By Jonas Ebrahimi, JLL.
The use of online platforms has allowed hybrid estate agencies to grow steadily in recent years - they now boast a 5% share of the UK’s residential transactions.
Hybrid agents, who combine online services alongside teams of local property directors, look set to play an increasing role in how the residential market operates. But will it be a leading role, or more supporting player?
Russell Quirk, the founder of the UK’s second largest hybrid agency eMoov.co.uk, predicts that 20% of the overall market will be split by the top five hybrid operators by 2020. To put this into context, the UK’s current largest estate agency is Countrywide Group with a 10% market share.
But can a start-up company compete with an industry giant, let alone surpass it? The answer lies in disruptive innovation - by creating a new market and value network to displace the existing market.Technological innovation has led to some phenomenal success stories across a number of other industries in recent years. Uber is now the largest taxi firm in the world with a market cap in excess of traditional car giants such as Ford or General Motors; Airbnb now has more than 1.5m listings in 34,000 cities around the world; and Netflix effectively killed off the video rental market by offering on-demand TV streaming.
Purplebricks is the UK’s largest player in the hybrid estate agency space, with a 60% share of the market. Purplebricks, which was founded in 2014, describes itself as the fourth largest estate agency in the UK.
Its business model sees it sell properties for a flat fee ranging from circa £800-£1,150 dependent on a property’s postcode. It says that on a typical £190,000 sale this would equate to a £5,000 saving in agency fees.
Online-only valuation difficulties
But could the market grow in a purely online-only capacity?
There are a number of difficulties facing online-only operators in providing accurate local market valuations to customers. For instance, gaining a sufficient appreciation of a property’s location and standard without ever setting foot through the front door could see valuations that are wholly inaccurate.
The solution to this from hybrid agencies is to employ local experts who will take photographs, create a floorplan and write the description of a property before it is listed on the likes of Rightmove or Zoopla.
Crucially, it is this kind of model that experts believe will prove successful in the immediate future, with a market perhaps dominated by a handful of major hybrid operators combining online and local agency services.
And while the local human touch will underpin an agency’s success in today’s world, going forward, it is the online element which could become increasingly significant, particularly once the tech-savvy Generation Z – the cohort born from the late 90s onwards - begin to dominate the private rental and first time buyer markets.