Will New Challengers Revolutionise the Estate Agent Space?

If you compare Countrywide (the UK's largest estate agent) with new upstart Purple Bricks, a clear trend emerges.

The share price of Purple Bricks has  risen significantly from £0.95 on the 18th of December 2015 to £4.22 now. If you compare this with Countrywide, the share price has reduced in the same period from £4 to £1.13 as of the 18th of January (Patrick Collinson, The Guardian, January 2018).

Purple Bricks turns the traditional commission based estate agent model on it's head by offering model where for a fixed fee, a price will be agreed with the seller. They will find a buyer at that price or buy the home directly.

As the estate agent model depends on transaction volume, the fall in the London market is causing difficulties for the traditional players.

Rents in London are now flat or falling, putting pressure on letting agency income and buy-to-let activity is also predicted to fall in 2018 (Patrick Collinson, The Guardian, January 2018).

These factors are not permanent however and form part of the usual cycle in the property market. The issue for the traditional model is that there are other factors that result from market disruption rather than being the result of cyclical effects.

First of all, the tenant fee ban will likely mean that lettings income falls from current levels. There will additionally be pressure from online property sales marketplaces such as Rightmove.

The big potential disruptive factor that may influence the market however is that of disintermediation, with new providers making old models obsolete.

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