Purplebricks’ share of the overall UK housing market will rise to 15% by 2022, a bank is forecasting.
JP Morgan also says that Purplebricks’ current conversion rate from instruction to sale agreed places Purplebricks agents “amongst the leading in the business”.
The bank, starting its coverage of the company, has given Purplebricks an ‘overweight’ rating and a target price for shares of 733p – while at the same time downgrading Rightmove to ‘underweight’, saying that the budgets of traditional agents will be under pressure.
Yesterday, Purplebricks shares rose and Rightmove’s fell – while Countrywide shares crashed after it warned that it is expecting to announce a drop in profits for last year to £65m, down from £83.5m the year before.
Purplebricks’ current market capitalisation is £1.15bn; if it were to achieve share prices of 733p, with around 273m shares in issue, the business would by 2022 be worth just over £2bn – within eight years of its launch in April 2014.
JP Morgan’s new report into ‘UK property classifieds’ says that Purplebricks is now converting instructions to sale agreed at the “increased” rate of 78% (in the first half of its current financial year).
In Australia, it says the conversion rate is 83%.
The report predicts that this year in the UK, there will be 1,219,000 transactions, at an average house price of £299,970. In 2021, housing transactions will be fewer, at 1,182,312, but the average house price will be £309,059.
This year, it predicts Purplebricks will have 5.9% market share, rising to 7.3% next year, followed by 10.2% in 2020, 12.5% in 2021, and 14.9% in 2022.
Its revenue per instruction will rise from £1,170 this year to an average of £1,717 in 2022.
The report estimates that the average earnings per Local Property Expert in the UK is £65,000 per year, based on 12 instructions per month with average earnings of £450 per instruction.
The report says that the future of online agents looks bright, with the average fee about 70% lower than high street agents.
The report notes: “A rising share of online agents will also accelerate pressure on commission for traditional agents, we believe, amplifying tough market conditions post Brexit.”
It says that Purplebricks’ UK revenues will shoot up each year between now and 2022, and that in 2021, Purplebricks will have an EBITDA profit margin of 28%.
The report predicts group EBITDA (profits before costs) of £190m by 2022.
However, the report does say that there are risks to Purplebricks, including from both new competitors and established agents.
Other risks could be if the global expansion goes wrong.
The report also highlights: “As online agents continue to grow we expect the wider estate agent industry to react.
“This could include a reduction in fees, more technological innovation in the estate agent sector, or a change in fee structure. We also see limited scope for traditional agents to enter the space given their high cost base.”
JP Morgan, downgrading Rightmove in the same report, says that it has limited scope for earnings “and market share gains of online agents will – next to a depressed UK housing market – in our view put pressure on established UK property agents’ budgets”.
However, it does say that while traditional agents will cut costs, this is more likely to be by reducing spend on print advertising and on Zoopla, and also by cutting staff headcount.
It says that Rightmove “has been a darling of the stock market in recent years but we see clouds on the horizon”.
JP Morgan does expect to see the amount that agents pay Rightmove (ARPA, or advertising revenue per advertiser) to continue rising at low double digit rates in the next few years.
However, it says that there will be “tougher ARPA discussions ahead”.
Yesterday, according to the London Stock Exchange, Purplebricks finished the day up 4.11% at 420.80p. Rightmove shares shed 3.73% of their value, down 170p at 4,391p.
Countrywide shares crashed by 25.20p to finish at 110p, down 18.64% – the day’s biggest faller on the stock market.
Foxtons’ shares were also affected by sentiment towards the property market as Countrywide shares sank, finishing 6.6% down, to 76.6p.
So if this is right (it’s not) rightmove just need to ban onliners from advertising with them and nip it in the bud.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
That is very unlikely for all sorts of reasons Smile Please but they could insist that all agents offer the choice of No Sale, No fee so as to better highlight the difference between ‘Proper’ estate agents and pay any way estate agents for the considerable benefit of the consumer?
Why don’t JP Morgan or the regulators simply ask Woodford or PB for concrete proof of their listing to completion ratios as they charge either way – not including completions negotiated by other agents post instruction and to include those properties withdrawn from PB that are put off coming back to the market or fail to sell during a traditional agency agreement of say 3 months?
