Purplebricks’ founder Michael Bruce recently claimed the company “sold 88% of its instructions within ten months” in response to a complaint on BBC Radio 4’s Moneybox programme.
We, along with everyone else I’m sure, would like to know how he arrived at those figures and whether those who’ve already dropped out of the selling process – and switched back to a traditional agent in frustration – have been included in his sums.
We don’t think it’s unreasonable for Mr Bruce to substantiate his claims, in a way that a customer would understand.
Is he saying 88% of ALL instructions go on to complete within ten months? This seems inordinately high, though the ten-month timeframe indicates just how terrible they are at actively generating viewings and offers for their vendors. There can’t be anything worse than feeling trapped by an agent who has taken your money and is doing very little for you. The average independent agent will agree a sale on a property within 14 days.
Or is the ten months referring to the time from an agreed sale to exchange or even from exchange to completion? If he is so proud of the company’s success rate, why does he not reveal his figures in detail?
Already City analysts have queried exactly how many sales have gone through and what the conversion rate is. So why be so prickly, Purpleprickles? Just exactly how long does it takes on average to complete a property sale from its initial listing? And when realistically is the company planning to turn a profit?
The more I look at Purplebricks’ model, the more I wonder how the company is actually going to make any money, something they’ve failed to do in their first two years of trading. They may be the champions of a poor performing sector as a result of expensive TV ads, but they will have to keep spending millions of pounds every month on marketing in order to maintain their position, while other online and hybrid agents snap at their heels like hungry piranhas, forcing fees down.
Plus there are the costs associated with marketing a property. People don’t realise how much it costs to advertise online or via traditional media – it can be up to £2k on average per property for sale. So how can you make money if you are charging less than £1k for the whole service? Their recent price hike on fees won’t do much to close the gap.
It’s already become a vicious cycle for all involved, with everyone discounting in order to get volume of sales, but the market for online sales isn’t big enough to sustain the model. The last time I looked, there were around 40 online agents fighting for a small slice of the market.
So will Purplebricks’ losses continue to mount, at a time when online agents are facing increasing criticism for failing their clients – something which I’ve commented on previously? Let’s see whether the Aussies have confidence in the model Down Under. My information is that ‘prickles’ have had to change their model and it’s not going too well after a £10million investment!
Hope on homes or empty promises?
There’s no doubt the Government is making all the right noises over housing, with plans outlined at the Tory Party conference for a new £3bn fund to help build over 225,000 new homes, alongside efforts to speed up house-building.
It may sound like a lot but it’s a drop in the ocean to fix a far larger problem. The Government may get close to their target but if the vast majority of units are flats it won’t satisfy the market’s need for family homes.
We need to understand exactly how they intend this to become a reality and whether housebuilders are able to gear up with materials, land and labour to make this happen. What exactly does the Government intend to do to sort out our antiquated planning laws?
We know there’s no quick fix – but while the Government sorts out the detail, our population is continuing to grow and people are living longer, widening the gap between demand and supply. What’s the housing shortage going to look like in a decade if this issue isn’t tackled quickly?
As for those trying to get on the housing ladder, scrapping the Help to Buy Mortgage Guarantee Scheme and expecting lenders to get the market moving for first-time buyers is not sufficient.
We need some radical thinking from Mrs May. Come on, Theresa, we need you to overturn the recent stamp duty hikes to get middle England moving. We need to do everything we can to encourage buyers and investors back into the market.
House prices are already beyond the reach of many would-be buyers, particularly in major cities and in the south-east, where no 95% mortgage is going to make any difference, given the size of deposit that people have to find.
It’s ironic that money is poured into housing benefit to help those who are most in need financially, but far less is spent on housing, whether subsidising developers or giving the green light to housing associations and those few local authorities that have their own development divisions.
Let’s hope we’ve heard an end to the rhetoric and broken promises from the Government. We need a sustainable housing policy, supported by investment in infrastructure, which can bring hope to everyone, whatever age they are, and we need it now.
Are agents to blame for board chaos?
Yet more local authorities are planning to restrict the use of For Sale boards, according to an investigation by Property Industry Eye – and I’ll lay money on it that, in most places, estate agents have only themselves to blame.
Unsightly rows of boards have been allowed to proliferate around housing developments – with some agents flouting the law and putting up more boards than they should or ‘forgetting’ to take them down once the property has been sold, not adhering to the law.
The result is that local authorities are increasingly looking to restrict the use of boards, forcing agents to apply for planning consent in some areas – with the possibility of permission being refused. This is already in force in Leeds, Camden, Wandsworth, Hammersmith & Fulham, Hastings, Brighton & Hove, Preston, Waltham Forest and Newcastle.
It has now been revealed that four more councils – Charnwood, Bath & North East Somerset, Leicester and Swindon – have applied to the Department for Communities and Local Government for permission to impose a ‘Regulation 7 direction’, forcing agents to apply for planning permission in order to display boards, with fines if they break the rules.
You might have some sympathy in areas of historic interest, but to impose such restrictions elsewhere leads only to additional time and financial costs for agents – and this will surely be passed on to the consumer. The agent who chooses not to pay will be the one who loses out by not having a visible presence in their local area.
So are boards relevant in this current day and age with the internet? Does it really matter whether our signs are on display or not? I’ve yet to meet an agent, traditional or online, who doesn’t see the direct correlation between board presence and new listings, so the answer is yes, it really does matter.
I’d like to know what impact it’s had on estate agents in those areas where restrictions are already in force and whether it’s become a case of the survival of the fittest.
I was in Manchester recently and it seems to be common practice that when a vendor goes multi it’s a free for all with boards which eventually will be clamped down on.
We must also look at how boards are used to advertise local events. My own company, haart, was caught in the middle of a dispute not long ago that was not of our making. One of our branches had been approached to advertise a local event on our sale boards. These boards were put up in areas where the organisers had obtained consent – but we bore the brunt of the complaints when it reached the local media – all for trying to support the local community.
So where will this all lead? Will other councils follow suit and come down on agents like a ton of bricks? I’d say this was in the hands of the agents themselves.
If they continue to think they are above the law, they will only have themselves to blame when one of their most effective advertising methods is taken away. They will end up having to spend yet more money on other marketing methods – at a time when promotional costs are rising and fees are falling. That’s not a good combination for anyone.
Agents should be sensible and not flout the law as we will all suffer in the end.
* Paul Smith is chief executive of large independent firm Spicerhaart