Brightsale

In a communication to all its members last night, RightMove effectively rejected calls for it to reduce its fees or to move to a different form of charging (per property rather than per branch). The company’s argument appears to remain that estate agents should reduce their print advertising budgets instead. The other major change is a reduction in focus on overseas property – which we were aware RightMove was already struggling with. To us this looks like another clear indication that the British public’s previous rush (we might call it the Place in the Sun stampede) into overseas property is slowing abruptly.

What agents make of RightMove’s decision to tough it out on fees will be interesting to see. Many have threatened to leave the portal (as many as 75% according to a recent poll). By sending this communication RightMove appears to be calling the bluff (if it is one) of those agents, and effectively daring them to try to survive with them. We will see how many put their listings where their mouths are and leave! To quote Margaret Thatcher, RightMove is clearly ‘not for turning’.

A lot of estate agents will probably have had the same response that we did to the news that sellers INCREASED their asking prices in October (by 1% over September): i.e. Are You KIDDING?? The explanation RightMove gives for this seeming anomaly in the current difficult market is that if a seller knows he is going to chipped away on price he (and his agent) might as well start with the highest number possible! As we all know, and RightMove rightly points out, this is patent nonsense. Over-pricing can lead to the property not being seen at all by the right buyers. A buyer looking for (say) a 2 bedroom city centre flat will often have a very tight price range in mind (especially at the moment). This price range (say £160,000-170,000) will form the basis of all that buyer’s saved website searches. They will only receive notifications when property listed in this range appears on the market. This means that the misguided seller listing at £190,000 with a view to accepting £165,000 will not appear on the radar screens of the very buyers he/she is really targeting. Madness.

But there is another, more intriguing, explanation for RightMove’s October result. Because all RightMove does (we believe) in compiling the statistics is to compare the prices of properties listed in one month with the previous month, the data set is always changing. So an equally plausible explanation is that the composition of listings is changing and that higher priced properties are now coming for sale. This would be consistent with anecdotal evidence that the better off in our society have initially been sheltered from the effects of the economic slowdown. Is it catching up with them now?

This set us thinking even more. We wondered how many million pound plus properties might now be coming on to the market as the investment bankers and hedge fund managers who have done so much to drive up central London prices start to head for the exits? A few additional properties such as the £40 million ‘flat’ (!!) in Chesham Place SW1 (listed by Knight Frank) might really change the RightMove sample meaningfully.

How ironic it would be if the distressed sales of former ‘masters of the universe’ were giving the impression of market strength, rather than weakness…

The City of London appears to be throwing in the towel on Rightmove. In October of last year (2007), as the term ‘credit crunch’ was just beginning to achieve common currency, RightMove’s share price was riding high just below 620p. But since a mini-rally in March this year, it has been falling steadily. Until recently the share price had been supported in the downturn by the ‘theory’ (mainly disseminated by Rightmove itself – but bought by some analysts) that as it got harder to sell houses, agents would need Rightmove more and more. In fact, Bloomberg quoted RightMove Managing Director Ed Williams as saying earlier this year: “A tougher housing market means that property advertisers examine the cost effectiveness of everything they do … This plays to Rightmove’s strengths”.

Well yes … and no, Mr Williams.

The problem for Rightmove is that estate agents are indeed examining the ‘cost effectiveness’ of everything they do, and our discussions with agents suggest they are increasingly wondering why they should be paying up to £475 a month per branch to Rightmove when Globrix is increasingly doing the job for free. Indeed in the middle of April Globrix was able to announce that it has risen to 750,000 properties listed, which is not far behind Rightmove now.
From our perspective there can be little doubt that Globrix will surpass RightMove - probably in a short space of time - unless Rightmove abandons its outdated ’subscription’ model. by not including the listings of online estate agencies, RightMove is limiting the number of properties that its customers see. This ‘invisible’ universe of properties that are on Globrix but not on Rightmove is growing at a rapid pace, leaving Rightmove looking like the Dutch boy with his finger in the dyke - desperately trying to support a model that is being swept away.

