Chancellor George Osborne’s announcement that there will be a 3% Stamp Duty Land Tax surcharge has wiped £6m off the share price of Martin & Co in the week since the Budget Statement.
The share price of competitor firm Belvoir has also been hit.
Yesterday, shares in Martin & Co stood at 157p and in Belvoir at 115p.
Since last Wednesday’s Budget Statement, there have been two other highly significant moves.
Osborne – again – has announced that the Government wants to encourage online-only estate agents, while online agent Purplebricks is set for launch on the stock market with a valuation of £240m.
The launch is to be on AIM, where it will join the likes of both Belvoir and Martin & Co – which now trades as the Property Franchise Company.
Martin & Co started off as a lettings-only franchise, but as the Property Franchise Company is also active in sales and has several brands.
Yesterday, chief executive Ian Wilson offered what he called an alternative view on the Purplebricks valuation, as speculated.
He said that online agents are parasites on Rightmove.
Wilson said: “When we are asked by investors whether we think the centralised call centre online agency is a good model, we point out that these businesses are wholly parasitic on the Rightmove business model.
“If the online model catches on, then Rightmove can extract the profit by increasing its fees to agents operating this type of non-geographically specific business.
“The real innovator and first mover in this space was Rightmove and if you think online agency is a winner, you should buy Rightmove shares.”
Separately, Russell Quirk of eMoov welcomed the Chancellor’s latest move, highlighting the Government’s support of online agents but while also acknowledging the sector’s low penetration of the market.
Quirk said it was “rare for the Government to set out plans with the emphasis so heavily tailored to a single area of industry, but this latest announcement certainly seems to do that”.
He went on: “This latest paper from the Treasury really is a significant nod to the success of the online property sector and how far it has evolved in such a short period of time.
“When I started eMoov five years ago, the traditional sector found the concept of an online agent laughable and dismissed it as a fad.
“For the Government to now acknowledge its success and the superior service provided to the consumer, by bringing it to the forefront of their plans to further advance it, really indicates that the online sector is the future of estate agency.
“We’ve known for a long time that we offer a vastly superior service for a fraction of the cost of the high street. If you ask me, we have most definitely penetrated the market already and have been injecting innovation for quite some time now.
“However, I understand that the Government can’t base its plans on a whim and so having now had enough time to evaluate the results, their latest intention shows that they, like us, are clearly consumer centric when it comes to the property selling process.
“Since starting eMoov we have seen a number of competitors join us in the space and to further encourage this is good for us and good for the consumer, as it will further enhance the service provided to the customer, something we are passionate about.”
With so many new online agents launching and the absence of any barriers to entry, the market for online agents will become so fragmented that none of them will have enough market share to sustain the TV advertising they depend on. They certainly can’t afford to cover the UK with the other media used by traditional agents, such as local papers and through the letterbox, not to mention shop windows and sponsoring the school fairs, so when investors decide they want a profit and stop funding the tv ads at a loss, these online businesses could dissappear as quickly as they emerged. Does anyone remember low cost property shops? They displayed property and charged next to nothing and they didn’t last.
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@Outspoken – can you name any agents who are NOT online.
Regardless of whether an agent is Hg St or not isn’t the main factor today. It’s how agency operatives use the web to innovate business.
Legislation comes and changes. Its how we use tech in this industry to power forward.
For sure most online only models who do have success have raised fee’s in the last 12 months, ie eMove and easyProperty, at the same time many traditional agents ave reduced fees. The playing field of the two is becoming closer.
Its common knowledge that the UK’s biggest online agency (with Hg St offices) Countrywide and Connells are exploring new online models. The whole game is in flux
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Why is there any need to take a story about Martin and co off on a tangent about what Russell Quirk reckons this week?
Split the two stories give the second one its own title and allow readers to read or avoid it if they wish
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Who blinks first ?
Do all agents that advertise on rightmove continue to allow on line agents to advertise on rightmove (you can vote with your feet by not renewing your advertising contract with RM) or you complain but continue to advertise on RM in the knowledge that all you are doing is giving the so called on line agents a chance to keep up?
After all a proper on line business would see RM as competition as it advertises high street agency property. For example would Amazon advertise it’s products on Argos website or BBC news on Channel 4 ? No
Clearly there are issues.
1: RM allow to continue
2: Pull away from RM
3: ?