This must be based on completions as I imagine PB’s fall-through rate is high- by charging anyway PB’s customers need to better understand the chances of success and failure?
Let us not forget that in the recession caused by bankers post-2008 the instruction to completion ratio in my region was around 50%. So traditional agents only got paid on 50% of the work they did.
As the market tightens up should traditional agents remind the public of this?
There really ought to be better due diligence reporting in place before banks and shareholders make unsubstantiated claims to the market as per my comments above, or else this may be perceived as market manipulation without such definitive evidence to back up such claims?
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Very true, I have spoken directly to Rightmove about this before and the simple equation is this, if every agent who advertises on Rightmove reverts to cheap budget agency policy and reduce their fees by 70%, where does Rightmove see their revenue stream going?
Money talks Rightmove, wake up and smell the coffee…….
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Hats off to PB if they are really selling at a rate of 78% to instructions in the current market . But there are a number of ways in reporting such statistics, it would be interesting to see the formula being applied by them !?
Even if correct, taking the industry standard fall-through rate of 30%, they are only completing the sale on one out of every two instructions…….but get paid on both ! A 50/50 chance of losing your upfront fee !!
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
What the report fails to get across is that Purplebricks success (at the moment) is itself based on Rightmove.
If Rightmove start to see the tide changing then they can just turn the screw on purplebricks costs of advertising when their contract is up and slow down future growth by eating into their funds.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Dead right.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
For the attention of JP Morgan – You may be right, you may be wrong, but one thing i am sure of, is that if the market toughens up and selling properties becomes harder than it is currently, do you think vendors are going to shell out £1000-£1500 up front/credit agreement to pay if there house doesnt sell. The housing market is based on consumer confidence, if that erodes so will confidence in the pay anyway model.
For the attention of Rightmove – If you are at all fearful of how Purplebricks and the other call centre estate agents will effect your business in the future, stop them advertising on your site now, and they will fall to pieces. Take control of your future.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
JP Morgan’s new report into ‘UK property classifieds’ says that Purplebricks is now converting instructions to sale agreed at the “increased” rate of 78% (in the first half of its current financial year).
In Australia, it says the conversion rate is 83%.
These are pretty impressive conversion rates although it would be nice to have the actual completion rate.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Agreed if true they are staggering, however from personal experience i would suggest the figure are somewhat inflated…much like that 88% figure previously quoted by the main man. I can only look at my local market but PB has hardly made a dent currently looking at less than 10 instructions, so either locally people havent heard of them, or more likely they have been out and not been able to sell themselves in a productive manner to the potential vendor.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
It does seem almost unattainably high, there will always be a percentage which drop off the market for all types of reasons.
But PB does have the advantage of effectively having a 10 month sole agency.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
When Fanboy#1 don’t believe it you know someone’s talking bollox.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Now, now ArthurHouse02, don’t go spoiling the dom’s morning moment of moistness.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
“These are pretty impressive conversion rates…”
Come on, dom-boy – you’re being quite reserved there, ain’t ya? That’s not “pretty impressive” – it’s f*****g phenomenal.
Erm… but how would it be for you and the #PB_Massiv if it was also LIGHT-YEARS off mark?
A small but significant factoid like that would sort of wazz all over your Purple firework… wouldn’t it?
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
PB – Top of the news yet again? Only if you have shares I guess. If everyone deserted rightmove, there would be no rightmove. Come on PIE why don’t you feature PB once a week maybe call it PB Fridays and feature other interests the rest of the week.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Come on PIE, for example, why can’t we have a weekly update on how OTM’s IPO is coming along? 😉
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Up to now there ha been very little marketing competition to PB. If we can get Collective Active Intelligent Marketing for independents motoring this year……hopefully all that will change.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Rightmove and PB.
Didn’t google originally start on Yahoo?
Perhaps rightmove are so arrogant about their market dominance that they perceive there being no threat to them at all.
Perhaps they need to work out a rate per listing that would be fair to all?
