Online estate agent Purplebricks has claimed to sell three times more properties than the next largest estate agent, but can we ignore its pre-tax losses and falling share prices?
Claiming to revolutionise the homebuying and selling process, the online estate agent seems to have seen some major success since its launch in 2012, and has just posted gross UK profits of £45.1m, on revenue of £78.1m.
It also claims to have sold (subject to contract) 3.1 times the number of homes compared to the next top estate agent over the last financial year – but as it has not provided any solid figures or evidence to back this up, some critics are questioning whether Purplebricks is really as successful as it insists.
How is Purplebricks unique?
The idea behind the business model is to offer a lower cost service to customers by removing the traditional offices (and often flashy company cars) associated with many high street agents. Purplebricks charges an upfront fee to list a property rather than taking commission on sale, and sellers can opt to pay an additional £300 for the company to also handle property viewings.
Vendors can expect to pay from £849 to sell their homes, or £1,199 in London, compared to average high street agents‘ commission rates of 1.3% plus VAT, which typically equates to £3,900 on a £250,000 home.
Group chief executive Michael Bruce said: “We have doubled revenues in tough markets, taking market share as we continue to win over consumers to the modern way of buying and selling property.
“As the latest independent UK research by TwentyCi released in July 2018 shows, we sell more of our properties and complete faster than any of the top 10 largest agencies in the country, saving consumers thousands of pounds in the process.”
“We are confident that Purplebricks’ market leadership will continue, given the strength of its brand, the continuing investment into team, technology and processes and our £153m war chest for global growth, following the strategic investment by Axel Springer.”
Questioning the figures
However, according to its figures, the company actually made pre-tax losses of £26.1m in the year to April, up from £6m the year before, with operating losses of £11.8m in Australia and £16m in the US, while UK operating profits rose to £6.5m.
Anthony Codling, city analyst at Jefferies, believes the Purplebricks model remains unproven based on its recent performance and falling share price, which lost 4.7% of its value to 303.65p in early trading.
He said: “Purplebricks continues to tell us it sells lots of houses, without backing up that rhetoric with actual figures. Sold Subject to Contract does not mean sold.
“Perhaps more telling is that the number of UK LPEs (local property experts) is now lower than it was six months ago. If the model is the lifeboat for a sinking high street does the lifeboat itself have a leak?”