There will be an inflection point, reached quite soon, when Globrix’s listings equal those of Rightmove. As soon as that point is reached, Rightmove will begin to hemorrhage agents because in this climate, if an agent can save up to £475 per branch per month and achieve the same result they are going to. And once one or two break ranks - an avalanche will ensue.

Rightmove’s share price has already plummeted from 620p last Autumn to just 330p now (6th June 2008). Investors are reading the writing that this clearly written on the wall.

Online estate agents in the US won a huge battle last week by being granted access to the comprehensive MLS database of ‘for sale’ property.

Online estate agencies in the United States had, for the last few years, been engaged in a bitter struggle with their traditional ‘realtor’ (read: traditional high street estate agency) competitors for access to the “Multiple Listings Service” (MLS) database of homes for sale in the US. As anyone who has bought or sold property in the States knows, fees there can amount to 6% - with the buyer and the seller each paying 3% to their respective agents (yes, even the buyer usually has an agent in the US). Given such exorbitant fees, it is little wonder that a dynamic ‘for sale by owner’ (FSBO) sector of online estate agents has developed over there.

But until last week’s judgment, the organization representing agents, the National Association of Realtors, had restricted access to the MLS listings service to try to stifle competition from lower fee online agents. The situation was investigated by the antitrust division of the Department of Justice, and the NAR has had to climb down and drop its prohibition on online agency listings.

The parallels with the UK are interesting, although not exact. Here the National Association of Estate Agents (NAEA) does not actively discriminate against online agencies. That job is left up to the previously dominant portal RightMove (which was established by a group of traditional agents). RightMove does discriminate against online estate agents, and actively tries to perpetuate the monopoly of high street agency by refusing to allow listings from any agent not employing a traditional branch network. Fortunately for vendors in the UK, RightMove’s dominance is fading fast (along with its share price) as the News Corp. backed non-discriminatory portal Globrix has leapt from nowhere to second place in the portal rankings. And given the progress Globrix is making in terms of traffic numbers, and the squeeze on agents’ marketing budgets as transaction volumes plummet, it looks to be only a matter of time before RightMove loses its 800 pound gorilla status.

So it looks as if the marketplace in the UK will facilitate what the DoJ has had to do in the US, namely to allow a fair and level playing field on which traditional and online agencies can compete. It is not too much to ask.

Apologies to all the early birds who read this when it was first published. It seems I got my “findas” and “finders” mixed up. It is indeed FindaProperty not PropertyFinder who are involved in this deal.

The news that FindaProperty and Primelocation are to merge comes hot on the heels of the tie up between HotProperty and PropertyFinder. This looks like the beginning of an end game for the first iteration of the property portal model – where estate agents paid a subscription fee to list properties . The move can surely only be welcomed by cash strapped agents who now have one less subscription to find each month. It still looks like there are too many similar portals, however, and we expect to see further consolidation before the year is out. Fish4Homes has never really recovered from the debacle of having most of its properties (without their agents’ consent) listed on the sell it yourself Tesco Property Market last year, and looks to us to be the most likely next victim. Even Primelocation does not look impregnable to us, with its big new website launch turning out to be rather a damp squib earlier this year.

Perhaps because the early portals were set up to replace newspaper advertising, agents have been surprisingly tolerant of the subscription model. But this is now starting to change. The entry into the market of the advertising-only funded Globrix has shown agents that there is another way. After its initial rather buggy beta version, it has emerged as a strong and usable portal which will surely continue to gain traction with the News Corp. marketing machine behind it. We are also intrigued by other funding models such as the payment for leads model that is being explored by companies like Zoomf. We think this has some exciting possibilities, although property portals are not quite MoneySupermarket, and it is not easy to define exactly how valuable a ‘lead’ is at the time it is forwarded.

We expect all portals to be advertising and / or lead generation funded within the next couple of years, and we expect there to be only two or three mainstream ones (led by Globrix) with a larger number of ‘niche’ operators leading the innovation charge. The future looks better than the past, and should certainly be cheaper for estate agents. This is welcome news.