The online agent claiming to be the longest-established in the UK is predicting consolidation, with acquisitions and mergers in the sector.
Mark Readings, who co-founded House Network in 2003, forecast that the industry will shake out over the next two or three years.
He said that the cost of customer acquisition is extremely high for most of the online firms, with millions of pounds being poured into marketing.
He said: “I don’t see how six or seven firms can be spending such vast sums of money and how all of them can expect to be the one that comes out on top.”
However, he is not forecasting that investors will stop pumping millions into the sector.
Well known examples include Savills and LSL, both backers of Yopa; Neil Woodford who backs Purplebricks; Toscafund, which backs easyProperty; and Carphone Warehouse founder Charles Dunstone who is backing HouseSimple.
Will these investors ever get their money back?
Readings said: “It’s still a great sector to be in.”
He said that for anyone interested in the residential agency sector, “Where else would you put your money?”
Readings, who emphasises his own business has been built slowly and organically, says that the online sector is all about potential – and that is what appeals to investors.
But what is the size of that potential?
He said: “If over the next five years the online sector increases its market share from 6% to 25%, it will have done very well.
“If over the next five years, the market share goes to somewhere between 25% and 50%, and there are only five or six players left, then we’ll all be doing very nicely indeed.”
However, he thinks it is naïve to think that traditional agents will face a wipe-out: “When I started the business, it was all about providing customers with choice, and to me that is still the key.
“I also think that online agents and high street agents are showing less divergence. Online agents are charging more, and offering ‘no sale, no fee’ as well as fixed rates; high street agents’ fees are coming down.”
Readings said that high street agents do face a dilemma: “They have interesting choices to make. Trying to go online as well is not easy. The Countrywide offering was always going to fail.”
His business is based in Brentwood, the UK capital of the online agent world, with Emoov just round the corner.
House Network has grown headcount to 63, including 16 Local Valuation Specialists, and recent key hires are Dominic Green (ex-Countrywide) and Richard Durrant (ex-LSL).
The business charges sellers depending on where they are in the country: on a ‘no sale, no fee’ basis, they would pay between £1,000 and £2,000. On a fixed fee basis, the cost would be between £595 and £795. Accompanied viewings are extra, at £375.
That makes it cheaper than many, but Readings does not believe that price is the USP that matters as online agents – he prefers the term ‘non-traditional’ – fight for supremacy.
He says: “Our message is all about customer service. All our staff are employed and we’re staffed until 7pm, although we do use a call centre after that as it enables us to offer a 24-hour service.
“Of course we use technology, but I simply cannot see us becoming a company that is wholly dependent on it. That’s not going to happen.”
It has also recently upped its marketing, promoting a 20-point promise to customers (everything from promising that viewing agents – he uses Viewber – will take their shoes off to offering vendors their own relationship manager).
Use of TV, radio and digital platforms to get the message across has, he says, been successful.
Over the last 20-24 months, House Network has averaged 250 new instructions a month and gone on to sell 78%.
This month the business is on target to get to 400 new listings. He sees no reason why the sales rate should drop.