Brightsale

It’s very difficult to call the market right now, some analysts are predicting doom, doom and more doom, yet others are proclaiming this is the ideal time to buy!  Who should you believe?  It seems like there is a never ending stream of contradictory information populating the media.  So what should you do?

As self-serving as this might appear, my honest opinion is that this is a good time to buy.  There are plenty of properties on the market right now which are sensibly priced, and even taking into account the fair pricing there are vendors who are still willing to listen to offers and are open to negotiation.  

The point is, countless properties on BrightSale’s books are priced to sell, even considering this difficult market.  Even in these negative times this particular still property strikes me as great value for money.

So, don’t wait for the media to report an upturn in the fortunes of the housing market before you decide to buy!  At that point it’s likely the best deals (like the one above) will have gone.

Now is the best time to buy - but then I would say that - I am an estate agent with a vested interest in selling property !

But think about it, many of the signs are pointing towards now being the best time for you to negotiate the lowest price on the property you want to buy.

If you don’t buy now you might look back at this point in time in a few months and say I wish I’d agreed to buy sooner?  Why?  Well:

1. Vendors have spent all year reducing their asking prices.
2. The media have hammered the housing market and vendors expectations are at their lowest level for years.
3. There is increasing choice in the market place.
4. There is a backlog of people who want to buy, especially in the first time buyers market, but they are wondering when make their move - when they do vendors expectations will harden.
5. Savers cannot get a decent return on their money in the bank or building society
6. If property auctions are anything to go by the property market is a good choice and investors are returning in their droves.
7. Stocks and shares continue to be high risk because of their volatility, buy to let investors feel that prices have stabilised and risk has reduced to acceptable levels.
8. Interest rates are at their lowest level since the 1950’s.
9. New build housing construction has come to a standstill so there will be a shortage of supply when the buyers return.
10. Vendors are accepting offers below what are already very realistic asking prices because they can pass their loss on to the property they buy.
11. The cost of renting has become more expensive than servicing a mortgage on a comparable property
12. Buyers are in short supply at this time of year, increasing your chances of being able to buy at the right price now.

Important new research on home buyers’ changing browsing habits was revealed today by national online estate BrightSale.com.

BrightSale’s research was conducted over the month of November 2008 and measured the percentage of its sales leads generated by:  a) established property portals such as PropertyFinder and Fish4 etc and b) directly from organic searches over the internet.

The analysis flagged up a startling trend: a full 28.8% of BrightSale’s sales leads came from direct searches over the internet.  This is people typing a specific street or building into a search engine like Google and being taken directly to a relevant property on BrightSale.  The sales leads which came direct from the internet were especially concentrated in areas such as new builds and apartment blocks.  But leads were generated on a wide spectrum of different property.

November 1st to 30th 2008

BrightSale Managing Director Andy Etches tried to explain what was going on:

“Buyers searching for an apartment in a particular city centre block are not well served by property portals.  They end up having to trawl through literally hundreds of listings that are not actually in that building.  Increasingly, we are finding that these buyers are just typing the name of the building or road they are interested in into Google or Yahoo and using the results list as a more focused and relevant search.  This is a very worrying trend for the portals and for many traditional estate agencies.  But it is certainly one that we expect to continue accelerating as more and more people use internet search engines as their first port of call for all internet searches.“

The results suggest that many traditional agents may be misguided in placing so much confidence in the property portals alone to deliver buyer leads.  Mr Etches said:

“In this current dire sales environment, agents simply cannot afford to leave almost 30% of potential buyer leads on the table.  At BrightSale we are obsessed with search engine optimisation and ensuring that our client’s properties are given absolutely maximum exposure on the internet.  Unfortunately for a lot of vendors, not many high street agents have the expertise or ability to do this effectively.”

BrightSale success in attracting organic search leads had already led the company to review its portal policy.  Like many other agents recently, BrightSale has withdrawn all its stock from RightMove, although for the time being its listings continue to be shown on all the other major portals.

BrightSale intends to continue to monitor the trend towards organic searches replacing portal leads and to present further data, covering a larger time span, early in 2009.

ENDS.  

Well he did his best.  After his interim report in July was positively tepid in its support for direct Government intervention in the mortgage markets, Sir James Crosby finally got off the fence in his full report (published with the pre-budget report this week).  In fact he went from lukewarm to ‘shock and awe’.  Without direct Government intervention in the wholesale mortgage markets he predicted that it was “very likely” that net mortgage lending would fall below zero in 2009.  Yes BELOW ZERO.  This means that the amount of mortgages being paid off would exceed the sum of new lending.   To put this in context, in the year to Sept 2007, Bank of England data shows that net residential lending totalled £ 84.7 billion.  In the year to Sept 2008 this had slumped to £37.4 billion.  Lending is down a little over 50% and sales transaction volume is down – well yes, around 50%.  So if net lending falls to zero, then transaction volumes go to?  The spectre of a virtually closed housing market looms up before us.

