Are online agents heading for a bumpy ride?

Paul Smith
Paul Smith

The wind of change is in the air in the estate agency market. You can feel it wrapping itself around you, albeit a light breeze but gathering momentum as uncertainty envelops the world.

The public are starting to get the jitters – about war, inflation, energy price increases, record house price rises – and inevitably we’re seeing the market starting to correct itself, despite heavy demand for property. Overnight, in some places, it has flipped from a sellers’ market to a buyers’ market.

Where we used to sell properties in days, it’s now taking much longer. For example, with bungalows which had attracted people who were downsizing, prices are now having to be reduced. Even though we’re selling far more of what’s being listed compared to years gone by, buyers are now being very cautious.

At the same time, the delays in conveyancing, with average house sales now taking 21-24 weeks instead of 13-15, is causing ongoing issues, with transactions falling through. Why the government, the Law Society and Local Authorities are not doing more to resolve these issues in a world where technology has taken over is beyond me. Surely a version of Home Information Packs is the way forward.

It’s at times like this when traditional agents come into their own. Their commitment to customer service and willingness to hit the phones to get deals over the line will shine through. Whereas the cheap as chips online agents are going to feel far more than a breeze down their necks as they try to make ends meet.

Take Purplebricks with its current woes and failing model. Its new CEO has been forced to shed dozens of staff (though I don’t see this happening at a senior level), while the company’s legal claim from ‘hundreds’ of former workers relating to IR35 and non- payment of benefits is said to be imminent. Those remaining are seeing the writing on the wall, judging by the number of job enquiries we’re receiving.

Having reported a six-month loss in October 2021 of £20.2m and a decline in market share from 4.8% to 3.9%, all eyes will be on its next set of figures due in July. While their turnover fell dramatically, ours showed a sizeable increase, suggesting they are losing profitability to traditional estate agents. They’re burning through their cash reserves too. The City isn’t filled with confidence, with Purplebricks’ share price at just 17.7p compared to 88.2p exactly a year ago!

Now it’s appeared as the worst agent, according to AllAgents, for customer service. Plus, all this on top of failing to properly serve legally required documents to tenants about their deposits. What more could possibly go wrong?

As the market tightens even further, I can’t see things improving for Purplebricks, with low fees and escalating marketing costs. The sums just don’t add up. They’ve retrenched to the areas where they’re doing well. I can’t see how they can describe themselves as a nationwide company now.

The change in market conditions will also prove to be a burden to the likes of Yopa, Strike and other so-called internet agents, or those who are self-employed. It will take far more than putting a property on portals to get it sold. They will really suffer if they rely on this. It’s a people business, powered by tech, not the other way around. It takes a great deal of skill and experience to get a transaction over the line.

Their models are not geared up for a changing market, with house sales taking longer and costing more, and we are going to see some facing a slow death. It’s not going to get any better and throwing money at marketing isn’t going to solve the problem. They need to make some dramatic changes to the quality of service they deliver. People quickly realise you get what you pay for.

I don’t believe we are heading for a house price crash, even with rising interest rates and lower mortgage rates being withdrawn, but it will be a tough winter ahead. It will be more of a correction than a crash unless something major happens, like WW3.

But the growth in house prices is not sustainable, even if demand is there, because affordability is questionable in the face of rising bills. If ever there was a time to charge what you’re worth, this is it. Otherwise, the wind of change will blow so hard, it will topple you over and you’ll find it harder than ever to get back up again.

Paul Smith is chief executive officer of Spicerhaart. 

 

OPINION: Is the Purplebricks wall collapsing?

 

Homesearch EOS
x

Email the story to a friend



10 Comments

  1. John Murray

    The agents that will do well in this coming market are the ones that can take the time and effort to provide outstanding levels of customer service and who are also highly recommended, winning business through referrals and recommendations. It is one of the huge advantages of the self-employed model that this is how they are generating winning levels of business and those agents that continue to rely on high volumes and offer low fees are really going to suffer.

    We are moving into a proper estate agent’s market and personally, I can’t wait.

