Purplebricks flotation: Sign of times to come?

 

 

Purplebricks’ flotation on the Alternative Investment Market just before Christmas has proven a big success.

The online estate agency floated on the AIM with shares priced at £1, raising a total of £25 million for for the firm, which will give the agency a major advantage over an increasingly crowded sector.

Indeed, as property buyers increasingly search online with property portals such as Rightmove and Zoopla, a weak spot has opened up in the traditional appeal of high street estate agents, with their bricks and mortar offices. Online-only agencies have been quick to try and open that gap into a fully-fledged market, with everyone from the “easy” brand (easyProperty) to the founder of Poundland (EstatesDirect.com) competing for customer attention.

They have caught the eye of investors too, with Midlands Business Insider crowning the flotation of Purplebricks as the “Deal of the Month” for December 2015.

“The Purplebricks float is a notable deal, not just because it’s another great midlands flotation that’s been successfully got away, but because it underlines the emergence of a market – the flat fee online estate agency – that barely existed two years ago,” the publication declared.

As Purplebricks capitalises on its funds with an advertising push, research firm Hardman notes that the online company is already the fourth-largest agent in the UK by number of property transactions.

“Some analysts compared the ‘disruptive’ technology-driven new businesses with the success of taxi-hailing service Uber, which is challenging old-fashioned taxi services,” reports Reuters, adding that other unlisted online real estate companies are estimated to generate about $6bn in annual fees.

Is this is a glimpse of the future of the property market? It certainly seems like momentum is building. One analyst, though, says it may not be.

Hargreaves Lansdown notes that despite Purplebricks and its rivals being well positioned to fund advertising and growth, “whether online players can gain widespread acceptance remains to be seen”.

Indeed, according to the analyst’s research, only 3 per cent of house sales are currently through online-only agents.

“Currently, only the most price-conscious consumers are taking the plunge,” writes Hargreaves.

While investors and buyers may not pile into the Purplebricks sector, though, high street agents are also showing signs of interest, with Connells, the second largest UK agent, recently acquiring online agency Hatched. If more bricks and mortar firms begin to buy out online start-ups to boost their digital presence, that hybrid model really could be a sign of times to come.

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