Skip to main content

The disruptor making real estate digital

The disruptor making real estate digital

Digitalisation has forced the downfall of many once great staples of the high street. The likes of Debenhams and House of Fraser have been unceremoniously dismissed in favour of online, e-commerce specialists such as ASOS and Boohoo. Retail has taken the brunt of the force of digitalisation, but the digital wave has affected all industries to a greater or lesser extent.

Residential real estate is an industry that has put up a valiant fight to digitalisation and in Q1 2019, online estate agents had a market share of just 7.6% in the United Kingdom – that figure is much lower in the more expensive London market.

Digitalisation is driven by younger customers who are more trusting in technology and find it easier to use than their older counterparts. Using retail as an example, the online fashion market is most popular with millennials, whilst the older gen X’s are keener on traditional bricks and mortar stores. However, millennials are only now beginning to join property buyer ranks and therefore it follows that we should expect a correlated rise in the uptake of online estate agency use.

Whilst the market share of online agents is still relatively small (7.6%), 76% of that belongs to Purplebricks, a company that is barley five years old, yet already a household name with 96% brand awareness. Purplebricks was not the first company to offer agency services online, however it has been the standout winner in the developing online real estate market. Whilst the group sees some competition from peers such as HouseSimple and Yopa, the benefit of being in an as-yet unsaturated market space is that competition only helps to grow the market, which may ultimately serve Purplebricks a bigger slice of pie in the long run.

Low personnel costs and a lack of bricks and mortar expenses means that fee per instruction at Purplebricks can be offered at a much lower rate than the traditional estate agents. Whilst costs are low, customer satisfaction rates remain high due to quicker sales and an excellent customer experience using the app.

Purplebricks has suffered in the past from rapid expansion and failed launches in Australia and the US which hurt the company financially. However, the company has recently recruited a fresh-faced board with highly relevant experience in market disruptors such as JustEat and Spotify which should help to steer the company away from making rookie mistakes. This, combined with a new leader in Vic Darvey from MoneySuperMarket, makes Purplebricks an attractive proposition to investors.

Whilst the digital revolution of residential real estate is still in its infancy, investors should be confident that the market has good growth potential, with Purplebricks continuing to pioneer new technology that provides a good service at low cost. The anchor of bricks and mortar stores will likely prevent traditional agents competing on cost, and if the online alternative can continue to provide quality service, it is hard to see how the high street estate agent can prevent itself from being the latest casualty of the digital revolution.

The views expressed are those of Mark Wright at the time of writing and are subject to change without notice. They are not necessarily the views of Seneca Investment Managers Limited and do not constitute investment advice. Whilst Seneca Investment Managers has used all reasonable efforts to ensure the accuracy of the information contained in this communication, we cannot guarantee the reliability, completeness or accuracy of the content. This communication provides information for professional use only and should not be relied upon by retail investors as the sole basis for investment. Seneca Investment Managers Limited (0151 906 2450) is authorised and regulated by the Financial Conduct Authority and is registered in England No. 4325961 with its registered office at Tenth Floor, Horton House, Exchange Flags, Liverpool, L2 3YL. FP19 355.

Contact Us

Online Form

  • Before submitting this form, please confirm that you have read and agree with our website Terms & Conditions