The Present is the future of agency - Proptech Weekly #33

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Friends, Feudal Landlords and Commoners, 

This week Gary Chimwa put on the excellent Future of Property Tech conference in London. 

It was big!

There were three big themes: agency, mortgages and VR. 

And the conclusions from what was on show and the conversations in the round table sessions were:

The future of agency looks much like today (i.e. full of a long tail of agents) 

The future of mortgages looks much like today (a chap from LendInvest confirmed they won't be ever offering mainstream RESI mortgages, and neither will anyone else because it's so tightly regulated); 

And the future of VR looks much like today (gadgets for excitement at events, but no mainstream application). 

These aren't negative comments. It's just the current state of property technology. Specifically there really isn't much tech. Especially tech that changes live/behavior for the better/simpler.

Which is easier? Picking up the phone and letting someone else do all the work, or filling out a form online with the thought of all that work to come?

And which gives more comfort? Savings on fees or a small percentage of the ultimate sale (1-2% in the UK, 5-6% elsewhere in the world)?

The stand-out session at Future Property Tech was on the 'future of agency'.

There was some fascinating data from Miles Shipside of Rightmove, which I'll highlight below.

But through all the discussion in the event there was near enough no talk of tech being worked on now. None of the online agents had any tech to boast of.

There were two comments that eluded to a future 'Uberisation of estate agents', enabled by an app so they could go solo from the large corporate brokerage structures.

After the event I received an email about the rise of online agents and whether I "have any strong views?"

Well, here you go:

1. Currently they're (still) tiny and even though spending investor capital to chase market share isn't denting the traditional agents. Rightmove says just over 5% of all new listings come from agents on their 'Geographic Pricing Model':

Linear growth, but underwhelming (5% market share) considering the investment in ads (PB) and PR (Emoov).

2. Their low fees are dragging down overall fee levels, but that's normal in mature industries with such fierce competition.

3. Consumer isn't responding to the low fee sell. There needs to be a better sell/hook for any agency to win customers over.

This is the killer: Rightmove survey on consumer awareness of online agents and whether they'd consider using them. Damning indictment.

4. Purplebricks will raise their prices as they find out that maintaining both market share and growing will be impossible without their massive ad spend - they don't have the 'free' advertising of shop fronts on local high streets. In VC terms, their 'unit economics' don't stack up.

5. At the end of the day, if you're fundamentally a conduit to list on Rightmove, your business model isn't one for the long term - there'll always be plenty to undercut on price and nullify your USP. Which let's face it is all PB is. Those 'local' property experts aren't paid enough, so they won't attract 'killers' - Compass in New York found this out, ditched it and hired away the best performing agents from other brokerages.

6. I'm bullish on - sustainable fee level (2%) and a 'gimmick' that people can trust (if they don't sell your home within 90 days, they'll by it at asking price).

7. By the way, Countrywide will be taken over by PE by some point. They're so poorly run. There's real opportunity to extract more value (at least 2x) from their massive but underperforming branch network.

I maintain (for all agents):

a. If the first thing you do is drop your fees (Countrywide are guilty of this), then you're not going to negotiate the best deal for my home.

b. If you tell me you'll sell my home, for less; then you're telling me you'll sell my home for less...

Think about this last two things:

c. if people sell their homes every 8-15 years, and you have no local link you'll need to keep through money at 'customer acquisition'. And if it costs more to acquire and service customers than you make from them, then there's going to be a big casualty soon enough which will curtail (very suddenly) investment into online agents.

d. Rightmove always wins. And that's truly why agency will look the same in the future as it does today. Because no-one is disrupting the true status quo: Rightmove controls the UK property market (you could say the same about Zillow in the US and REA in Australia).

Please feel free to relay news, tips and comments @RayhanRESI 


Rayhan's PropTech Weekly XXXIII

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