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3. identify patterns of behaviour and alert Rightmove to it. Allow Rightmove to ignore concerns or request they do something about it.
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Does anyone know how much onliners pay RM?
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I raised this question with a field sales chap a few years ago. Apparently they have a basic account that allows 3 post codes and then pay again for every further post codes they advertise property and it is supposed to be comparable to high street agents costs.
But he seemed a little (how do you say this) smelly !!!!!
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This is a very grey/murky area and one that I’ve often tried to shed light onto. My assumption is that an online only agents will pay a fraction of the cost of a traditional chain, who pay a subscription based on how many offices they have. So, a 10 office chain would pay around £10k per month, whereas an onliner selling property in each of those towns would get away with a “one off” central subscription.
If the traditional agent wanted to expand into a new territory by opening another office, they would have to take out another subscription at £1k per month, whereas the onliners don’t have to and are free to target as many areas as they like.
This is a bit like The Sun charging Halfords £50k for a full page advert, whilst the local bike shop is able to buy the same ad, reaching the same audience, for a fraction of that. It makes it a very uneven playing field!
I’ve often though that one way to combat this would be for all the large chains to set up an internal call centre (which transfers calls out to the relevant local offices) and, in doing so, swapping their multi office subscriptions for a central office subscription, as the onliners do. This would have enormous revenue implications for the portals meaning they would even the playing field pretty dam quickly!
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I can clarify.
Rightmove start by charging a normal branch fee to online agents.
If the online agent has more listings the the average number of listings for an average physical branch on Rightmove (currently around 34) – you have to pay for another branch fee every time you hit the current average.
So an online agent with 340 properties would pay Rightmove 10 branch fees.
Wheres an office based based with 100 properties would pay just 1 fee.
To stop people playing the system, they do impose geographical limits on the distance from the physical office.
This causes issues for the ‘pay upfront fee’ agents who don’t sell. Because they’ve paid a fee, customers are reluctant to move and in turn keep the online agents costs high.
So Rightmove/Zoopla don’t favour online.
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Thanks for clarifying, but why wouldn’t R/Z not favour online if the nature of their model keeps their costs high? Surely, as far as the portals are concerned, the more the agent has to pay, the better…
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@Property Paddy – ouch. Your right in what you say that agents have a right to vote with their feet. But even the CMA are above RM and if RM banned online only agents it would be seen as anti-competitive and cartel like.
Portals and platforms can only make rules as to fair honest trade. To restrain trade of target groups that under the EAA79 are classed as lawful estate agency operatives is treading on very thin ice.
The good bit is that yesterdays budget agents are and have been increasing fees. The very budget operatives.
With now eM, eP and PB, well funded, and desperate Dans offering to save sellers £billions on their 2 bed flat sale, are likely to realise that running marketing and good staff is much more costly than their £299 set up tomorrow estate agents website off ebay.
I think the main 3-4 lower cost models have made their mark, they do have some bits very right, but they’ve also upped fees on the whole which is a good thing.
But lets hope greater innovation comes in that enables all to gain better fees, whilst consumer boxes are ticked with the powers that be.
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The share price falls of the lettings centric businesses simply reflect market sentiment.
The government has made clear with a raft of taxation and legislative attacks on landlords that it wants to reverse the trend from rental as the norm, to private ownership.
The last decade has had a generation of new workers being corralled into ‘generation rent’. That’s why lettings businesses have flourished.
With the government plans for more social houses and squeezing landlord profits, the pendulum will swing the other way. Not over night, but in 10 years the housing landscape will look very different.
You’ll probably see Countrywide making hasty adjustments as well to switch their current business plan of one of being lettings centric. Given their history as predominantly sales, this will be easy for them to do.
If you’re a lettings only business, you’ll need to re-shape your business for a future with a smaller market share.
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For all the online haters out there answer this question, have you ever used Amazon, compare the market.com, money supermarket etc etc. Why should this industry feel like it should be exempt from the progress of technology. If you still think that EA is an old boys club where you should still be able to charge 2,3,4% fee’s without competition you’re living in a dream world, recognise that the world has moved on, the public have changed the way they research and buy and online agents are here to stay.
I’m not saying it’s a good thing but that’s where technology has taken us, it’s just boring hearing the same old stories being pushed out day after day.
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Well said Chrispy – BUT now can you show me an agent who isn’t online
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That’s my point Trevor!