    Report
  2. janbyerss

    There will always be vendors who will use a cheap on line agent

    On line agents will not go away there will always be another one

    Report
  3. Mike Bidwell

    Spot on. I cannot wait to see the back of the borderline DIY models that have in my opinion been an utter disaster for everyone other than the original shareholders and senior management sitting smuggly and no doubt well rewarded in their bunker. In certain ways it reminds me of wars in years gone by when pompous ill informed generals sat on their horses detached from the real action whilst the soldiers bravely fought the battle; many losing their lives in doing so. Most importantly it will be good news for naive easily led clients who will realise that paying more for professional expertise and marketing will actually get them a better outcome ….. and a far more palatable experience to boot. At least Yopa give indications of correcting  their model but as for PB and the utterly abhorrent Strike, I will take delight in your demise because of the damage you’ve done to this profession and the misery and I believe losses that you’ve inflicted on your unsuspecting clients. Don’t forget to switch the lights off as you depart!

    Report
    1. Old school 23

      Well said Mike!

      I vote that PIE provide you with a weekly column!

      Report
      1. Mike Bidwell

        Very good of you to say.  I note ‘old school’ and judging by that we’ve both probably been round the block a few times now, no doubt with battle scars to prove it, but I do consider that providing high quality service and expertise over ‘cutting corners tech’ is modern thinking and there is no doubt that best in class quality costs money – it’s as simple as that.   So far as a column is concerned, whilst I typically have plenty to say on such matters, my comments are really only derived from those few minutes of contemplation spent at the breakfast table over an early morning cuppa and the demands of the ‘day job’ keeps me so fully occupied as to rarely having the time for any more.  What concerns me more than anything however is that judging by the significantly reduced engagement with fellow agents on PIE these days, what’s the point?!  Wishing you all the very best, Mike.

        Report
  4. AndSotheStoryBegan

    Here’s why “the Agents that will do well in this coming market are the ones that can take the time and effort to provide outstanding levels of customer service and who are also highly recommended” won’t make an impact:

    Every agent claims to offer outstanding service. Every agent has five star reviews, whether genuine or not. Reviews only matter when the person posting the review has the same level of judgement as the person reading the review. Social proof is a road to perdition, paved with easy promises.

    What matters for every agency is first them having a message that creates attention and allows them to truly differentiate. Customer service doesn’t do that because the customer doesn’t know how good the experience will be until they experience it.

    If your agency hasn’t got a message, it hasn’t got a future. It is consigned to hustling its worth with bland, meaningless headlines, hoping to convince and convert the few naive vendors that believe everything they are told.

    The article emphasises the importance of higher fee levels. If there’s no message worthy of that fee, there’s little attention and even less engagement. That’s the problem online agencies need to address – a message that is something other than “we are the same, but cheaper.”

    Report
    1. Diogenes

      Very true. What really counts is word of mouth. Chats at the school gate, at the golf club etc.

      Report
  5. janbyerss

    “Every agent claims to offer outstanding service. Every agent has five star reviews, whether genuine or not. Reviews only matter when the person posting the review has the same level of judgement as the person reading the review. Social proof is a road to perdition, paved with easy promises.”

    100% correct.  How does any agent demonstrate that they “offer better service” when they are on a valuation.  Any fool can say “we offer a better service”.

    A vendor has no idea what the service is going to be like until they have instructed an agent.

    Report
    1. Woodentop

      Seems many people do not understand or have forgotten …. nearly all sellers were once buyers and they know the process and who the good agents are from experience, and those unsure nearly always asks family who have been buyers and sellers at one time or another. The majority of a good agents customers are returning customers or associated with them and their previous efforts make the new instructions relatively easy. There isn’t a town in the country that does not have its leading agent(s) and not by chance. Better the devil you know! If agents are on a parr with each other of service fee’s etc, it is down to personalities. Everyone has herd the “we are best pitch” and take it with a pinch of salt. Those sitting in their bedrooms, don’t get half a look in and get buried by the wise high street competition, as proven by 95% of public confidence.

      Report
      1. janbyerss

        If that was true no one would ever use an on line  or cut price agent which they do which is why people get so agitated about them Most people do not move house for over 7 years n ow they  will have forgotten the guy they bought through who probably does not even work for the  same company 7 years later.
        I last moved 3 years ago I do not  recall  the name of the guy who sold me the house or the one who sold mine When  I com e to sell this I will certainly invite a number of agents to visit
        If a person asks a family member or mate who is a good agent the likely reply they will get is that they are all rubbish  not saying  that is so but it is the public perception

        Report
X

You must be logged in to report this comment!

Comments are closed.

Thank you for signing up to our newsletter, we have sent you an email asking you to confirm your subscription. Additionally if you would like to create a free EYE account which allows you to comment on news stories and manage your email subscriptions please enter a password below.