not pub­lish the num­ber of homes it ac­tu­ally sells.

Ul­ti­mately the high street has not moved with the times, Wain­wright says, with branches that only open dur­ing the day and lim­ited cus­tomer con­tact – the very op­po­site of what to­day’s de­mand­ing con­sumer wants. What’s more, few pub­lish their fees on their web­sites, mak­ing it dif­fi­cult to know how much their ser­vices will cost up front.

Typ­i­cally, prices range from 1pc to 3pc of the fi­nal sale price, of­ten work­ing out far more than the av­er­age flat charge that on­line com­pa­nies charge.

Wain­wright adds: “We’re suc­cess­ful be­cause we’re in­ter­act­ing with the cus­tomers in a way that suits them.”

‘I liked the idea of be­ing in con­trol my­self and be­ing able to han­dle view­ings and talk to prospec­tive buy­ers’

‘We need to pro­vide the same ser­vice and out­come – if not bet­ter – than a high street es­tate agent’

The days of scour­ing es­tate agents’ win­dows for a new home seem to be num­bered, with house­hunters say­ing ‘it’s too much of a faff’

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