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Obviously didn’t read the full article, the geezer sums it up quite well
“The real innovator and first mover in this space was Rightmove and if you think online agency is a winner, you should buy Rightmove shares.”
Its starting to get boring hearing the ‘its all going online’ rhetoric being pushed out day after day.
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If High Street agents were to stop providing Rightmove with stock for their online shop window and pay a hefty price to do so, they might be in a position to influence such portals rather more successfully than they do at present and if High St agents had the courage to support OTM the online agents would find life much more difficult.
We have the collective power to influence the market in OTM. Why are we all not supporting it and show all the portals and online agents that we won’t be kicked into touch without a fight. Our weakness in defending ourselves is the fragmented nature of our sector and we have it in our grasp to overcome this by joining OTM.
It’s time for agents who have not joined OTM to step up to the plate or sit by and see online agents and their political fans tread High St agents into the mud.
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Glynis – the problem with ALL portals in the UK is that they rally agents into one place to compete against each other. That’s not a mutual best way forward, but a structure built on prehistoric single directional data flow that retrains agents opening up stock mutually together.
Industries like mortgages, insurance have it right. A broker should be able to access all of market, not keep close only their stock for consumers.
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Is it not somewhat ironic that Rightmove should have parasites!!
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Isn’t it about time someone flagged the only similarity between traditional and on-line Agents is that they both offer houses ‘for sale’. On-line Agents do not ‘sell’ houses, as correctly said in the above article, they ride on Rightmove for readership, that’s about it.
What about the client, their needs and wants; what about local and industry knowledge and depth in arriving at the valuation and advice upon marketing method and style, timing etc. What about negotiating the ‘best price’ for the client, how many thousands of pounds are vendors losing ? or worse how many sales are not happening because there is no expert negotiator there to pull it together, to demonstrate what is a good offer and what is not.
But most of all, what about the 8/12/16 weeks after a buyer is introduced, contrary to popular belief this is where real Agents earn their corn in checking the ability of the buyer to proceed, checking their financial ability and commitment with instructing solicitors, survey and searches ie. spending some money. When there is a problem with the chain, the survey, the mortgage, the boundary etc etc. that is where a vendors relies on the Agent and that is where most of the Agents time and resources are directed. Without real Agents many sales would go no further than the first of these obstacles to present itself.
Furthermore, when an on-line agent is in the chain, we’re all in trouble ! a total lack of understanding of the process, no idea who to call, ‘what’s a chain’, this is fast becoming the biggest issue in getting sales to completion, ask any agent with one of those in the middle of the chain … nightmare !
Traditional Agents need to get their act together to get the message out that finding a buyer, (stage 1) is in fact the easy bit (particularly in todays stock starved market) the difference is at (stages 2 & 3) – negotiating and securing the deal; then seeing it through the often lumpy road to Completion.
Make this loud and clear and the on-line offerings will have to add some actual service to compete in an industry where the consumer has a better knowledge of what really goes on.
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Harts – is Countrywide, LSL and Connells, Savills, Knight Frank etc etc etc – all online???
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not sure what you’re getting at, are you suggesting they are also guilty of not seeing their sales through ? If so that is certainly not my experience of them.
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Chrispy, i take it from your comment that you are an online agent….what concerns me as a signed up member of the old boys club is that you continue to feed the RM beast – optomiser drivel etc…so when RM morph into an online agent and you find yourself as the “online middleman” no longer required don’t be too surprised….
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Far from it Albere, I started as a neg back in the 90’s in the ‘good old days’ but we’ve still got our offices for branding in town but focus on ALL the basics plus emails, portals, leaflets, local knowledge, service etc etc. My frustration is that too many people on here act like my children when they were toddlers when they would throw themselves on the floor and stamp their feet when they didn’t get their way. So many comments sound like ‘It’s just not fair’
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Quirk says “When I started eMoov five years ago, the traditional sector found the concept of an online agent laughable”
We still do fella, you business is p1ss poor! – So much so you need to beg the public to keep the lights on and the doors open.
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To be honest there is space for on line and high street agencies, there is a market for them both, there is a desire to reduce moving costs too. But if Mr O thinks on line can go forth unregulated, because that’s what’s going to happen then he is a bigger fool than me.
