Investment website The Motley Fool says that people should forget buy-to-let and buy shares in Rightmove and Purplebricks.
It says of Rightmove: “The reasons for its popularity are clear: 77% market share, operating margins of 74.7% over the past six months, steadily increasing dividends and share buybacks, and a major shift in the way people shop for property.
“The downside for those on the outside looking in is that investors enamoured with these qualities have piled into the shares at a rapid clip and they trade at a lofty 30 times forward earnings.
“To live up to this valuation, Rightmove needs to continue growing like a startup rather than the £3.8bn juggernaut it has become.
“While the past six months saw growth in the number of agency customers only rose 1%, it was able to squeeze enough extra sales out of existing customers to increase revenue per agency by a full 12%.”
The Motley Fool says growth in traffic “means estate agents will pay a premium to list on Rightmove”.
It says it will be interesting to see whether Rightmove can grow its international business, but concludes: “At the end of the day, Rightmove’s fortunes remain largely tied to the health of the domestic housing market, but it’s partly insulated thanks to charging agencies a subscription fee rather than per listing.
“And with the average monthly fee only £789 it would take a sustained and dramatic downturn for agents to begin cutting back on its services.”
The Motley Fool says that Purplebricks is for the more risk-hungry investor.
It says Purplebricks’ combination of a fixed fee and local experts “gives it a differentiator in a profusion of online estate agents and provides customers with greater peace of mind for such an expensive and life-changing transaction”.
The market for Purplebricks’ services is massive, it continues, “as sellers increasingly balk at paying up to 2.5% of the sale price to estate agents who may do no more than list a property on Rightmove.
“This is evidenced by the 448% increase in year-on-year revenue for Purplebricks.
“Now, the company is only two years old so this growth should be taken with a heap of salt.
“Furthermore, it was loss-making to the tune of £10.5m last year due to high marketing spend. But with a multi-billion pound market to disrupt and the company expecting its first profits next year, Purplebricks may be worth following for growth investors.”
[EYE disclaimer: We do not give investment advice or endorse the advice of others. Do your own research.]
Comments (18)
PB is still priced £1 per share more than they should be. Maybe some motley fool has some shares he wants to off load ?
Is everyone else sick to death with every fool inflating claims of what agents earn and then stating they do very little for it. I can do appraisals, good photography, run the software, update the website (and help design the new mobile friendly site), top quality metropix floor plans, viewings (typically over 30 on most properties), feedback and advice, offer management, proving ability to proceed, dealing with solicitors/ contract chasing), and throughout keeping people happy and informed, all for an average fee of less than £2,000 plus VAT. All of it is to get the very best sale price price for my vendors. I reckon on average all that adds up to 50 plus man hours….so less than £40 per hour or probably between £20 and £25 per hour after you have paid for the overall marketing costs (Rightmove,Zoopla, website, software, office etc.).
What rate per hour do people pay their dentist, or their solicitor, or their IFA, or their consulant for a private medical consultion…..typically over £100 to 200 per hour. I understand there are more qualifications involved, but I am sure many double glazing salesmen earn more on average per hour than I do……and as a client you want me to find and engage the absolute best buyer for your most prized assett…possibly obtaining you an extra £10,000 or more on your sale price from the care and dedication.
Comments welcome!
You are right but the scam they are using is the TV to tell people they can do the same job for a fraction of the price and the public are falling for it …… and this is the decade of consumer protection regulations coming out of every orifice except ….. on-line only agents advertising. Scandalous.
Motley Fool reminds of the Whacky Races. just as shaky. What a load of tosh re PB. Did you see they are putting up their highway robbery tariff.
Yeah yeah yeah ….. so what, the important factor for any investor is so obvious by its omission …. what is the investment return likely to be and what has already been given? We all know they have only made a huge loss.
Investment advisors do little more than sit at their desks and write badly researched and just plainly silly articles,that my 15 year old daughter could have done a more accurate job of. Presumably they get paid shed loads of money for doing so as well. Talk about the pot and kettle, except in this instance the kettle does far more for far less than stated!!!
The clue is in the name!
2.5%!! since when?
“as sellers increasingly balk at paying up to 2.5% of the sale price to estate agents who may do no more than list a property on Rightmove”. <<<—- which one of my 50/60 hours a week does this “Fool” person wish to experience in my shoe, whilst I simply chuck a property on rightmove and wait for a sale to come along? Perhaps he’d like to join me on my 7:45pm viewing tonight?
The Motley Fool says growth in traffic “means estate agents will pay a premium to list on Rightmove”.
* Many agents claim to spend £1200 – £1500 pcm. So who is getting cheaper deals costing others more?
Portals only take listings. They don’t give listings back. Agents need a tool that helps win the instruction.
As for PB. The ‘Fool’ is right in saying anyone on PBs early investment run would have made big returns. ….. but then many told the Emperor he had nice new clothes.
I think most agents that pay £1200 per month or more have lots of bolt on extras, such as microsites, valuation alerts and property listing enhancements. The base cost, without those is a lot lower.
The tools that are game changers for getting instructions for independents will hopefully be in construction soon, well as soon as I am out of hospital and can sort out a really good app developer. Had plenty of time to think about them since being laid up.
Yet again another fool giving out advice who doesn’t understand the property market. He seems to be confusing investing in a buy to let property with investing in an estate agency. If RIghtmove shares really have grown by 12% in the last year, then this isn’t massively different to the house market growth of 8-10%, so not only has the investors equity increased in the property he or she bought but they have a rental return as well.
And yes i sit in my office every day, doing no more than listing properties on Rightmove for my 2.5%, what a boring, yet rewarding life this would be.
What would happen to Purplebricks share price if everyone who had not sold their property could suddenly claim a refund of their listing fee?
Even in a tough market an ‘expert’ ought to be providing information to a principal that will ensure the timely sale of their property usually 3-6 months max. If the experts’ advice is deemed negligent no fee is payable.
Its not how the internet generation see estate agency, as ‘experts’ I’m afraid. Its the ‘click culture generation’ that they are aiming at who don’t have any understanding of a professional relationship. These are the people who have 1000’s of friends, but have never met them, their communication is through XBox or Playstation, they talk via text and if they like something, they tell everyone via a like button! PB are having success with the mass market houses and flats with lots of comparisons and a clear cut market. Of course, a boom market has helped flatter them. As for Rightmove, I challenge everyone to go to their bank and say that their business is consistently offering a 75% return on capital. That’s why brokers and the market and marketeer’s like Motley Fool like them. For those who don’t follow the market, the Rightmove share price in the last 2 years has ranged from around £19 a share to todays price of £42 a share !! A 100% profit for those with the right timing. A clever investor will have property investments, a home, shares and no expensive divorces or luxury yachts!! Investors are delighted that between Rightmove and Zoopla they can keep extracting profits from estate agents old and new…because of course there is no threat to their income or how they can monitise your data……or is there, let me think……..
It has taken 15 months but from Saturday anyone reliant on portal juggling as a surrogate mailing system has a problem, their properties will just have to sit there swilling about the portals like everyone else’s. Anyone traditional, online or corporate who doesn’t sell houses but simply does the paperwork for DIY buyers will quite rightly be disadvantaged.
On Saturday the property world changes yet with every warning it is possible to give, Motley Fool are advising investors that stock solid, Gerald Ratner couldn’t have done better himself.
Well done Robert. I am looking forward to it.
Ros, you owe me a new keyboard for this headline.