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
“JP Morgan’s new report into ‘UK property classifieds’ says that Purplebricks is now converting instructions to sale agreed at the “increased” rate of 78% (in the first half of its current financial year).”
If correct, this suggests that Mr Bruces’ oft-quoted figure of 88% conversion and the figures quoted by Purplebricks lawyers of over 90% were false. These were statements made by the CEO and the legal representatives of a PLC. Over to you FCA, NTSEAT, NAEA/ Propertymark, TPO etc.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
#bitterness
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
No, just a desire for honesty, integrity and transparency. You should ask your chums to try it.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Keep banging on about about one comment from months ago.
Perhaps you should worry about the cartel agreeements or the conditional mortgage selling, oh actually that is not about PB so is not part of your crusade.
Such hypocrisy it is cringeworthy.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
“Perhaps you should worry about the cartel agreeements or the conditional mortgage selling…”
Keep banging your particular drum, dom-boy.
You find us a live, running cartel agreement and we will act on it.
Give us proof of conditional moretgage selling – we know who to take it up with.
And if nothing else you must give us credit for our persistence and results achieved to date with our “crusade”
While on the subject of “conditional selling” – how’s about the unscrupulous agents who make it a condition of using their appointed conveyancers to sell unless the vendor pays an “administration fee” to appoint their own, vastly cheaper, legal eagle?
Do you think we should make more of that cheeky little hey-diddle than we currently are, as we fight the good fight for the benefit of our industry and its’ customers?
Actually – don’t answer that – there is only one reasonable response.
Consider it done. Thanks for that poke, matey! Your name will no doubt become synomymous as the catalyst for change.
;o)
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
>this suggests that Mr Bruces’ oft-quoted figure of 88% conversion and the figures quoted by Purplebricks lawyers of over 90% were false.
It was quoted once by PB in a live interview. The only reason it is oft-quoted is because you keep bringing it up. Completely insignificant because it’s ancient history in the fat developing world of PurpleBricks. The most recent figures are the only ones of relevance and who listens to finance programs on the radio anyway?
Chris, you need to comment on current events and ignore trivia if you want any recognition as anything other than a bitter estate agent. It’s very easy to study everything somebody says and does and find fault.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
If the dynamic duo would take their heads out of Mr Bruces’ special cave for a minute, they might accept, for once, that a CEO making a public statement about conversion rates which was subsequently backed up by a solicitors letter stating an even higher figure plus, the much publicised advertising stating PB are as effective or more effective than estate agents all adds up to (if Morgan Stanley and GetAgent and others figures are correct) knowingly disseminating false trading figures.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Fat developing world or ‘fast’ developing world?
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Oh right, yes “lets ignore what someone said at a particular point because it fits my opinion” take huh.
And I’m sorry but a conversion rate of 78% is complete fabrication and should be investigated.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
If JP Morgan are right, Purplebricks will handle more transactions (1,219,000) in the UK this year than Land Registry predict will be sold!
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Perhaps all the figures are exagerated ten fold!
And where the hell do they get their ‘70% lower’ figure from?
What evidence do they base that on?
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
…with their current market share of…???
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
And as usual this raises the validity of the success rate of PB. How did they come by the figure? Please don’t tell me that they haven’t seen them but was told by someone !!!!!
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
As to “JP Morgan’s new report into ‘UK property classifieds’ says that Purplebricks is now converting instructions to sale agreed at the “increased” rate of 78% (in the first half of its current financial year)”……
How did JP Morgan determine that the sales were agreed through PB other than (for example) via another agent after PB was given the listing?
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
How long before PB stops paying rightmove and just uses its own website. rightmove has been silly to promote and allow online agents to get a free ride while it loses traditional agents who are closing branches and reducing payments to them. How long before we are logging into purple bricks rather than rightmove?
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Tommy, do you really think that RM have a choice is deciding to allow onliners onto the website, have you heard of restriction of trade?
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Yes but they could choose a better pricing model to help make it fairer for the majority of their smaller customers…..how about a price per property listing or maybe a cost per postcode?
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
This is how RM got up and running to where it is today, we made RM. RM have made PB.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
“Sales agreed” means what, precisely, in the land of #Purple_Pain?
