With the UK’s housing market rapidly transitioning into a buyers’ market, many property sellers are expected to become more selective of their estate agents, and could spell bad news for online agencies, according David Reynolds, analyst at Davy.

Reynolds has published a fresh note on Purplebricks’ market share backdrop, noting that Q422 was a stable quarter for Purplebricks with share at c.2.5%.

The latest TwentyCi data reveals a healthy supply of new instructions and the market up 8% year-on-year, but mortgage approvals crashed; fewer buyers with the same options.

House supply is relatively steady, but November’s data show mortgage approvals 31% below their ten-year-average. Davy note that the wider housing market is now entering a “buyers’ market” phase, predicting sellers to be more selective of their agents, “leading to a difficult time for the online agents”.

You can see the full note below:

THE DAVY VIEW
We track new instructions in the UK on a quarterly basis. Q422 was a stable quarter for Purplebricks (PURP) with share at
c.2.5%. The TwentyCi data show a healthy supply of new instructions and the market up 8% year-on-year (yoy), but mortgage approvals crashed; fewer buyers with the same options. Is this a buyer’s market? One wonders how the online estate agents will fare.

Q422, the market and how PURP performed… no change

TwentyCi reported that the UK housing market delivered 289,635 new instructions in Q422, +8% yoy and -28% against Q322, very much a seasonal decline. PURP saw new instructions fall 12% yoy to 7,156. This represents a marginal 10bps increase in market share to 2.5%, although December’s market share slipped to 2.3% – the lowest monthly share since our data series began in Q119. Is this the first sign of a more stable picture? Possibly, but clearly no recovery yet. 

PURP’s market share backdrop

Across 2019 there was a stable backdrop for PURP, with market share drifting from 4.1% in January 2019 to 3.9% in December. In 2020, that theme continued, albeit with a temporary respite across April and May. However, January 2020 saw market share of 3.8%, December 2020 3.6%, another 20bps fall over the year. In 2021, the market share loss picked up pace, falling to 3.0% in December 2021. In percentage terms, PURP has lost c.40% of its market share over the last three years, with the pace accelerating in 2021. Q122 looked steadier, with market share of new instructions at 3.2%, up 20bps versus Q421, but Q222 saw a 30bps fall to 2.9%. Another 50bps decline in Q322 before clawing back 10bps in Q422 for a 2.5% share.

What has happened to the market?

An eye-opening 28% quarter-on-quarter decrease is actually normal seasonality. Q422 is +8% yoy and only -1% versus pre-pandemic Q419. House supply is relatively steady, but November’s data show mortgage approvals 31% below their ten-year-average. Agency trade body Propertymark thinks we are entering a ‘buyer’s market’. You would expect sellers to be more selective of their agents, perhaps this will be a difficult time for the online agents.