Sir James proposes to lance this terrifying apparition with a good old fashioned dose of nationalisation.  He proposes that the Government should guarantee £100 billion in new mortgage securities (on a temporary basis) in 2009 / 2010.  But the problem is that Sir James has does not actually possess a lance.  The lance is held by Chancellor Darling.  But will he actually use it?  Many in the industry drew heart from Mr Darling’s response to Crosby’s full report yesterday, but the optimism needs to be tempered.  Mr Darling certainly did not say he would definitely adopt this proposal.  In fact he was very clear that he could not adopt it without clearance from the EU.  In fact, looking at the exact language used by Mr Darling he only committed the Government to  “proceed to work up a detailed scheme based on Sir James’s recommendations”.  Given that the budget is not until next March this hardly smacked of a urgent response to a pressing problem. 

Our sense is that Mr Darling is very much keeping his options open, waiting to see how other factors play out before deciding what actually to do about the mortgage market.  The problem is that the Government’s balance sheet is ballooning at an alarming rate.  Adding another £100 billion in the form of Government-backed mortgage would be a massive decision, and EU approval for such aid is by no means guaranteed. 

And then there is the issue no one seems to have noticed.  Many Westminster watchers are shortening odds on a Spring 2009 General Election.  Were this to occur and Chancellor Osborne took over would he feel similarly constrained to implement Crosby’s bail out?  Given what both he and David Cameron have been saying about the Government fiscal “irresponsibility” surely the answer is no.   

We support measures to ensure the stable and proper functioning of our mortgage markets.  Without them, Britons could become virtual prisoners in their own homes in 2009 and 2010.  But homeowners and estate agents have to prepare themselves for the fact that 2009 could be very difficult indeed.  They must not be lulled into a false sense of security and believe that Sir James has definitely ridden to the rescue.  Homeowners who need to move in the next 12-18 months should get their properties on the market now and should price them sensibly.  There are still mortgage-approved buyers out there, but undue delay or unrealistic pricing could yet mean tangling with a real dragon next year.  There is no time for delay.

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.

We are confused - and we don’t mean a super-annoying car insurance advert. We are confused because for about a year now we have been assured that high street estate agency fees have been rising. The story has been that it is much harder to sell properties at the moment (which can hardly be doubted) and that estate agents are now having to work much harder (bless them) and therefore the general public are only too happy to pay higher fees for the service. It is the last point that has always struck us as a little odd. We know that in the early 1990s house price recession agents’ fees did go up. In some well-heeled areas we know that some agents even got away with charging a ‘registration fee’ of up to £500 just to list a property, and then up to 3% commission on top of that. But times have changed a great deal since then. Competition from lower cost modern agencies such as BrightSale have changed the competitive landscape – and have surely made it much harder for high street agents to simply raise prices in the face of falling demand (which is all they are doing).

So it was almost with a sense of relief that we read yesterday of the major London agent Lauristons offering customers a chance to opt out of the traditional 2-3% (this is London remember) fee in return for a non-refundable up-front payment of £999. To us this looks like a desperate attempt to get some, ANY, cash flow into their business before the year end. If you cannot make money actually selling properties, try to make it by listing them instead.

But isn’t this just another sign of a business model that simply doesn’t work anymore? Most vendors in these hard pressed times are not going to be happy forking over £1,000 in cash with no guarantee whatsoever that a sale will be achieved. So although Lauristons’ move certainly worked as a PR stunt, it will do nothing to address the fundamental problems of traditional agency: bloated costs, ineffective technology, poor client service, excessive fees etc. But as the Director of the company concerned said: “the market is changing and the current economic climate means it probably won’t be the same in the future.” Amen to that!

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…

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.

Spicerhaart’s purchase of Tesco’s online estate agency may well herald the start of a massive high street branch closure programme, not just for Spicerhaart but for other high street estate agents as well.

We believe that by buying Tesco’s online platform, Spicerhaart is experimenting with a branchless model that companies like BrightSale have practiced for some time. If successful, we would expect to see a rapid closure programme of expensive and increasingly redundant Spicerhaart high street branches. This could see up to 227 Spicerhaart high street branches closed.

As we predicted in our recent research note Is there a Future for Traditional Estate Agency? (BrightSale Research, April 2008), online estate agencies like BrightSale are set to replace traditional high street (high cost) agents in most areas of the market over the next few years. Spicerhaart’s move seems to be admission of this possibility.

Even before Spicerhaart’s announcement, the high street sector has been struggling in recent months. Yesterday, MovewithUs predicted that 4,000 agencies could be shuttered before the end of the year.

But the gloom on the high street is not mirrored in the online sector. At BrightSale we are seeing a big huge increase in demand for our online estate agency product, with listings up by 46% since the beginning of March 2008. Customers are embracing the reduced costs and ease of use of the online product as never before.

Spicer deserves some credit for its early change of tack. Most traditional high street agents are simply sleep-walking into oblivion in the face of the new challenge from online agencies.

We welcome both Tesco and Spicerhaart into the online fold because their presence in our market will further credentialise the online estate agency offering.

And we will not be churlish and remind Spicerhaart CEO Paul Smith that a year ago when Tesco launched the Property Market he wrote a passionate attack on the idea in Estate Agency News, concluding: “Tesco might think that ‘every little helps’ – but it won’t be at my expense”.

But I guess he is allowed a change of haart.

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