Analysts at international bank Berenberg have cut its rating of Rightmove to from ‘hold’ to ‘sell’, saying that there are “too many risks”, with agents feeling the heat.
It follows similar advice from UBS, which last month told investors it was time to take their profits.
In a new report, Berenberg says that Rightmove’s current share price does not “reflect reality” – specifically, the difficulties that estate and letting agents are currently seeing.
Berenberg says that it is “of the view that a business model so reliant on price increases is ripe for disruption”.
In its report, the bank says that it sees both OnTheMarket and Zoopla as strong competitors.
It says that while Rightmove has strong pricing power and high recurring revenues, agents’ own margins are under pressure.
It says: “Newsflow over the coming months is unlikely to be supportive, in our view, which could lead to a significant de-rating. With the shares not too shy of all-time highs, and risks greater than we have seen for some time, we cut to Sell.”
The report says that both estate and letting agents are feeling the heat: “One only needs to look at the share prices of listed estate and letting agents to get a sense of the troubles that some players are currently going through.
“Rightmove also admitted at its H1 2018 results last week that sentiment amongst its members is low.”
Berenberg says that Brexit and other uncertainties mean that there will not be any growth in the housing market in the near term.
In addition, hybrids and an over-supply of agents are putting pressure on fees.
It says there are too many agents chasing too few instructions, while the lettings fee ban, due to come into force next year, “can only add to the woes of the industry”. It says that loss of revenue will be a bitter pill to swallow.
Berenberg, which has cut its price target to 4,100p for Rightmove shares, also makes reference to OnTheMarket in its report.
It says: “Our point is not that we believe OnTheMarket can replicate the success of Rightmove, or even materially dent its dominance.”
However, Berenberg says Rightmove investors are “too relaxed” about the impact OnTheMarket could have on the giant portal.
It says agents could leave Rightmove, and/or the portal might have to lower its profit margin.
Of ZPG, it observes that the business might have “materially more firepower at its disposal” after its acquisition by private equity firm Silver Lake and could now compete more heavily with Rightmove.
Berenberg also says that ZPG could change its business model to allow customers to advertise directly – although it does say that this could trigger an uprising from agents.
Of OnTheMarket, Berenberg says OTM’s ‘new and exclusive’ offering is a clear differentiator and that agents still have a vested interest in OTM’s success.
It lists the top 20 estate agency shareholders in OTM, led by Spicerhaart with a 2.6% stake, Savills with a 1.9% holding, and Knight Frank with 1.7%.
Rightmove shares yesterday closed about 2% down at 4,772p. OnTheMarket’s shares fell 0.60%, or down 1p, to finish at 164.5p.
Every time a high street agent leaves, a “For Sale By Owner’ company joins.
So estate agents need to look hard at which portal platform they are going to support.
It’s time agents got together and set up a proper portal run by agents, and decisions made by agents.
But in the meantime, like it or not put all your stock with On the Market platform to de-stabalize RM and Z. Or if you like sitting on the fence only list 50% of your stock on RM and Z on rotation.
This way OTM will hold the most property stock and will make it the portal to go to until all agents have a proper long term game plan.
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Property Poke In The Eye
What a simple and brilliant idea – particularly for those sitting on the fence !
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Or look at the real value that the portals add to your business…bearing in mind everyone else is on them and negotiate more favourable terms. Talk to your competitors and other offices, you will be shocked by the difference in prices/packages. The corporates are milking your presence if you are an independent/small biz. Remember, the packages are legacy, dating back to when Rightmove was luring the big boys for content. Their rates are sometimes 50% or even 100% under the rest. The corporates have all sold their shares now, so don’t deserve the big discounts. These portals are not new ideas or tech any more, in fact its old hat! They are just an online poster board with an email alert…they need your content, it creates their traffic! YOUR PORTAL NEEDS YOU
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“Indeed; my fee is 1.5% this includes Rightmove etc; yes Ill drop to 1.25% but i can’t include Rightmove in that fee……”
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PPITE
“It’s time agents got together and set up a proper portal run by agents, and decisions made by agents.”
Agents don’t ‘get together’. It’s not in their DNA. And on the rare occasion they do – they chuff it up biiiiig style (I offer the recent Zummerzett CMA case as prima facie evidence)
You know as well as I do that two Estate Agents in the same room couldn’t agree on how to run a bath – never mind ten thousand from all corners of the Nation trying to concur on the running of a portal.
I’d rather become a window cleaner tomorrow than trust some of those in the industry to control the fate of my listings – and they would probably feel exactly the same way about my thoughts as to how to do it.
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Great idea!
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Rightmove are going to be the architects of their own demise. That ugly human trait called “greed” always wins in the end. Their contemptible treatment of, especially the smaller Agents, will prove to be their undoing. It will be a great shame though, but they’ve been “pushing their luck” for a long time and deserve a good kicking. Incidentally, I have found Zoopla to be far more beneficial to our Agency than Rightmove. Just saying.
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People keep talking about OTM being the best portal and the one to take RM down but surely they are overlooking one major factor – BUYERS & SELLERS need to know who OTM is and that isn’t the case, certainly across the North of England.
Go out into any town in the North West and ask people what OTM is or ‘Where do you go to buy a house’ and all will say RM, some Zoopla. Pretty much the same in Yorkshire and the North East. Nobody has heard of OTM, I’d hazard a guess at barely 1%.
Until OTM has a very attractive, sustained, Nationwide marketing campaign then it is pointless being on it, let alone drop RM for it.
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Nor in the South
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NotAdoctor32
I have to agree, OTM could do some advertising in areas north of the M25, but it also down to the Agents in all areas to push OTM, similarly as we did with the Newspapers, and RM when it first launched !
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Just as RM are totally intransigent on insisting on 10/14% rise annually, agents should be equally so in refusing to list with them.
There are two credible alternatives out there and when RM loose their stock levels as agents leave, the public will leave them too,because they (public) have no loyalty. They will go where what they need exists.
Bully boys always get their comeuppance and RM’s time is coming
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It must be incredibly frustrating for agencies who feel they have to choice but to be on RM and Z. We work with lots of independent estate and letting agents, who now feel in control of their own business once again. They are being successful without being stung by the prices of the property portals.
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Give us an example.
Just one – so better make it a good one.
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Still waiting. Please share with us how these ‘lots of independent estate and letting agents’ get round paying portal fees.
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Our RM rep has disappeared since we asked to go back to the basic package after initially stating cancellations can only be done face to face – we are paying approx £1800 per month (Inc VAT)
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Surely you can email your account manager? I did, to downgrade my package and cancel some add-ons.
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Have NEVER met a RM rep in 12 years despite having requested a meeting on numerous occasions. I’d assumed they were mythical beings.
Hard enough just to get a call back!
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Wow, they’re relentless with us and constantly trying to up-sell Featured Property but the idea of paying to advertise on an advertisment doesn’t seem right to me.
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