Brightsale

Wow, what a few weeks it’s been here at BrightSale Towers!  Releasing groundbreaking new features, adding a huge amount of new property for sale,  tying up partnership deals and above all else to our loyal readers… moving the blog!

After many weeks of deliberation, we finally decided to switch platforms and integrate the blog closer with the site.  We hope this will make it easier for people to find and encourage comments and interaction with our customers and fellow property bloggers.  You might also notice we’ve moved our press section to this part of the site too, so those wanting to stay up to date with the latest BrightSale company news can now subscribe by RSS to receive the latest news as it happens.

We hope you like the new blog appearance and we look forward to hearing from you all soon!

Today, we have formally announced a landmark deal between BrightSale and the highly regarded traditional estate agency Thornley Groves.

The purchase of 25% of BrightSale by Thornley Groves represents a major step forward for BrightSale and UK estate agency as a whole. We believe it firmly cements BrightSale’s position as the UK’s leading online estate agent and opens up our unique service and platform to many new customers.

To read the full release and see more details, visit our press section.

Today BrightSale announced that it had written to the Chancellor demanding the removal of the restriction on SIPP pension schemes investing in residential property. BrightSale argued that such a measure would have a hugely positive impact on the housing market and (unlike the removal of stamp duty) would cost the Exchequer nothing. The full text of the letter is reproduced below:

Dear Mr Darling,

Amidst the media frenzy regarding the possibility of a ‘stamp duty holiday’ this Autumn, we fear that you may be missing a potentially much more effective (and cost-free) remedy for the current housing crisis.

As you know, on 1st October this year holders of ‘protected rights’ pension assets will be allowed to transfer those assets into Self Invested Personal Pensions (SIPPs). The Financial Times this weekend estimated that up to £100 billion in assets could be transferred at this time. As it stands currently, none of this money can be invested in residential property because of the Government’s last minute removal of residential property from the qualifying assets list in 2006. This is despite the fact that when the legislation was drawn up in the Finance Act of 2004 it was Government policy that residential property would be included in ‘SIPPable’ assets. We understand that at that time the Treasury feared the impact of extra demand on an already tight property market. We do not dispute that that may have been an appropriate decision then, but with prices now in free fall surely now there is strong case for revisiting the restriction.

Lifting the restriction on residential property in SIPPs as of 1st October 2008 would not constitute a ‘bail out’ or involve intervention in the mortgage markets. It would involve no ‘special favours’ to property owners. It would pass any ‘fair and reasonable’ test because it would simply remove a restriction that, until 2006, the Government itself regarded as iniquitous. The special conditions that applied to the property market in 2006 have now certainly dissipated. Property derivatives markets are predicting a total peak to trough decline in prices of over 30% - more than double the total fall in the 1989-1993 period.

The Government should not set the price of tradeable assets in a free economy. But neither should the Government unnecessarily restrict investment where it is needed. Price movements are telling us that investment is needed in residential property. As you will also be aware, unless urgent action is taken at this time the Government’s goal of delivering 240,000 new homes a year may as well be torn up.

Action is needed to break the vicious cycle of self fulfilling negative price expectations. Many of our customers have marked down their properties by 20% and have still have had little success in attracting interest. The market has virtually ground to halt in many areas of the country.

Unlocking £100 billion in SIPP capital has the potential to reverse the spiral of negative expectations and to get transaction levels moving upwards again. It would have much more short-term impact than a stamp duty holiday and would not cost the taxpayer a penny. It is a far more logical response to the crisis and we urge you to look closely at it.

Because of the huge amount of public interest in this matter, I will be making a copy of this letter available to the press.

Very best regards,

Jeremy Howard
Finance Director

Here at Brightsale we thought it about time we blew our own trumpet rather than commenting on others failings for once…

Based on the fact that 80% of prospective purchasers now search for property online, wouldn’t it be great if you knew that your agent was doing everything possible to make sure your property appeared as one of the top searches on the worlds biggest and most popular search engine, Google? Of course it would. Brightsale are fortunate to not just have experienced estate agents on board, but also experienced web and programming experts, enabling us to maximise the exposure your property receives on the web. The proof is in the pudding however, so lets try an example:

Take any development of flats where Brightsale currently have an apartment for sale, for example the ‘Quay Five’ development in Manchester. If I were a member of the public looking for a property here, I would type into Google ‘Flats for sale in Quay Five’ and look whose link comes up first. Brightsale. There are lots of flats available in this development but through our unrivalled experience in this field we can virtually guarantee a top five placing. This power is immense and provides us with the majority of our sales, pro-active ready to move purchasers know where and what they want to purchase and are by-passing the traditional property websites and searching directly and clicking the link shown by Google. Flats and apartments are not the only ones to benefit, take any of our houses and enter its’ street name, for example ‘houses for sale in Elmslie Close’. There we are, top of the tree. Surely there must be more than one house for sale in a road called Elmslie Close in the whole world? But there we are top, above all the other agents and even the property portals themselves.

