Cheap on-line agents fail to deliver
Michael Bruce and his brother Kenny launched Purplebricks only five years ago and since then the online estate agent has become the second largest in Britain in terms of its listings. Yet any ambitions of matching such rapid growth overseas seemed to come to a shuddering halt this week.
Two and a half years after launching its model in Australia, with the promise that it would “change the real estate landscape”, 18 months after landing in the United States and less than a year after acquiring the online estate agent Duproprio/Comfree in Canada, Purplebricks executed a sharp, unexpected U-turn. It said that it was closing its Australian business and was scaling back investment in the US amid a “strategic review”.
The announcement was made alongside that of the departure with immediate effect of Michael Bruce, 45, who as chief executive had spearheaded the company’s international expansion. Under his leadership, the business had high hopes that its model of having no physical branches and of charging a (typically lower) upfront fee regardless of whether a home is sold, would be as disruptive in international markets as it has proved in the UK.
Many are now unsure whether the fixed-fee model will thrive in a slower housing market, with sellers forced to pay £899, including VAT, and £1,399 in some London areas. Critics also claim that an online platform cannot replace the personal touch needed to persuade people to buy a new home.
Anthony Codling, chief executive of Rummage4property, a rival online property portal, was critical of Purplebricks in his previous role as an analyst at Jefferies, the investment bank. He said yesterday: “In my view, the departure of Michael Bruce tells us that the market for passive intermediary agents such as Purplebricks, is not as big as it was once believed to be”.
We at Wilsons firmly believe that when selling a high-value asset like your home, it appears that most people want a high level of service, not a low-cost, low-service alternative. This point appears to be in the process of being proved.