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
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’