Now where’s my trumpet….?

In these challenging times for all estate agents we read with amazement that our already struggling high street competitors are raising their fees.

KFH recently said: “Our fees have gone up because of the nature of the property market as it is – we are having to do more to find buyers for our customers … In that situation, it is inevitable that fees will have to go up – we have 50 branches across London and have had to raise our fee across the board.” Mmmmm.

Perhaps if they focused more carefully on their cost base they would not have to raise prices for the hard-pressed consumer.

A senior negotiator at Bonnetts in Brighton is quoted as saying: “a lot of people are getting desperate to sell and so they put their property on with a load of agents. The chances of us selling it when we are competing with five other agents are slim and in a difficult market, you don’t want to spend the time on these sorts of properties if you are not going to get a good fee. If people walk away because the fee is too big then that is fine with us if it is something that we do not want to deal with”.

Well, firstly whoever let this member of staff speak for the company must be mad. Everything about it reads badly. The phrase ‘the chances of us selling it when we are competing with five others are slim’ exudes not just a lack of confidence in the market but also in the ability of the company to perform the task that the public are now paying them more for!

This is followed by ‘if people walk away because the fee is too big, then that’s fine with us’ just amazes me. Every instruction is a possible fee for an agent, letting people walk away is just madness. If I was still in traditional agency and one of my staff let someone ‘walk away’ because of a fee I would go crazy. They are negotiators, negotiate! Would you want an agent like that to let a potential buyer ‘walk away’ from your property because their negotiation skills failed them?

All estate agents, traditional and online, need to get real. The market is tougher, sure, but the way to deal with it is to roll up your sleeves, cut out unnecessary costs, and work harder. Simply raising fees and turning away business is the path to ruin, not salvation.

It was Tuesday morning, and as I got into the car something already felt different. There was a strange feeling to the day, something I hadn’t felt for a long time, I couldn’t quite put my finger on it until as I reversed off the drive I immediately had to do something that I hadn’t for what felt like months on end…I had to put sunglasses on so that the morning sun didn’t blind me. A stunning morning with the crisp blue skies you remember from childhood had dawned and oddly everything else started to fall into place from there.

The usual two mile queue that greats everyone trying to get to work on time out of Epsom towards the A3 was nowhere to be seen. Of course the children were off school! …the DJ on the radio sounded optimistic, dare I say happy even! The weather forecaster promised a week of sunshine with temperatures reaching nearly 30 celsius by the weekend. This was too much, I was smiling uncontrollably for no reason, I even turned up a Queen song as I reached the A3 in record time! Could things get better? You bet!

The 8am news came on the radio and provided the ‘bricks’ for my mornings optimistic ‘cement’. Petrol prices were coming down. Our dear friends at Tesco, Morrisons, Asda and Sainsburys had agreed to reduce petrol by up to 5p a litre. Wonderful.

The odd thing about it all, is that here at Brightsale we knew it was coming. Whilst we are not claiming to be the Estate Agents version of Nostradamus, this blatant disregard for the ‘Doom and Gloom’ of recent months had been echoed by our own performance throughout July. We have found viewing levels to be much higher than that of April or May, and with motivated able purchasers and realistic vendors meeting each other with their price expectations, this months sales have been the best of the year so far.

So, stock up on the sun tan cream, fill the car up and should you be thinking of selling, why not try an agent who remains positive week in, week out? One who explains and qualifies the adjustments you may have to make on your asking price rather than just tells you every week that your price is too high. People still have to buy property, there is no reason why yours shouldn’t be one of them.

An excerpt from our latest research report into the myths surrounding the Property Misdescriptions Act 1991…

What is not fair is traditional agency’s misinterpretation of the law to justify their costly and cozy business practices, to the detriment of online estate agents. And of course the biggest culprit is the oft quoted, and oft mis-quoted, Property Misdescriptions Act 1991. The Act is well-named, because there cannot be a more widely “misdescribed” piece of legislation on Britain’s statute books.

Another great piece by our research team that is a must read for anyone interested in this often murky subject. Click here to read the full report.

It is nice to have an opportunity to agree with Paul Smith of SpicerHaart for a change. After we had the temerity to suggest that his purchase of Tesco’s online estate agency might lead to Spicerhaart branch closures (BrightSale Blog [May 7th 2008]) he contacted us directly to complain. He had a point, in that we have no evidence of closures either real or planned at this stage (but you can be sure that we are watching closely and if we see SpicerHaart’s being shuttered you can be sure we will straight back to the issue). But for now … enough.

However, in his column in Estate Agency News this month (June 2008) Mr Smith was in much more constructive form. He forecast that 3% of vendors would choose to sell their properties ‘online’ when the SpicerHaart / Tesco Property Market is re-launched. Given our current estimate for completions in 2008 of around 1 million, this means 30,000 properties sold online in the next 12 months or so.

