House prices are set to stay flat - but our profits are SOARING: The online estate agent enjoying a very purple patch
01-09-2017
By Vicki Owen For The Mail On Sunday
Michael Bruce founded 24-hour online estate agent Purplebricks less than three years ago with his brother Kenny – and now the pair are multi-millionaires while their company is one of the fastest growing businesses in the country.
Bruce reckons the housing market will be flat this year – stamp duty changes and fear of Brexit have already seen high street estate agents Foxtons and Countrywide issue profit warnings – but not for his business.
Last month, Purplebricks reported gross profit up more than 150 per cent in the six months to October last year to £10.4million. That included the period after the referendum on our EU membership, of course, and Bruce says Purplebricks is making a sale every 16 minutes.
On the board: Michael Bruce says the branch model for estate agents is outdated
Unlike traditional estate agents Purplebricks charges a fixed fee – currently £849 or £1,199 in the London area – to list a home for sale online after it has been valued by one of its experts.
Bruce says of traditional estate agents: ‘They’ve been able to charge people too much for too long for too little. If you’re there charging an average of £4,000, are you really going to go out and create technology and people that are going to drive that down by 70 per cent? That isn’t going to happen.’
House prices in London's most expensive hotspots fall nearly...
What's wrong with the UK housing market and how do you fix...
Online estate agent Purplebricks sees shares soar after it...
Purplebricks senior manager cashes in £340k of shares in the...
Purplebricks shares: Check the latest price here
Purplebricks is a model which has caught the eye of star fund manager Neil Woodford, who is a leading investor, and controversial tech entrepreneur Errol Damelin, the man behind Wonga – the payday loans firm which used new software to similarly disrupt the lending market.
‘On average, savings could be anywhere from 50-70 per cent, depending on where you are in the UK,’ says Bruce. ‘It’s a considerable saving but at the same time they get a much better service. We’ve got over 10,000 rated excellent reviews, and try finding an estate agent anywhere in the world that gets positive reviews. They’re very difficult to find.’
Bruce is well aware that estate agents don’t have the best reputation, and keen to explain: ‘I started life as a lawyer, ended up on the board of an estate agency group.
‘Most people aren’t born to be an estate agent, you fall into it in many ways and I fell into it. I ended up buying that estate agency group. Being the boss of an estate agency whereby you’ve never actually been an estate agent, you’re able to look at it in a very different way. I’ve worked with some first-class people, who genuinely wanted to help and support customers, but the minute you mention the words “estate agent”, everybody has an inner feeling of unhappiness, and that’s down to the model.
‘It’s a model that requires the leaders of estate agents to send their troops out to get a property on at all costs, tie a customer into 12 to 16-week agreements, spend the next 12 to 16 weeks chipping them on price. If they chip on price they sell, if they don’t they churn in the market. That’s why 60 per cent of houses sold in this country sell with a second or third agent.’
Bruce claims he wanted to allow people the opportunity to be proud to say they are an expert in property, while also offering a better service by bringing the industry ‘into modern times’.
He says: ‘Rightmove and Zoopla came into existence. Millions and millions were invested in helping the buyer understand what’s in the market. But actually no one’s invested materially in assisting and supporting the people who pay the bill, people who generate the revenue in the sector, the people who sell their houses.
‘What was abundantly clear was that people are not yet ready and may never be ready to hand over the sale of their property entirely to technology. They still want someone who can give them advice on price, about how they’re going to get the best price for their property.
‘So in many ways Purplebricks was born off the back of what consumers in the UK wanted. They wanted a mix of people and technology. They wanted the process to be more transparent. They wanted the process to happen instantly. They wanted better communication.’
Bruce says Purplebricks now has 340 ‘entrepreneurs, people who are running their own business, and we’ve given them technology that makes the whole process much simpler, much more convenient.’
He says customers like it because usually the person you meet in your living room ‘hands over the whole experience to a bricks and mortar branch office, and that office then does most of the work thereafter.
New model: Unlike traditional estate agents Purplebricks charges a fixed fee
‘But the person who has made the promise in the living room, the person who has promised a service and promised a price, goes off into the sunset to the next customer leaving the bricks and mortar branch office to deal with it. We built technology that acts as that branch office, but acts like it 24 hours a day. It’s working at optimum level – it’s never off, it’s never on holiday, it’s just constantly delivering for customers. And that’s why 70 per cent of our traffic happens when traditional bricks and mortar agents are shut.
‘Our costs are a lot lower. We estimate that one of the most well-known and popular agents in London charges £4,600 for every house they sell and that contributes to rent, which is enormous. People don’t go into branch offices anymore. People don’t need fancy shop windows because if you’re thinking of buying or letting a house you go straight to Rightmove or Zoopla and you wouldn’t engage with every agent in the street.’
The first property experts he hired ‘must have been mad,’ he says. ‘They sat in interviews, we had some of the best people in the industry coming from big offices with profits in some cases of over £1million and they were coming to us and we were saying, “Can you sign this non-disclosure agreement?”
‘We wouldn’t show them the website, the technology, the marketing. We just told them about our dream and how we were going to achieve it. What surprised me is how many people believed in the same dream.’
The firm launched in Australia last summer. Bruce explains: ‘We think we’re fascinated by property here. Oh my goodness, the Australian public are absolutely infatuated by it. There are several pages in every newspaper every day about it. Their average fee is £9,500 plus marketing. If you don’t like estate agents, don’t go to Australia. Because despite there being half the number of transactions, there are twice the number of estate agents. There’s nearly 40,000 estate agents. We made £600,000 of revenue in Australia in the first seven weeks.’
In the UK, the firm chose Boxing Day to launch a new TV ad campaign challenging why people pay billions of pounds in commission as January is a key month for home selling. Bruce says: ‘Boxing Day is interesting because Mr and Mrs are both at home, they’re both the decision makers in terms of their views on selling the property.’
And if the Bruces get it right, then that same Mr and Mrs might just learn to love estate agents too.