On line selling of property doesn’t have to be an on line agent, like I mentioned in previous posts different business models might create entirely new types of house selling sites that could take them outside of standard agency regulations.
And that means he who pays the piper gets the tune, so if the vendor isn’t paying…….!
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If agents went back to B2B as was the most common form of estate agency sales flow 1890’s to late 1990’s – then played that way today, with higher fees, why couldnt an online only and a traditional agent work together?
If one has the buyer and the other the seller, that sounds quite sensible. Both can exist and do business together.
This would drive budget agents out of biz, as cheap fees wouldn’t allow B2B. Equally, more buyers at the table via a main agent and heir sub agents = more offers = best price achieved
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Well said albere billachip. It is only a matter of time – it is all being handed nicely to RM on a plate. Forget about all the other so called ‘game changers’.
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The sooner the industry wakes up and realises that continuing to feed the two monsters of RM and ZPG, will actually be the death of us the better. Their respective disregard for the high street agents who made (and continue to make) them their money by allowing on line agents to advertise on their sites is staggering. On line agents offer little more than an internet presence. High street agents simply cannot deliver what they deliver to customers at the rates on liners do and nor would we want to, because we deliver a proper service. RM and ZPG have lost sight of who pays them and who they serve,as their mantra is. “It’s what the consumer wants” I would urge everyone out there who has not yet signed up to join Onthemarket to do so URGENTLY, before the two monsters we have created devour us. They are building platforms ~(have built them) off the back of the cash we have given them,that soon will not be dependant on us and as such will destroy our business model. For the industry to sit back and kill itself off in this way is tragic. Urgent action is required to stop this happening. And we now have the added threat that the b****y government on the case of backing on line only agents. Soon they will be legislating that it’s illegal to practice as a high street agent!
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trouble is zoopla loses and rightmove gets stronger because onthemarket doesnt have the corporates on it and no one can remember what onthemarket is….having a rubbish RAF symbol doesnt help!!
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“Their respective disregard for the high street agents”
“RM and ZPG have lost sight of who pays them and who they serve”
I think you’ve lost the plot. RM and ZPG are not there to serve estate agents. Estate agents pay to use those platforms in order to advertise their properties to consumers. RM and ZPG serve the consumer. The reason why? They are bigger than any agent, bigger than any gathering of agents.
The only thing they are selling to agents is advertising space. Since when would a newspaper doing the same owe anything to the estate agent?
Why not take your properties down off RM and ZPG and go back to advertising in the local press. See how your vendors feel about that!
“Soon they will be legislating that it’s illegal to practice as a high street agent!” – nope, they’re just saying that estate agents aren’t very good value for money.
The urgent action required is to prove your value. As a home owner, that’s all I want. The high street just needs to weed out the bad eggs that give the rest of the industry a bad name. Work a bit harder, charge a bit less and realise that there is competition and that competition is good.
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One of the best post’s on PIE this year.
Or any year.
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Oh dear … online agents are parasites on Rightmove.
This idea that every online agent simply ‘sticks a property on RM and Z and hopes for the best’ is pathetically presumptuous and totally biased.
As a high street agent I am taking the sea change that is happening in our industry towards a greater awareness and acceptance of onliners seriously. Those mocking, laughing and making ‘parasitic’ comments are taking the same dismissive attitude that has cost many businesses dear when they refused to accept or acknowledge changes in technology or customer demand.
Online only is here to stay, will grow exponentially in the next three years and will have a dramatic and permanent effect on a sellers attitude to estate agents in general and sale fees in particular.
High street estate agency will survive but many high street estate agents will not. In my opinion that is a cast iron certainty.
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Online or mainstream – whoever pays peanuts will get monkeys.
Just like like Home Information Packs, this crazy scheme will die a death and all those who have thrown money at Purple Bricks (must have more money than sense) etc, will see it disappear down the drain fairly soon – Just watch.
Of course there will always be a market for a giveaway service but in the end, quality counts and the market for it will remain small.
It’s also worth bearing in mind nearly all the gossip about the cheapskates is within the industry, the vast majority of punters haven’t even heard of them and if they have, they’re not interested because they want the job done properly.
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Whoever pays peanuts will get monkeys?
No … they don’t even get peanuts.
Not with those ‘cheapskates’ Ryan Air and Easyjet.
