I Storbritannia tar nettbaserte Purplebricks store markedsandeler fra tradisjonelle giganter i meglerbransjen. Mange nye proptech-selskaper følger etter, og skaper endring i strukturen rundt hvordan boliger bytter eiere. Her kan du lese mer om hvordan det skjer, og hvorfor.
How Purplebricks kickstarted a new wave of PropTech
written by: Nikkita Dixon
As anyone who’s made their way onto the property ladder will tell you, homeownership in the UK is difficult. And confusing. And rarely will you get the best bang for your buck. Murky fees, pushy salesmen, a general disconnect between all involved parties – the whole thing smacks of dysfunction.
Yet many of us will, at some point in our lives, allow ourselves to be dragged over the coals of the property sector to call a small slice of our country home. But that’s all about to change. In fact this past year several startups have begun to streamline the entire process – and it honestly couldn’t come quick enough.
The problem with traditional property management
Let’s look at the age-old process for selling a house in the UK: a seller contacts an estate agency, a valuer is sent out to agree on a price, a local negotiator steps in to sell the house at that price and there are even more people involved to accommodate viewings – oh, and all of this needs to be done during office hours.
It’s a logistical nightmare for consumers trying to juggle full-time jobs, children or other commitments. In fact, 34% of recent homebuyers say the number of people involved in the home-buying process is the most stressful part, according to a recent report from HSBC*. To add to this, high street estate agencies can charge up to 3.5% commission on the sale of a house.
When you consider the average house price in London has skyrocketed to £482,779, that’s £16,897 an estate agent could be walking away with. That’s not including the thousands they add on for a variety of services, some the customer will never actually use. When asked by HSBC, 29% of recent homebuyers said understanding the legal paperwork (21%) contributed the most amount of stress, followed by fees (19%) and negotiating the price (16%).
How Purplebricks changed the game
An indication of how little the property sector is working in favour of the wider population is evident by the sheer speed at which PropTech startups are taking up share of the market.
Within just five years, hybrid agency Purplebricks has grown to control 72% of the online market share of agents. It’s now 50% larger in terms of market share than property heavyweights Foxtons and Countrywide. With no high street office, just an online platform and an army of local property experts (LPEs), the PropTech powerhouse is undercutting high street estate agents on price at every turn.
Purplebricks promises to put the control back in the hands of the buyers and sellers. Instead of charging commission (or ‘commisery’ as they call it on their website), the company charges a flat fee of £849. They even have an online calculator to show just how much you’ll save by avoiding a traditional real estate agent’s commission system. Customers can use the website or an app for most of the buying process and the LPEs for anything requiring a human face.
These LPEs have many similarities to Uber drivers. They’re self-employed, they can work flexible hours and the rate of growth of their business is entirely dependent on their own ambition. LPEs can even hire and manage their own team if they find they’re generating more business than time will permit – and the earning potential is uncapped.
This business model appears to be working, with recent figures from Purplebricks indicating the organisation makes a sale every 16 minutes. With just 4% of all real estate sales being made online in the UK currently, and that figure expected to rise to 20% by 2020, it doesn’t take a math genius to realise the company’s earning potential. Investors are certainly on board, with Purplebricks stock price hitting a record high of 525p on August 8. It’s recently had a slight dip in share prices following some bad press, but continues to trade higher than it did in Q1 and 2 this year.
Why the time is ripe for change
To start with, the UK is a nation obsessed with property and British homebuyers are among the most digitally savvy in the world. 93% of UK homebuyers use the Internet* to assist with their search, while one in two have spoken to an estate agent online as the first port of call in the home-buying process. It’s also a nation that has had a gutsful of being taken advantage of by high street estate agents. Brits are crying out for more transparency and simplicity when it comes to the single biggest asset they’ll likely have in their lifetime. Even the Queen recognises the need for change.
This perfect storm has seen the UK eclipse the US and Asia’s efforts in the PropTech sector this year, with more investment in PropTech than anywhere in the world. Startups in this space are also starting to collaborate more to ensure customers are getting the best value for their money, competition aside.
Even bigger partnerships like the one between HM Land Registry (HMLR) and Ordnance Survey (OS) are having a huge impact on the innovation potential in PropTech. Startups are being encouraged like never before, with grant funding of up to £20,000 available to help participants develop their business as part of the pilot partnership. A range of resources and services are also being made available, including access to experienced software developers, geospatial expertise from OS and property expertise from HMLR, as well as business mentors to assist with business proposals and investor relationships.
Why we should all be excited
The explosion of PropTech this year is on track to radically change the way we buy and sell homes.
Purplebricks has opened the floodgates to a huge number of other PropTech startups trying to simplify and digitise everything from letting transactions, rental agreements, viewings and referencing, to mortgage advice, conveyancy, lending and data analysis. Some PropTech even allows you to complete the entire buying process online, negating the need for a physical estate agent office altogether.
The PropTech movement has paved the way for the creation of property crowdfunding, giving investor newbies the chance to invest with as little as £100 and receive an immediate percentage of rental income. Meanwhile, property websites are becoming more sophisticated, using big data to give home buyers and sellers actionable insight into their home value in relation to their neighbourhood or postcode, census information, nearby property listings, consumer surveys, geographic information and much more.
Virtual reality is also playing a big part, by allowing home buyers to do viewings in their own time and even ‘live’ in their prospective house for several days before committing to a purchase. And that’s without delving into innovations in the ConTech (construction technology).
The impact on traditional estate agencies
Many in the UK property sector are starting to feel the pinch. And it’s not just down to the emergence of PropTech innovators. Insolvency specialist Begbies Traynor revealed 25,000 property managers, residential landlords and letting agents are in a state of financial distress. The writing is on the wall for a third of these companies who are unlikely to still be in operation three years from now, according to Begbies.
A number of factors have contributed to this, including changes to public policy, uncertainty surrounding the EU referendum and a general slowdown of buying and selling. As a result, profits reported by property heavyweights Countrywide and Foxtons have tumbled 97% and 64% respectively. Moving to a new business model that works for the consumer will be critical for Foxtons with 55% of the company’s revenue coming from letting fees, which (as we mentioned earlier) will be scrapped this year as promised in the government’s Autumn Statement. According to the company website, Foxtons charges £420 (not including fees for tenancy renewal and changes of occupant) in letting fees to tenants, plus 13.2% of the rent from landlords.
With so much money rolling in from such draconian practices, it’s no surprise these estate agents have been dragging their feet when it comes to innovation. But, much like Black Cabs and Uber, a new generation of disrupters have a different idea – and those who don’t keep up simply won’t have a place in the future of property management.
photo: from Purplebrick’s webpage
top photo: Annie Spratt, middle photo: Terrah Holly