But more importantly, Mr Smith also stated that his forecast predicted an online market share of 10% by 2013. By then we estimate that completions will have recovered to their ‘trend’ rate of around 1.5 million annually. This suggests that in 2013 the online market will be some 150,000 completions per year. At an average fee rate of 0.5%, this implies an online market turning over £150 million annually from commission fees alone. Ancillary service revenues would boost this past £200 million.

These numbers are very large and must be very troubling to the traditional sector. But aside from the investment of the far-sited Mr Smith and SpicerHaart in the Tesco platform, there really has been very limited investment to date in pure online estate agencies. This is very surprising, and stands in stark contrast to the $12 million invested in the leading online agency RedFin in the US.

But if Mr Smith is correct (and we hope he is) then the era of significant investment in online estate agency is about to begin.

Today’s RICS survey shows that 78.5% of surveyors reported a fall in house prices in March. This is not surprising, as we pointed out in our recent research report, Is There a Future for High Street Estate Agency?, house prices in the UK - as a percentage of average earnings - remain well above the peak ratio of 1989.

The property derivatives market, which we believe offers the best guidance on future price trends, continues to point to steep falls ahead. Our friends at DTZ sent us up to date prices this morning. They certainly make for interesting reading:

Average / House Price / Change
Current    £194,094
Mar-09    £170,803    -12.0%
Mar-10    £163,039    -16.0%
Mar-11    £161,098    -17.0%
Mar-12    £163,039    -16.0%
Mar-13    £166,921    -14.0%
Mar-14    £174,685    -10.0%

Bear in mind also that prices have already fallen almost 3% from their high of £199,600 in August 2007.

In traditional estate agency there have been two responses to the gathering evidence of a significant correction in the market. The first is simple denial. Hence we still have forecasts from ‘commentators’ such as Savills’ Lucian Cook who as recently as February still predicted a 3% increase in house prices this year.

The second response has been to increase fees. This is rather more puzzling, although it is great for online agents like us. Hence we read in last weekend’s Financial Times that Savills was proud to announce an increase in their fees to 2% - 2.5% in the last couple of months. This was justified, according to the FT, on the basis that ‘property is harder to sell now’.

Well forgive us for being a little churlish, but surely it is always hard work providing buyers and sellers of property with a quality service. Surely that doesn’t change regardless of the state of the market.

So why the increase in fees, and why so proud about it? The FT piece went on to rubbish online estate agents by lumping high quality, full service, companies like BrightSale in with ’sell it yourself’ websites like Houseladder and claiming that they couldn’t sell property in a bear market.

Far from it, our rigorous approach to completion chain management has left us, if anything, at an advantage versus the high street brigade in more challenging times.

We wrote the FT to clarify the matter, but regrettably that have not deigned to print our response. Far be it from us to suggest that this might have something to do with the amount of colour advertising that Savills does in the Weekend FT. But in the interests of balance, we thought we should publish the letter the FT rejected here:

Dear Weekend Editor:

Your rather lop-sided defence of the traditional estate agency set up a false dichotomy between traditional high cost agents such as Savills and ’sell it yourself’ websites as provided by Tesco and Asda (’We’re back to having to work hard’, Weekend FT, April 5th/6th).

Pure ‘sell it yourself websites’ such as Tesco’s had no chance of success. The convoluted process of buying and selling residential property in England and Wales (which HIPs have done nothing to alleviate) means that vendors certainly need an experienced agent’s help in managing the completion process.

But sadly your correspondent completely overlooked the fastest growing sub-sector of the market: the full service online agency. These companies employ experienced hard working agents but in more efficient call centre locations. In a report published last week (Is there a Future for High Street Estate Agency?), my own company noted that listings with such agencies had leapt 58% in the last nine months alone. If this sub-sector were counted as one group it would now be the tenth largest agency in England and Wales (by instructions).

Your correspndent also seems to ignore the fact that traditional agency fees have been in steady decline since 1997. It would defy all business logic if a period of steeply falling demand for estate agency services (with lower transaction volumes) was met with a sustainable increase in prices.

Our research shows that if house prices and transactions fall in accordance with previous cycles, that the costly branch network and staff overheads built up during the doom years could be an anchor that drags down traditional high street agency for good (as has all but happened in conveyancing and travel agency). The future certainly belongs to estate agents who work hard, but probably not from expensive high street premises in logoed cars.

Yours etc.

Andy Etches
CEO

Commenting on the publication of a major BrightSale research report (Is There a Future for High Street Estate Agency?) BrightSale Managing Director Andy Etches said:

“A combination falling house prices and completion rates is going to cause major upheaval in the next couple of years. Many traditional agents are already struggling. We demonstrate in this report that the high costs associated with an increasingly redundant branch network are going to be the anchor that sinks the traditional agency ship.
Online estate agency, by contrast, is growing rapidly. Online listings are up 58% in just the last nine months (to 3,200), making the online sector now the 10th largest ‘estate agent’ in the country.
Vendors are feeling the pinch, and they are keen to secure the best deal possible when selling their properties. This is causing them to migrate to online agents in record numbers.”

Read the full report here.