Purplebricks will struggle in Australia because it is not a “results-based business”, a local real estate trainer has said.
Tom Panos, a well-known Australian real estate expert, has given an insight as to how the Purplebricks launch is going Down Under.
Speaking to Sky News in Australia, he said: “Why would an owner take the risk of spending $5,000 on an experiment that may not work, when they know the experiment of paying an agent 2 to 3% may give them an extra 5–10 % on the price of their property.”
He suggested Purplebricks was having little success so far in Australia, and asked about its UK business, he told the presenter: “A lot of people have listed using Purplebricks. Here is the interesting issue – they charge you when you list, not when you sell, it is not a results-based business; with real estate you pay once you have sold.”
He said for this reason it couldn’t be put in the same category as ‘disruptors’ such as Uber, adding: “The connection economy and consumerism of 2016 and beyond is a results-based economy. People say they will pay when there is a result: the issue with Purplebricks is you pay when you list, not when you sell.”
You can watch the full interview on our video page
Comments (17)
It’s a good video of someone who knows the Aus market. He points out other FSBO as the Aussies are classing it don’t work over there.
Over here lower cost mkdels at £99 / £499 are no dout hitting the £600-£1,000 budgets.
How can anyone list on a consistent basis for £300 or under when this is probably the cost per property to get on RM and Z. Or are my calculations totally wrong?
Way off I am afraid.
50 properties total to include sales and lettings per month example:
Zoopla £350 per month
RM £1350 per month (half price 1st 6 months) (20 sales, 30 lettings)
Zoopla is 50 live properties which is very generous. RM is 50 total…
Central London….
Yes …but you don’t list 50 new properties every month…so every property has more than a months costing (perhaps on average each property is listed for 6 to 8 months) and you have a full membership cost every 36 properties average stock.
On average it seems to me that most agencies who have an average listing of say 50 properties tend to sell that many each year. So for RM I worked on say £800 times 12 divided by 36 and rounded it down to the nearest £50. The result was £250.
I would welcome other peoples opinions and suggested calculations on portal costings per property listing.
It will just be a starting point, paid for by investors money, with a view to increasing once they gain traction. The only problem being that there’s no shortage of people queuing up to try it, so there’s never any traction. Much like when we started with Zoopla at £100 / office for the first few months and then they say “right your costs are going up” and we say “for all the leads we’re not getting? Goodbye.”
Says it all, the public here have been swindled into believing cheap is a saving.
” ….when they know the experiment of paying an agent 2 to 3% may give them an extra 5–10 % on the price of their property.”
“….. Here is the interesting issue – they charge you when you list, not when you sell, it is not a results-based business; with real estate you pay once you have sold.”
With the pay up front model, once you have an offer close enough, you are just going to recommend the owners accept it. Why would you do any different ….you have earned what you are going to, and telling them you think you can do better is just making more work for yourself. This is the real truth ….there is no incentive to get the best possible result for your vendor.
Who gave you a dislike for that comment? With some many stats around and data gathering modules these days I’m surprised someone who has the number of listing to sales, hasn’t been able to work out the sale price to asking price. If we assume PB and any other fixed fee agent are not doing their duty under the EA Act …. they wouldn’t survive the backlash or be allowed to trade?
snigger!
PB are still trading 83 pence too high (in my opinion). Still going down though !!!!
I can`t imagine anyone agreeing to pay when you list and not when you sell, so what is the attraction apart from the promise of a huge financial saving?
I remain a great believer that in life you get what you pay for.
The word disruptive was introduced into property in January 2008, it is the attempt to “own the industry” (by a single supplier) to get access to all the earning opportunities of BIG data. The end goal is to harvest every opportunity and earn at every stage of the process of selling or letting property and thereafter from knowing who is living where.
Lots of people have heard and been told a very convincing tale and there are several entrepreneurial attempts to replicate the master plan. The only flaw is that ethically the BIG data belongs to the agent who wins the instruction or who gets invited out to value. It does not belong to data hosts and their 3rd party friends have no right to it or to access it.
The reality is that the data IS accessed and used by the 3rd parties. I saw it many times. Check the small print with some of the software suppliers for what rights the agents are inadvertently granting their suppliers. How do you think these same suppliers are going to launch their consumer-facing products…?
Most agents don’t read the paperwork let alone the small print. In some cases existing service agreements get updated when firms are bought out and agents are quite unaware of what they have granted access to or have warranted.
Quite innocently some agents are confirming the are complying with quite onerous regulations of which they are blissfully unaware.
I’ve never really understood what is meant to be so ‘disruptive’ about businesses that spend big to obtain market share, incurring huge losses in the process, until they get to some kind of promised magical end point.
I think “Disruptive” is a term coined by the author Clayton Christensen. (I recommend his books). In short, companies that are ‘standard’ are on scale that goes from; high end (expensive but offer more), to; low end (cheap, but offer less). Disruptive is the term for a new technology or business model that is both Cheap AND better. For example: Amazon online book shop, cheaper, more choice, shop from comfort of own home, online book reviews, etc. The Fax machine disrupted the postman (cheaper and faster), email disrupted the fax machine (Cheaper and faster), there are thousands of examples, and investors love disruptive tech because it can make people rich. Purple Bricks like to call themselves disruptive, but they are not disruptive because; they are cheaper, but offers less! so they are a low end offering of a standard business. There is a place for it in the market, but it could never take over the market, not unless to invents or adopts new tech that is truly disruptive (which is very unlikely).
As for “Spending Big” to get market share (or predatory pricing) It is so well known that this approach does not work that it is actuality illegal in the UK. Not to protect the weak competition, but to protect the big businesses from having idiot MD’s who forgot predatory pricing doesn’t work. If you succeed in forcing your competition out of business, the staff just open up again in a new shop, without the debts of the old firm, so you just succeed in creating new, better competitors to compete with. This process repeats until the big company runs out of money.
No fan of Bricks but they have had a reasonable start in Oz . 30 LPE,s appointed,189 instructions of which 38 already “sold” Since they have only been gong a few months and lets not forget their fee is considerably in excess that they charge here.However they should be a litle more concerned back in good old Bilghty where instructions have hit the proverbial brick wall in recent weeks . Lucian Cook of Savills annoucing in his recent research report that transactional activity is likley to fall by 16% doesnt bode well for Bricks Still a country mile from reaching instruction levels required to hit a profit their current valuation of £300m looks very full indeed. The SP started slipping yesterday but no doubt the founding fathers will be on hand to attempt to halt any cliff fall Possibillity of another cash call on the horizon.Jury definitely out
There is no sycophantic group think in Australia so investors, vendors and commentators can see the offering for what it is; a loss leading scheme to leverage vertical opportunities..
Trouble is all the lucrative verticals are being scavenged by other vultures or the public simply haven’t bought into the idea that cheap, loud and unprofessional is good for them.