The world-leading authority on property and technology yesterday forecast that in the UK, Purplebricks could now merge with a traditional business and have high street branches.
Professor Andrew Baum, of the Said Business School at the University of Oxford, said: “When a business has raised a lot of money and is burning through it very quickly, it commonly looks to merge with a traditional model.
“In the case of Purplebricks, that would not surprise me in the least.”
Baum was the author of Proptech 3.0: The Future of Real Estate two years ago, in which he castigated Purplebricks for having an ‘unadventurous’ and ‘shockingly simple’ business model.
Yesterday afternoon he said that he had not changed his mind since those early criticisms.
He said: “Right from the start, I didn’t think Purplebricks’ technology was particularly innovative, and its business model was really only built on cutting out the overhead of offices.
“However, the phenomenon of banks having no branches and estate agents having no branches has placed both in danger of becoming extremely unpopular.”
Baum, who currently leads an initiative called the Future of Real Estate Technology, said: “Purplebricks’ growth estimates were entirely based on denting the business of high street agents – but that has not really happened.”
Yesterday, Purplebricks was at pains to say that its latest forecasts had been hit by lower than expected revenues in its Australian and US businesses, but that its UK business was doing well.
However, Baum said he was sceptical of this: “Every agent in the UK is struggling at the moment, and I would be surprised if Purplebricks were any different. The market is defined by low transactions and is pretty horrific.
“Purplebricks is a low-cost, low-touch business, where the model works well in a healthy, rising property market and where demand exceeds supply.”
He said that in markets characterised by falling demand, lower transactions and falling prices, the public does not want a commoditised product and turns to traditional models.
In the case of estate agency, sellers would express preference for high-touch, high-fee agents to get deals over the line.
He said, however, that there is still a place for online/hybrid models.
Baum said this would be at the lower end of the market, where properties are relatively uniform and sell for similar prices: “In this scenario, I completely understand why sellers would want to pay cheaper commission.”
His views on Purplebricks possibly merging with a traditional agency business have been echoed by other commentators, who suggest that Belvoir – with its strong, cash-generating lettings business – is the obvious choice.
Baum’s 2017 paper on proptech caused waves on publication and was the most downloaded Oxford Said report of the year. The professor holds global appointments, and was previously at the University of Reading and Henley Business School.