Online Estate Agents - the new dinosaurs of house sel...

I’ve just read an article saying that this is the time of the online estate agency.

The time in question is, of course, the cost of living crisis: we are familiar with the headlines of a predicted 7.1 per cent drop in living standards, the highest taxes for over 70 years and the eye-watering prospect of tens of billions of public spending cuts.

So if ever there was a time for people to use online estate agents, it’s surely now. People may want to, or have to, move home and the prospect of a lower fee for an online agent is surely now at its most attractive.

Or is it? We have, of course, been here before and if history shows us anything, it is that budget online agents are not significantly more popular now than at happier economic periods.

For example, just over a decade ago we had the global financial crisis, considered by many to have been more menacing for living standards and the wider economic landscape than the current cost of living crisis.

And at that time there was a wide range of online agencies to choose from - HouseNetwork, Hatched and Housesimple were early examples in the 2000s followed by Sarah Beeny’s Tepilo in 2009 and Russell Quirk’s Emoov in 2010. Shortly after the financial crisis eased Purplebricks arrived in 2012 and then easyProperty in 2014 and Footsteps and Yopa in 2016. There were lots of others, too.

So what happened in the financial crisis? Did anxious cash-strapped sellers rush to online agencies? And did that break the dam allowing a rush of interest from buyers carrying on into the financial glory days of the mid-2010s?

Well, no.

Market share information on a like-for-like basis is hard to come by but research from a variety of reliable sources including TwentyCi, The Advisory, the old Countrywide research team and trade publications suggest that market share for online agents has never exceeded 15 per cent, and even then that was in only some parts of the UK and applying to only some segments of the market.

At the time, around 2010, that seemed a starting point not a career high.

Sarah Beeny, when setting up Tepilo, bravely hypothesised and told me during an interview in 2010 that we would still need traditional agents in the future but that there was every reason to believe online agents would move on to take 50 per cent market share.

Rob Ellice, then chief executive of easyProperty, told a conference in 2014 that in the first four weeks of its online residential sales service, the company listed 1,900 properties for sale, with 30 properties going under offer.

And according to a Property Industry Eye report, Russell Quirk told a (different) conference as recently as 2016 that “incumbents talk about online at only 5%, but if it’s doubled in two years, then where it could get to in 5 to 10 years, then I’d be a very happy individual.”

By this time even the journalistic excitement over online agencies began to fade (dear reader - I admit I too, thought online would be bigger than it was_ and in the past five years it’s become the norm to report online agency failures rather than successes.

So look where we are now, at the end of 2022.

Analysis by TwentyCi has revealed that online agents now take 7.6 per cent of market share - based on exchanges - with Purplebricks, Yopa and Strike responsible for over two thirds of that business.

TwentyCi’s most recent Property and Homemover report says: “The largest market for hybrid/onlines has been consistently in the lower-value ranges as they struggle to convince higher-value sellers of the appeal of their approach. This continued in the third quarter of 2022, where the share was as high as 9.4% in the Less than £200,000 category but decreased progressively in every higher category to a low of 1.2% in the £1m+ bracket.”

There are other measures of online agency failures. It’s impossible not to mention Purplebricks’ share price collapse from an all-time high in 2017 of 525p to under 10p this week.

More anecdotally, just look at the comments left on trade press stories about online agencies. There was a time that the mere mention of Purplebricks would inspire scores of comments; now yet another story of that agency’s problems scarcely raises an eyebrow. If that shows anything, it is that no one - absolutely no one - sees online as a long-term seriouss rival to the dominance of traditional agents.

Of course there will be flurries of success, with the likes of Strike making opportunistic hay when it enters new territories or has a new advertising campaign, although these are likely to be drowned out by the more typical stories of online agencies in trouble - Doorsteps, for example, has recently bitten the dust, just a few years after being heralded as the future of house selling.

I haven’t even spoken of the scale of start-up costs and lost investment that online agencies have incurred - that’s for another day.

I think the point has been made. Online agents have a place in the industry but it’s not going to transform the landscape now having spent almost two decades failing to live up to expectations.

So my next job is to drop a friendly line to the author of that article saying that this is the time of the online estate agency. Because believe me, it isn’t.

*Editor of Letting Agent Today and Landlord Today, Graham can be found tweeting about all things property at @PropertyJourn