International investment bank UBS, described in The Times this week as ‘a long-time admirer of Purplebricks’, has double-downgraded Purplebricks from ‘buy’ to ‘sell’, as more vendors turn to ‘traditional agents’.
Having analysed the latest data, UBS estimates that the Purplebricks has lost market share over the past six months, which has left it less convinced by the group’s long-term potential.
“Analysts flipped from bullish buyers of the shares to bearish sellers,” said an article in The Times this week.
It added: “Given the strength of the property market right now, the bank’s analysts had thought that more sellers would be keen to opt for Purplebricks’ cheap upfront fee. That hasn’t been the case, especially outside London.
“The bigger, more lucrative sales also seem to go to traditional agents, when their contact books come in particularly handy.”
Of every 1,000 houses sold for more than £1.5m, Purplebricks might get five, according to UBS data. By contrast, out of every 1,000 sales under £150,000, Purplebricks sells about 40.
According to Iain McKenzie, CEO of The Guild of Property Professionals, independent agents now lead the way in terms of market share growth for new instructions during 2020 and have continued to do so during the first quarter of this year.
He said: “Both large corporate brands and some online or hybrid type agencies have seen a decline in their market share over the past year, while independent smaller estate agencies continue to move from strength to strength. Based on new instruction data from TwentyCI, an independent property data and statistics provider, The Guild’s market share increased from 5.4% in 2019 to 5.61% in 2020, while brands such as Purplebricks saw a decline in their market share.”
He continued: “Ironically in a time when a virtual presence has become paramount for estate agents, it is the smaller independent agencies that have seen the largest growth in the number of instructions they have received, rather than the agents who have predominated already been the leaders in the online space.
“Perhaps the reason is that independent agents now have increased access to amazing technology and virtual tools, along with the visibility their local office and community presence.
“In additional, we are also seeing a shift in agents focusing on their websites as their shop windows, improving functionality and embracing digital marketing spend. There is the shift in public behaviour towards supporting local businesses, which has had a positive impact for local independent agencies.”
He adds that in a time filled with so much uncertainty, it seems that vendors are looking for property professionals who they can build a relationship with and who can guide them through the process of selling their property.
McKenzie added: “The property sales process was already complicated, and it has become more so with the added elements to think about during a pandemic. Aspects that vendors were perhaps happy to take on themselves before, are now being left to the agent and many people are opting for a local property expert who can help them navigate through the process.”
Comments (5)
PB were never going to achieve much more than 5% market share, but they may start to make a profit.
They have steadily increased prices and by moving away from expensive TV advertising will reduce costs significantly.
Of course, any profit is dwarfed by the £100 million losses racked up so far !
Also, they are sitting on cash (£60million +) so they have options to buy more market share. This is their real achilles heel – RM/Z will be keen to get some of that cash.
The solution is to buy a High St. EA or a portal like Boomin’ 😉
PB has never been a viable business proposition. It requires too much constant expenditure to stay afloat and is reliant on income to cover the overheads. Its business model has shown it has never been able sustain any growth for its investors, who it relies on to keep afloat. Some have already left. Others will now follow, if not they are going to continue to leak like a sieve.
Just like all the other on-line models that have come and gone before … ‘on paper’ only works when there is stability and anyone worth their salt in this industry knows the market is a constant seesaw and is not a manufacturer able to control its stock. We are a service industry and at the whim of the market conditions. The bigger you are, the bigger you fall. The market is made up principally of small independent agents who if wise can weather a storm and still remain the consumers choice as todays story confirms and is not new news. Many of the bigger agents are propped up.
Purplebricks and The Shrinking Inventory .It sounds like a Roald Dahl book
Today on ZPL it has shrunk to 9622 sales and 231 lettings .
Recent management changes undertaken so maybe they are in the process of addressing this .
The arrival of Beckwith from Foxtons who was their M&A man might be a clear signal they will be spending some of that £60m in the bank improving inventory
I wonder how that will pan out ?
James Munro of NTS has reached out to estate agents asking their opinions on “material information” required on property particulars .Is he just going through the motions?
However since 2015 he has been made aware on a daily basis of Purplebricks hoisting properties up on the portals as “First Listed” as anything but .Misleading the consumer and taken no action whatsoever
Even yesterday a property in Stone appeared as “First Listed “with a picture of the property with a Bricks board with the old logo. Meaning it was First Listed over 2 years ago
I agree.
However I think every agent is struggling to keep their listing numbers up!
Is it just me… or is stock across the board shrinking?
If PB does not work in this market where every property is selling within a week. It will never work.