Purplebricks ‘could now merge with high street business’, forecasts proptech expert

The world-leading authority on property and technology yesterday forecast that in the UK, Purplebricks could now merge with a traditional business and have high street branches.

Professor Andrew Baum, of the Said Business School at the University of Oxford, said: “When a business has raised a lot of money and is burning through it very quickly, it commonly looks to merge with a traditional model.

“In the case of Purplebricks, that would not surprise me in the least.”

Baum was the author of Proptech 3.0: The Future of Real Estate two years ago, in which he castigated Purplebricks for having an ‘unadventurous’ and ‘shockingly simple’ business model.

Yesterday afternoon he told EYE that he had not changed his mind since those early criticisms.

He said: “Right from the start, I didn’t think Purplebricks’ technology was particularly innovative, and its business model was really only built on cutting out the overhead of offices.

“However, the phenomenon of banks having no branches and estate agents having no branches has placed both in danger of becoming extremely unpopular.”

Baum, who currently leads an initiative called the Future of Real Estate Technology, told EYE: “Purplebricks’ growth estimates were entirely based on denting the business of high street agents – but that has not really happened.”

Yesterday, Purplebricks was at pains to say that its latest forecasts had been hit by lower than expected revenues in its Australian and US businesses, but that its UK business was doing well.

However, Baum said he was sceptical of this: “Every agent in the UK is struggling at the moment, and I would be surprised if Purplebricks were any different. The market is defined by low transactions and is pretty horrific.

“Purplebricks is a low-cost, low-touch business, where the model works well in a healthy, rising property market and where demand exceeds supply.”

He said that in markets characterised by falling demand, lower transactions and falling prices, the public does not want a commoditised product and turns to traditional models.

In the case of estate agency, sellers would express preference for high-touch, high-fee agents to get deals over the line.

He said, however, that there is still a place for online/hybrid models.

Baum said this would be at the lower end of the market, where properties are relatively uniform and sell for similar prices: “In this scenario, I completely understand why sellers would want to pay cheaper commission.”

His views on Purplebricks possibly merging with a traditional agency business have been echoed by other commentators, who suggest that Belvoir – with its strong, cash-generating lettings business – is the obvious choice.

Baum’s 2017 paper on proptech caused waves on publication and was the most downloaded Oxford Said report of the year. The professor holds global appointments, and was previously at the University of Reading and Henley Business School.

https://www.sbs.ox.ac.uk/sites/default/files/2018-07/PropTech3.0.pdf

x

Email the story to a friend

15 Comments

  1. JWVW

    Prof Baum states the “bleedin’ obvious” – but there is an interesting subtext. Would PB and a large struggling high street operation (like Countrywide) fit? Not beyond the realms of possibilities if you are a mad investor…

    Report
    1. GPL

       
      Well, let the Dafty Investors charge on as I sit with my recently acquired Countrywide Shares.
       
      As I took my Mother for lunch the other day and was then blamed the following day because she forgot to put her lottery ticket on, and if she had she would have won around £700! …..but she still loves me!
       
      Let the Countrywide share fun begin Mum, you may receive your winning ticket yet!    
       
       

      Report
      1. Hillofwad71

        Well good luck with those, The cash cow Lambert Smith Hampton-the jewel in the crown showing revenue decline In addition the original sponsors in the summer float still holding unallocated shares still seeping into the market
        Having said that they do look as if they have bottomed out

        Report
        1. GPL

           

          I threw some of my ebay profits into a some cheap shares on the basis I lose my money. Any gains will be a bonus. I do that every so often, you win some, you lose some.

          I nearly bought PB Shares when they dipped below a £1 as I thought they may artificially bounce when the big buyers bought back in cheap however I just couldn’t bring myself to do it, likewise OTM when they were 76 pence?

          Integrity matters most to me, my career is built upon it.

          Must crack on…..

           

           

          Report
  2. GPL

    “He said that in markets characterised by falling demand, lower transactions and falling prices, the public does not want a commoditised product and turns to traditional models.
     
    In the case of estate agency, sellers would express preference for high-touch, high-fee agents to get deals over the line.”
     