It seems that only they know – and they are keeping it that way.
Every time you ask them, the walls are put up. They hide behind their PurpleBricks, seemingly hoping that those that ask questions go away.
Recently one of their North West ‘Region’ LPEs Tweeted that they had agreed sales on 47 properties in three months, and “Sold” more than any other agent in 12 months. Had pretty Rightmove graphs to illustrate it an’all – proper swanky and convincing, like!
But the bu99er clammed tighter than a duck swimming downstream’s hoop when asked to confirm that they were all unique “sales”.
Hasn’t been near Tw@tter since.
#Funny_that…
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
I’ve heard through the grapevine that PB’s biggest concern is when OTM float and start up their marketing again as they’re not allowed to advertise on it
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
So this article highlights the impending battle between evil and evil.
Who will win??? Lets hope they destroy each other.
Will independents collaborate against them – no they won’t, because they cannot. How can you collaborate with someone who is directly canvassing your clients, and trying to take food off your table.
Concentrate on being better, raise your fees and stop worrying about PB who may get bigger with time, but they are not the only solution.
It is just such a shame that all of these onliners are so smug about their position in the world when they are losing money. Shareholders rejoice you have a load of mugs running around making you money.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
This is utter fabrication.
its more like 50-60 % with a huge fall through rate as they force everyone to use terrible solicitors.
Jp Morgan are also not factoring in how many people are being refunded and or discounted so negative reviews are not published (a lot of people)
pb back end is not scaleable or big enough to handle all these new sales eventually they will be the victim of there own success.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Agreed….the extra work involved post sale never fits well with a budget model. If you could just take money for creating an advert, doing very few viewings and then not selling at all…and get away with it for a long time…that would be far more profitable.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
The figures quoted by JPM can ONLY be wrong, we have +20% market share vis a vis our nearest competitor across all metrics on Rightmove fully available/new instructions/sales agreed for the calendar year 2017 and our conversion rate is 56% , that’s with eight hardworking professionals ( collective 100yrs + experience ) open 7 days and 20yrs trading history from the same site
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Can I talk to you?
in@agentv.co.uk
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Sure, I’ll make contact off here though 🙂
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
What these investment Bankers don’t understand is that only people who want the cheap deal from PB. call them in, so of course they get a high conversion rate, in fact it should be higher that it is! Not many Vendors, who have instructed a Real Agent on a ‘no sale, no fee’ basis are likely to want to stump up £1,000 for a ‘service’ that is increasingly becoming known as poor to non existent. I don’t know how they work it with 35,000 5 star reviews on Trustpilot, no one, even good agents couldn’t do that, but their new alliance with Feefo means that they can just submit favourable ones and there will be precious few of those. As far as Rightmove is concerned, they would be wise to consider getting rid of the onliners, as OTM have done. Their income stream from Real Agents is vastly more important and in the long run, sustainable. The bubble will burst on PB. in time and you will see a stock market crash like no other. I wouldn’t want to put money into them, unless I was prepared for a very rapid sell, at a moments notice.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Is this press release from JP Morgan all about driving the share price higher? isn’t that dubious, to say the least, from a legal point of view? Does anyone know?
It certainly seems to be helping depress countrywide’s share price to its lowest level ever!
BSOS23PC
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
There is a clue in the second paragraph that this is nothing more than hype. What the punter wants to know is how good are agents at getting their property SOLD. Why don’t JP Morgan print that figure? (Answers on a postage stamp).
Again they are using EBITDA (profits before costs) again. Sounds like JP Morgan have more of an interest in PB staying alive than an unsolicited independent review?
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Sadly, there are no profits before costs 🙂
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Yes their conversion rate is high, questionably high. However there is a reason for this…
As estate agents we classify a sale as an agreed price to a proceedable buyer. Sounds simple right?
No, when we get involved with Purple Bricks and are checking the chain we discover that there is an unproceedable buyer somewhere below, often our buyers buyer.
Put simply, the way we classify a conversion is not the same as PB. A sale is not a sale unless is a closed chain and proceedable, perhaps they could educate the “Local Property Experts” on this.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register