Low cost airlines were initially ridiculed by the established airlines for lack of service, lack of safety, lack of free meals and drink, lack of legroom, lack of destinations or far flung ones, lack of leg room and lack of experienced staff to name just some of the cynicism and scaremongering that was thrown their way.
You, and other cynics, may try to kid yourselves that estate agency is different to low cost airlines … but it isn’t.
Both are service industries and both had/have a huge latent demand for a cheaper service than that currently provided.
Of course, PurpleBricks will fall flat on its ass if it provides a poor quality service … but with £50million from a float in the bag there will be plenty available to put into the automated systems and staffing which will be essential to handle high volume instructions.
We’ll see who is right between us within 12 months.
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I accept there will be a market for the cheapskates but you must surely realise you cannot give the service MOST sellers require for their scale of charges.
I’m not a cynic Harree, I’m a realist and I anticipate we’ll see who’s ‘right’ in less than 12 months – especially in an increasingly tough market…….
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PS – Not a great comparison either – Easyjet and Ryanair are not that much cheaper than the big boys – and when you start adding the bolt ons…… If on-liners survive you watch the bolt ons creep in – just like the airlines!
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A service most sellers require or … want for a price?
The budget airlines prove that people will accept way less … if they pay way less.
Logic says that a local agent, with local expertise etc., etc., will get a higher price for their 1%-1.5%+vat than an onliner will for their £495-795+vat … and that the higher price achieved will leave the seller ££££’s in pocket over the lower fee operator.
The problem is … humans make a habit of ignoring logic and following far more powerful emotions … like greed.
If PB get the emotional content of their advertising right and reduce staffing costs way below the industry average per stockholding by automating a high % of their service … and sellers are aware of and accept this as part of the price they pay … they could crack it big style.
And remember this … the Govt wants to get the proportion of renters down and back into home ownership and they see hammering landlords and, now, supporting the development of low cost OEA’s as a way of doing this.
The younger generation, who are the Govt’s prime target future homeowners, are online shoppers and internet savvy … OEA’s will have a hugely receptive market when they become sellers.
Taking into account the above may be the ‘long game’ as well as the short game … but I bet thses factors have all been taken into account by PB and their major investors and advisers.
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Valid comments – we will all of course track with great interest – our business is certainly not boring these days!
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yippee the last post !
So I’ll ask this question again, as posed by others too.
How is a true on line estate agent any different to a high street agent if they both advertise on Rightmove & Zoopla?
I don’t think whether there is a high street office or working out of the spare bedroom is the real issue, My point is this:
In any other industry you wouldn’t get two competing websites advertising on each others websites but a true on line agent can because they realise they cant generate nearly enough business without using RM or Z.
But RM & Z are here to support high street agents in the same way high street agents advertise in newspapers.
So who blinks first is essentially the right question.
Do all high street agents assume the hybrid or on line has a strong enough business model to go forward or not?
If yes then all high street agents should just shut up their primary shop positions, move to a retail/industrial park or secondary shop/office position, expand their territory and increase their employee numbers. So A Reading agent would now cover all of Berkshire a London agent would cover the entire borough and so forth and so on (If you want to know why you would do this I’ll come back to this in a minute) or if the answer is no then you have to decide how you are going to compete effectively against on liners who don’t advertise in the local paper, don’t have a high street position and don’t employ any proper sales staff as they don’t actually sell, just list.
For example would you allow vendors to list on your website and your RM account for £199? No ! But you are still letting RM allow these competitors to advertise on RM and you are indirectly subsidising the on liners, because the more property to view on a website the more viewers your going to get. So if you move all your stock off RM & Z only the on liners will be left. RM & Z would have to turn off their computers as they wouldn’t have enough revenue to keep going.
Back to the retail park.
Because you are assuming the on liners have got price edge you have to reduce your fees. Vendors always hate paying £3500 or more but they would have used an on liner had they thought this would actually work out for them. So you reduce your standard fee to 0.6% for example, set in a minimum £2K fee to cover yourself but you average fee of £3500 is now £2500. With extensive local marketing you start to increase your market share and you need more staff. The industrial/retail park is simply a very easy way of expanding in all directions, very quickly. But you are now effectively competing with the on liners and you’ve just buried the old high street model.
I looked at retail parks in the mid 80’s but it didn’t look like a solid model, but now I think the landscape has changed so much since then I think this is a very strong possibility.
So who blinks first ?
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