    ……highlighted by Local/High Street Estate Agents right here on PIE almost daily, although the “high fee” wording is misleading, if one looks at what a real Local/High Street Estate Agent actually does to earn their fee
     
    …..and let’s just highlight “ EARN THEIR FEE”.
     
     
     
           

    Report
  3. ArthurHouse02

    Can’t see the sensible chaps at Belvior would merge with PB, they seem to not only have their heads screwed on but have a growing and profitable business. Dont see a merge on the cards, a huge buy out perhaps, but PB dont have the cash for that now.

    Report
    1. Hillofwad71

      As you say its a growing and profitable business which is attractive
      The current SP values the company at £35m which looks good value The original owner who is at retirement age still holds 12.9% so would have a big say in respect of an offer.
      £50m might win the day which Bricks could easily finance and it would certainly add value to Bricks. Stranger things have been known . Dont forget Northwood sold out to Belvoir

      Report
  4. Ric

    can’t see it.

    Report
  5. smile please

    Won’t happen for several reasons.

    1. They will find it hard to raise the cash needed to acquire and run.

    2. Why would a board want to sell to them after all the big boys have in one way or another already had their fingers burnt buy / starting an online option.

    3. The only one vaguely possible is CW and believe me there will be massive restructuring in the coming months, some offices have already closed which have not yet hit the radar. CW would just pull them down further.

     

    Report
    1. GPL

       
      Sorry Mum, sp has just burst that bubble….
       
      No matter, the life of a real Estate Agent goes on despite the downfall of the virtual Mimeliners. 
       
      Time to work for my clients. Have a Good Friday folks. 
       
       

      Report
  6. RichardHill61

    And you need to be a professor to work that out!!

    Report
  7. Property Poke In The Eye

    In simple terms PB days are numbered.

    Report
  8. Mark Walker 2

    Belvoir should crush Purplebricks under its heel.

    Report
  9. smile please

    Just wasted half an hour of my life reading the report. It comes from a side of bias and no real research has been done, just looking on the internet at what other bias companies want to promote.

    Anybody within the industry can see the flaws from the predictions and comments made.

    And this is the crux of why people find dealing with estate agents difficult. The public and service suppliers think its a very easy job, and it can all be automated or you should have quick turn around times. The public today think they are experts, and go against advice given as they feel they know better, the age old issue of ‘Mines the best in the street beacause XXXX’ OR Yes you the expert has put a top price of 300k on the property but to ensure i get that i want to try 325k

    Until so called experts such as the author of the report realise estate agents are a profession, and service suppliers stop trying to dumb down what we do for their own needs it will only get worse.

    Some of us are old enough to remember when you wanted to obtain a mortgage, get a loan, start a business you could go and see a person at a bank discuss your needs, they would advise you on what to do, how to do it and get your to where you want to be. There were thousands of banks stuffed full of staff you could see them and get good advice all the time.

    Today its a tick box exercise and the people you deal with know squat all about the products or advice they offer. They just tick boxes. S

    Report
    1. smile please

      Sorry hit enter with fat fingers.
      Cont..
      So the public turn to brokers, all target driven if working for corporates or bedroom experts meeting in coffee shops (does this sound familiar and could be related to estate agents). Is this better or has an industry and a profession been lost?
      Time and again we see people blowing the trumpet for onliners, how they have revalutionsed the industry, but what have they done? Surel they have dropped the price and they are transparent with a low figure (hide all the add ons though) and at what cost has this come at? Any seller using PPL as made to by PB i bet will tell you if it was not for other agents in the chain it would have fallen through.
      As much as i hate regulation (coming from a regulated background and knowing the pitfalls) if people really want to see change, elevate agents where they should be. To the top of the pile. Yes fees will go up but it will do away with the cowboys as it just will not be financially viable otherwise. 
       
       

      Report
X

You must be logged in to report this comment!

Leave a reply

Thank you for signing up to our newsletter, we have sent you an email asking you to confirm your subscription. Additionally if you would like to create a free EYE account which allows you to comment on news stories and manage your email subscriptions please enter a password below.