LONDON (Reuters) - Britain’s resilient property market is fuelling increasing numbers of online estate agents, and investors are warming to a new business model whose fees often undercut those of traditional estate agents.
Further property sector growth is likely as a global slowdown increases the likelihood of British interest rates remaining at record lows. The sector’s reputation as a “safe haven” grew after the 2008 credit crisis when investors poured money into bricks-and-mortar.
Research firm Hardman says that online estate agent Purplebricks has become the fourth-biggest UK estate agent by number of property transactions since launching in mid-2014.
It charges much cheaper fees than traditional estate agents like Foxtons and Savills, and capitalises on the growing trend for online searches.
Already, around 90 percent of property is sold when customers contact a traditional estate agency after a search on websites like Rightmove and Zoopla, Hardman analyst Mike Foster said.
Some analysts compared the ‘disruptive’ technology-driven new businesses with the success of taxi-hailing service Uber, which is challenging old-fashioned taxi services.
Other unlisted online real estate companies, estimated by market research analysts to generate about $6 billion in annual agency fees, include EstatesDirect.com, set up by Poundland founder Steven Smith, HouseSimple.com and eMoov.co.uk.
Purplebricks listed on the London market in December. The stock has lost ground since then, partly hurt by a broader sell-off on world equity markets, but some analysts expect the shares to gradually recover.
“It’s not unusual to see some negative reaction in shares of a fairly new and innovative company at a time when the broader market sentiment is pretty bearish,” said David Battersby, investment manager at Redmayne-Bentley.
“But I believe that the experiment is going to have a huge traction. Star investor Neil Woodford’s involvement with Purplebricks gives the company more credibility.”
Woodford Investment Management, which manages 14 billion pounds, took up a 29 percent stake in Purplebricks because of the company’s potential to grow.
FinnCap analyst Duncan Hall played down the threat from new online players, saying many customers still prefer face-to-face meetings with traditional estate agents.
But other analysts, such as Gavin Jago at Peel Hunt, point out that some of the new online firms have formed partnerships with local experts, combining the ease of online searching with traditional customer service.
Jago said the lower, fixed prices of online players will increase pressure on commission rates charged by traditional agencies.
($1 = 0.6997 pounds)
Reporting by Atul Prakash; Editing by Sudip Kar-Gupta and Katharine Houreld